A Better Way in Comp
This article accompanies Great Reports.
Thanks to the efforts of Scott Law, Zions Bancorporation is successfully meeting new regulatory requirements affecting executive-comp practices without compromising its business model and culture.
By David Shadovitz
When Scott Law joined Zions Bancorporation as director of compensation in 2006, he knew his job wouldn't be easy. For starters, he faced the difficult task of building a comp function from scratch at the Salt Lake City-headquartered company. Prior to his arrival, the function was primarily addressed by the CEO and CFO, with little involvement from HR.
Then there was the fact that, because of the decentralized nature of Zions' business, Law would be responsible for the design and management of more than 300 incentive plans -- a figure that's pretty astounding considering Zions has roughly 11,000 employees.
But, as Law would eventually discover, these challenges were just a preview of what lay ahead, thanks to the Great Recession of 2008.
To be sure, few employers escaped the financial crisis and the ensuing economic downturn unscathed. But if you worked in finance and banking, and specifically in compensation, the Troubled Asset Relief Program and the increased level of government scrutiny that accompanied it made the downturn particularly distressing.
As Law puts it, "Things got real complicated" once the crisis hit.
Working to Law's advantage was his background in finance and banking.
Law joined Zions from Aon Hewitt, where was a design consultant in charge of executive compensation. Before that, he served as a managing consultant for a small consulting firm named IPC Group, where he performed a wide range of financial analyses; a bond underwriter at Chubb Group; and a commercial lending officer at Bank of America.
"Because I was a lender, I understood the positions; I understood how performance is measured; I understood the key drivers of the business," he says.
True, the post-crisis regulations affected the executive-comp practices of every financial institution. But it created especially difficult hurdles for a decentralized company like Zions, a collection of diverse community and regional banking organizations.
Compared to similarly sized organizations that are run on a centralized model, Law says, Zions' decentralized model is far more complex and leads to a high proliferation of incentive plans.
"This dramatically heighten[s] the amount of governance we have to perform," he says.
Law notes that the easy solution would have been to roll everything into one plan. "But that would have defeated the purpose of our business model, which is to allow for local decision making so we can be more responsive to our customers," he says.
As a company, Law says, Zions is doing everything it can to meet the standards being put in place by regulators while preserving its business model and culture.
In response to the regulations, Law was instrumental in launching a wide range of initiatives across Zions' eight affiliate banks in order to strengthen their alignment with regulatory expectations. Changes included expanding the role of risk management and credit administration into the design, approval and validation of incentive-compensation plans, evaluating established systems for analyzing and validating the connections between incentive payouts and risk outcomes, and giving leaders and the board the tools and insights they need to ensure that incentive plans properly reward employees for their contributions and don't reward excessive risk-taking.
Law was also instrumental in establishing an enterprise-wide, systematic and multi-component incentive-compensation-governance framework, including the creation of oversight committees, governance policies, design standards and operating protocols.
In August 2012, Zions formed an incentive compensation oversight committee consisting of top business leaders who meet monthly to review the design of the incentive plans in order to ensure they're properly aligned with the Federal Reserve's guidance.
In addition, Law spearheaded last year's acquisition of a new multimillion-dollar incentive-compensation-management system. Previously, he says, all of the incentive plans were administered on Excel spreadsheets at various locations -- so there wasn't a central depository of data. But with new software from Cognos, Zions is currently in the process of moving all of its plans onto a single platform so it can better execute its governance activities and reporting capability across the enterprise.
Thanks to these and other initiatives, and the strong skill set he's brought to his job, Law and his team have earned the respect of others.
"Scott [possesses an] innate ability to take very complex information and synthesize it down to something that anyone can understand," says Dianne James, executive vice president and chief HR officer at Zions.
James adds that peers frequently seek Law out for counsel when they are struggling with an important issue and Zions' senior leaders, up to and including external board members and the bank's chairman and CEO, Harris H. Simmons, rely on his expertise.
Just further confirmation that Law is clearly making his mark in a big way.