DEF 14A 1 d837362ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

 

 

Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material under Rule 14a-12

KEYCORP

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

  No fee required.
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  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

     

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127 PUBLIC SQUARE

CLEVELAND, OHIO 44114

 

April 3, 2020

 

 

 

 

 

LOGO   

Message to

the Shareholders

 

BETH E. MOONEY

Retiring Chairman of the Board and

Chief Executive Officer

 

CHRISTOPHER M. GORMAN

President and Chief Operating Officer

 

Dear Shareholder,

 

In 2019, we delivered on our commitments and continued to invest and position our company for growth. Last year marked our seventh consecutive year of delivering positive operating leverage, driven by momentum in our core businesses and strong expense management. Importantly, we have maintained sound credit quality and a disciplined approach to capital management – including a 9% increase in our common share dividend year-over-year.

 

In September 2019, I announced my retirement effective May 1, 2020, and that Chris Gorman will succeed me as Chairman and CEO. This decision was made in conjunction with the full Board of Directors, and a very thorough and robust planning process. Overseen by the Board, the succession has been seamless and is a testament to our collective confidence in the talented and diverse team at Key. I look forward to the company’s continued success under Chris and the entire team’s leadership in 2020 and beyond.

 

On behalf of your Board of Directors, we are pleased to invite you to KeyCorp’s 2020 Annual Meeting of Shareholders on Thursday, May 21, 2020, beginning at 8:30 a.m., local time.

 

We encourage you to carefully review this year’s notice and proxy statement, which contain important information about proxy voting and the business to be conducted at the meeting, as well as highlights of KeyCorp’s 2019 performance. We hope you will attend the meeting, but even if you plan to attend, we encourage you to vote your shares in advance of the meeting by telephone, online, or by returning your completed proxy card to us.

 

Every shareholder vote is important and we want to ensure your shares are represented at the meeting. Please vote your shares as promptly as possible.

 

Thank you for your continued support of KeyCorp.

 

Sincerely,

 

LOGO

Beth E. Mooney

 

     


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LOGO

Notice of Annual Meeting of Shareholders of KeyCorp

 

Date and Time:

   Place*:

Thursday, May 21, 2020, at 8:30 a.m., local time

  

One Cleveland Center

1375 East Ninth Street

Cleveland, Ohio 44114

 

Items of Business:

 

At the meeting, the shareholders will vote on the following matters:

 

1.

Election of the 12 directors named in the proxy statement to serve for one-year terms expiring in 2021;

 

2.

Ratification of Ernst & Young LLP as independent auditors for KeyCorp for the fiscal year ending December 31, 2020;

 

3.

Advisory approval of KeyCorp’s executive compensation;

4.

A shareholder proposal seeking to reduce the ownership threshold to call a special shareholder meeting; and

 

5.

Such other business as may properly come before the meeting or any postponement or adjournment thereof.

 

 

Record Date:

 

Shareholders of record of KeyCorp common shares at the close of business on Friday, March 27, 2020, have the right to receive notice of and to vote at the Annual Meeting and any postponement or adjournment thereof.

Delivery of Proxy Materials:

 

We will first mail the Notice of Internet Availability of Proxy Materials to our shareholders on or about Monday, April 6, 2020. On or about the same day, we will begin mailing paper copies of our proxy materials to shareholders who have requested them.

Voting:

 

It is important that your shares are represented and voted at the meeting. You may vote by telephone, online, or by mailing your signed proxy card in the enclosed return envelope if the proxy statement was mailed to you. If you do attend the meeting, you may withdraw any previously-voted proxy and personally vote on any matter properly brought before the meeting.

By Order of the Board of Directors

LOGO

Craig T. Beazer

Secretary and General Counsel

April 3, 2020

 

Internet Availability of Proxy Materials: IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON THURSDAY, MAY 21, 2020: Our 2020 proxy statement, proxy card, and Annual Report on Form 10-K for the year ended December 31, 2019, are available at www.envisionreports.com/key.

