Zions Bancorporation, which failed the Federal Reserve's annual stress test, deferred giving Chief Executive Officer Harris Simmons a cash bonus until after the bank learns the results of its resubmission.
With the new version still pending, the board of directors "has not been able to determine whether the conditions have been satisfied" regarding the stress-test results, Salt Lake City-based Zions said yesterday in its annual proxy filing. The deferral includes vesting of restricted stock granted last year and also affects Chief Financial Officer Doyle Arnold, according to the filing.
Zions is among banks that have been tying pay to results of the Fed's tests, which help determine whether a lender can increase dividends and stock buybacks. Failure has brought criticism from analysts and investors upon executives in charge of the process. Citigroup Inc., the biggest bank to fail the stress tests last month, asked Eugene McQuade, a veteran executive, to cancel his retirement and lead the company's submissions rather than CFO John Gerspach.
"I find it refreshing," said Eleanor Bloxham, CEO of Value Alliance Co., a board advisory firm in Westerville, Ohio, referring to Zions. Banks have been "tone deaf" about public reaction when rewards aren't aligned with results, she said. "What they do in the follow-through will determine whether it's a slap on the wrist."
This is the first year the Zions board pegged executive pay to performance on the stress test. Simmons, 59, was awarded a cash salary of $890,000 last year, according to the proxy.
"The passing of the stress test is a vitally important part of running the company," said James Abbott, a spokesman for Zions.
The bank was among five firms that didn't pass. Zions failed as its capital fell below the minimum required while New York-based Citigroup, as well as U.S. units of Royal Bank of Scotland Group Plc, HSBC Holdings Plc and Banco Santander SA, were rejected because the Fed had concerns about the quality of their processes. Zions said it plans to resubmit its plan to the Fed this month.