 

*

As disclosed on page 64 of this proxy statement, we reserve the right to reconsider the date, time, and/or means of convening the Annual Meeting, including the possibility that the meeting may be held solely by means of remote communication due to COVID-19.


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Proxy Statement

The Board of Directors of KeyCorp (“Key,” the “Company,” “our,” “us” or “we”) is furnishing you with this proxy statement to solicit shareholder proxies to be voted at the 2020 Annual Meeting of Shareholders to be held on May 21, 2020 (the “Annual Meeting”), and at all postponements and adjournments thereof. The 2020 Annual Meeting will be held at One Cleveland Center, 1375 East Ninth Street, Cleveland, Ohio 44114.*

The mailing address of our principal executive office is 127 Public Square, Cleveland, Ohio 44114. KeyCorp employs the cost-effective and environmentally-conscious “notice and access” delivery method. This allows us to give our shareholders access to a full set of our proxy materials online. Beginning on or about April 6, 2020, we will send to most of our shareholders, by mail or e-mail, a notice explaining how to access our proxy materials and vote online. This notice is not a proxy card and cannot be used to vote your shares. On or about April 6, 2020, we will also begin mailing paper copies of our proxy materials to shareholders who have requested them.

All record holders of KeyCorp common shares at the close of business on Friday, March 27, 2020, are entitled to vote. On that date, there were 963,466,166 KeyCorp common shares outstanding. Holders of KeyCorp common shares are entitled to

one vote for each share held of record.

 

*

As disclosed on page 64 of this proxy statement, we reserve the right to reconsider the date, time, and/or means of convening the Annual Meeting, including the possibility that the meeting may be held solely by means of remote communication due to COVID-19.


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Proxy Statement Summary

This summary contains highlights of information contained elsewhere in our proxy statement and does not contain all of the information that you should consider. Please read the entire proxy statement before you vote.

Proposals for the Annual Meeting

 

 

Proposal

   Page   

Board

 Recommendation 

1.  Election of Directors

You are being asked to elect 12 directors. Each of the nominees is standing for election to hold office until the 2021 Annual Meeting of Shareholders.

   1    “FOR”

each nominee

2.  Auditor Ratification

You are being asked to ratify the Audit Committee’s appointment of Ernst & Young LLP as our independent auditor for fiscal year 2020. One or more representatives of Ernst & Young LLP will be present at the meeting to respond to appropriate questions from shareholders.

   59    “FOR”

3.  Say-on-Pay

You are being asked to give advisory approval of compensation paid to KeyCorp’s Named Executive Officers (as defined on page 22 of this proxy statement). This advisory vote is held on an annual basis.

   60    “FOR”

4.  Shareholder Proposal Seeking to Reduce the Ownership Threshold to Call a Special Shareholder Meeting

A shareholder proposal seeking to amend KeyCorp’s Third Amended and Restated Regulations to reduce the ownership threshold required to call a special shareholder meeting from 25% to 10% is being presented for vote.

   61    “AGAINST”

Voting Your Shares

 

 

Who May Vote:   Voting Online:   Voting by Telephone:
LOGO   LOGO   LOGO

Shareholders of record as of the close of business on March 27, 2020.

 

Registered holders can go to www.envisionreports.com/key and follow the instructions. If you hold your shares in street name, please follow the instructions found on your voting instruction form.

 

Follow the instructions in the Notice of Internet Availability of Proxy Materials or on your proxy card.

 

Voting by Mail:   Voting in Person:
LOGO   LOGO

Complete, sign, and date the proxy card and return it in the envelope that was provided in

the proxy statement mailing package.

  If you choose to attend the Annual Meeting in person, you will be asked to present photo identification and proof that you own KeyCorp common shares before entering the meeting. If you want to vote shares that you hold in street name in person at the Annual Meeting, you must bring a legal proxy in your name from the broker, bank, or other nominee that holds your shares.

 

Even if you plan to attend the Annual Meeting, we encourage all shareholders to vote in advance of the meeting.

 

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Proxy Statement Summary

 

 

2020 Director Nominees

 

 

Name

   Age    Director
Since
   Independent    Current Committee Memberships
   Audit    C&O    NCGC    Risk    Technology    Executive

Bruce D. Broussard

   57    2015    Yes                  

Gary M. Crosby

   65    2016    No                  

Alexander M. Cutler (1)

   68    2000    Yes          Chair         

H. James Dallas

   61    2005    Yes                Chair   

Elizabeth R. Gile

   64    2010    Yes             Chair      

Ruth Ann M. Gillis

   65    2009    Yes                  

Christopher M. Gorman

   59    2019    No                  

Carlton L. Highsmith

   68    2016    Yes                  

Richard J. Hipple

   67    2012    Yes                  

Kristen L. Manos

   60    2009    Yes                  

Barbara R. Snyder

   64    2010    Yes                  

David K. Wilson

   65    2014    Yes                  
(1)

Serves as KeyCorp’s independent Lead Director.

2019 Performance Highlights

 

In 2019, we delivered on our commitments and continued to invest for growth, marking another strong year for our company. We enhanced our financial and operational performance. We delivered our seventh consecutive year of positive operating leverage, driven by core business momentum, broad-based balance sheet growth, and strong expense control. Our distinctive business model, targeted relationship strategy and strong team enable us to continue to grow, improve efficiency, manage risk, and drive shareholder returns.

 

    Driving Stronger    

    Returns    

  

  7th consecutive year of positive operating leverage

 

  Broad-based balance sheet growth reflects execution of relationship-based business model

   Average loans and deposits both increased over 4% from prior year, driven by strength in our commercial and consumer businesses

   Net interest income reflects proactive positioning to moderate interest rate risk

 

  Continued momentum in fee-based businesses; ongoing investments to drive future returns

 

  Strong expense discipline reflects continuous improvement and investments for growth

   Full-year expenses, excluding notable items, decreased 3%(1)

   Completed $200 million cost savings initiative in the first half of 2019

 

  Cash efficiency ratio, excluding notable items, improved 140 basis points from prior year (1)

 

 

    

    

    Strong Risk    

    Management    

  

  Steadfast commitment to maintaining moderate risk profile and strong underwriting standards

 

  Net charge-offs to average loans (excluding previously disclosed fraud event) of 0.31%(1); portfolios continued to perform well

 

 
    

    Disciplined Capital    

    Management    

  

  Maintained strong capital position

 

  Common share dividend increased 9% ($0.17 to $0.185 per common share) in 2019

 

  $868 million in common share repurchases in 2019

 

 

 

(1)

Non-GAAP financial measure. Please see the section entitled “GAAP to Non-GAAP Reconciliations” on pages 14 and 15 of our Fourth Quarter 2019 Earnings Release attached as Exhibit 99.1 to Form 8-K filed on January 23, 2020, for more information on these non-GAAP measures and reconciliations to the most comparable GAAP measures and page 24 thereof for the identification of notable items.

 

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Proxy Statement Summary

 

 

Corporate Governance Practices

 

We are committed to meeting high standards of ethical behavior, corporate governance, and business conduct. Some of our corporate governance best practices include:

 

Director

Elections

 

   Annual elections for all directors (page 1)

 

   Majority voting in uncontested elections (page 3)

 

 

Board

Independence

 

   All director nominees, other than Mr. Gorman and Mr. Crosby, are independent under the New York Stock Exchange’s and KeyCorp’s standards of independence (page 15)

 

   Our standing Board committees (Audit, Compensation and Organization, Nominating and Corporate Governance, Risk, and Technology) consist solely of independent directors (page 10)

 

   Independent Lead Director—Alexander M. Cutler—with extensive responsibilities (page 10)

 

   Annual Lead Director evaluation and review of Board leadership structure by independent directors (pages 10 and 11)

 

   Prior approval from the Lead Director of the Board agenda, schedule, and materials (page 10)

 

 

Standing Board Committees    Audit Committee    16 meetings in 2019    (page 12)   
   Compensation and Organization Committee    7 meetings in 2019    (page 13)   
   Nominating and Corporate Governance Committee    6 meetings in 2019    (page 12)   
   Risk Committee    8 meetings in 2019    (page 13)   
  

Technology Committee

 

   New in 2020    (page 14)   

 

Practices

and Policies

 

   Experienced, diverse Board membership

 

   Commitment to Board refreshment, with an average tenure of approximately eight years and three new directors added since 2015 (page 10)

 

   Independent and non-management members of the Board met in executive session at every regular 2019 Board meeting (page 11)

 

   Approximately 97% average attendance by directors at Board and committee meetings (page 11)

 

   Annual self-assessments conducted by the Board, each committee, and each director (page 11)

 

   Strong Board leadership in the oversight of enterprise risk (pages 14 and 15)

 

   Annual disclosure of KeyCorp political spending (page 18)

 

   Strong director education program (page 17)

 

 

Shareholder Engagement  

   Active shareholder engagement program (pages 16 and 17)

 

   Engage with shareholders on a regular basis throughout the year to discuss a range of topics, including company performance, strategy, risk management, executive compensation, and corporate governance

 

   Activities include ongoing communication, numerous investor conferences, on- and off-site analyst and investor meetings, and roadshows

 

   Directors are available to meet with our shareholders

 

For a more detailed discussion concerning KeyCorp’s corporate governance practices, please refer to the section entitled “The Board of Directors and Its Committees” beginning on page 10 of this proxy statement.

 

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Proxy Statement Summary

 

 

Executive Compensation Highlights

 

The objectives of our executive compensation program are to:

 

 

Make pay decisions based on performance of the Company, the business unit, and the individual;

 

 

Deliver pay in a way that reinforces focus on balancing short- and long-term financial performance objectives; and

 

 

Support sustainable performance with policies that are focused on prudent risk-taking and the balance between risk and reward.

We manage to total pay opportunity (i.e., the sum of base salary and incentives), rather than making separate decisions on each element of pay, for each executive officer.

We support our compensation program with a number of best practices in governance and executive compensation, including the following:

 

What We Do:    What We Don’t Do:

 Impose robust stock ownership guidelines

 

 Subject shares to post-vesting holding period

 

 Use tally sheets

 

 Review share utilization

 

 Retain an independent compensation consultant

 

 Maintain clawback and forfeiture policies

  

×   No employment agreements for executive officers

 

×   No tax gross-ups

 

×   No “single trigger” change of control agreements

 

×   No active SERPs

 

×   No hedging or pledging of KeyCorp securities

 

×   No “timing” of equity grants

 

×   No repricing of stock options

2019 was a successful year for KeyCorp. We delivered results for our stakeholders and continued to position the Company for the future. Our distinctive business model, targeted relationship strategy, and strong team enable us to continue to grow, improve efficiency, manage risk, and drive shareholder returns. Our 2019 compensation highlights include:

 

What We did…   How We Delivered…
We delivered on our short-term financial plan.  

   While the KeyCorp 2019 Annual Incentive Plan performed at 80%, we delivered on our core short-term financial plan excluding the fraud loss we disclosed in our Form 8-K filed July 16, 2019 (referred to herein as the “fraud loss”).

   

We achieved our long-term financial performance targets.

 

   The 2017-2019 Long-Term Incentive Plan (performance awards) performed at 91.3% of target as our Return on Tangible Common Equity was at the 45th percentile of our Peer Group and Cumulative Earnings per Share exceeded our three-year financial plan.

   
Our Chief Executive Officer was awarded $10.7 million in total direct compensation for our performance for 2019.  

   2019 compensation of our Chief Executive Officer included a $2 million annual incentive paid for 2019 and a $7.5 million long-term incentive granted in 2020.

 

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Table of Contents

 

PROPOSAL ONE: Election of Directors      1  

Director Recruitment and Qualifications

     1  

Director Assessments

     3  

Election Process

     3  

2020 Nominees for Director

     3  
The Board of Directors and Its Committees      10  

Board Leadership Structure

     10  

Board Assessments

     11  

Board and Committee Responsibilities

     11  

Board Oversight of Risk

     14  

Oversight of Compensation-Related Risks

     15  

Director Independence

     15  

Related Party Transactions

     16  

Shareholder Engagement

     16  

Director Education

     17  

Communication with the Board

     17  
Corporate Governance Documents      18  

Corporate Governance Guidelines

     18  

Code of Business Conduct and Ethics

     18  

Statement of Political Activity

     18  

Corporate Responsibility Report

     18  

Diversity and Inclusion Report

     18  
Ownership of KeyCorp Equity Securities      19  

Executive Officer and Director Equity Ownership Guidelines

     21  

Policy Restricting Hedging, Pledging and Speculative Trading of KeyCorp Securities

     21  

Equity Compensation Plan Information

     21  
Compensation Discussion and Analysis      22  

Table of Contents

     22  

Objectives of Our Compensation Program

     22  

Overview of 2019 Performance

     24  

Elements of Our Pay Program

     25  

Alignment of Pay and Performance

     25  

Total Pay of Our Named Executive Officers

     31  

Other Elements of Compensation

     33  

How We Make Pay Decisions

     34  

CEO Realized and Realizable Pay

     37  
Compensation and Organization Committee Report      40  
Compensation of Executive Officers and Directors      41  

2019 Summary Compensation Table

     41  

2019 Grants of Plan-Based Awards Table

     43  

2019 Outstanding Equity Awards at Fiscal Year-End Table

     44  

2019 Option Exercises and Stock Vested Table

     46  

2019 Pension Benefits Table

     47  

2019 Nonqualified Deferred Compensation Table

     48  

Potential Payments Upon Termination or Change of Control

     50  

2019 Post-Termination Tables

     51  

Pay Ratio

     53  

Directors’ Compensation

     54  

2019 Director Compensation Table

     55  
Audit Matters      57  

Ernst & Young’s Fees

     57  

Pre-Approval Policies and Procedures

     57  
Audit Committee Report      58  
PROPOSAL TWO: Ratification of Independent Auditor      59  
PROPOSAL THREE: Advisory Approval of KeyCorp’s Executive Compensation      60  
PROPOSAL FOUR: Shareholder Proposal Seeking to Reduce Ownership Threshold to Call Special Shareholder Meeting      61  

Board of Directors Recommendation and Statement

     62  
General Information about the Annual Meeting      63  

Matters to Be Presented

     63  

How Votes Will Be Counted

     63  

Revoking a Proxy

     63  

Cost of Proxy Solicitation

     63  

Attending the Annual Meeting

     64  
Additional Information      65  

Proxy Statement Proposals for the 2021 Annual Meeting of Shareholders

     65  

Other Proposals and Director Nominations for the 2021 Annual Meeting of Shareholders

     65  

Eliminating Duplicative Proxy Materials

     65  

Annual Report

     66  
 

 

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            PROPOSAL ONE: Election of Directors

 

 

PROPOSAL ONE: Election of Directors

Our Board of Directors (the “Board”), elected by KeyCorp’s shareholders, oversees the business and management of KeyCorp. Members of the Board monitor and evaluate KeyCorp’s business performance through regular communication with the Chief Executive Officer and senior management and by participating in Board and Board committee meetings. The Board is committed to sound and effective corporate governance policies and high ethical standards. The size of the Board will be fixed at 12 members, effective as of the Annual Meeting of Shareholders.

On September 19, 2019, Beth Mooney announced that she will retire as Chairman and Chief Executive Officer of KeyCorp, effective May 1, 2020, but will continue to serve as a director of KeyCorp until this Annual Meeting of Shareholders, when she will retire and her term as a director will end. On September 19, 2019, the Board appointed Christopher Gorman to the Board for a term expiring at this Annual Meeting of Shareholders. Mr. Gorman will succeed Ms. Mooney as Chairman and Chief Executive Officer on May 1, 2020.

Additionally, Charles P. Cooley and William G. Gisel, Jr., each of whom served as a director during 2019, will continue to serve as a director of KeyCorp until this Annual Meeting of Shareholders, when each will retire and their respective terms as a director will end.

Under KeyCorp’s Regulations, directors are elected to one-year terms expiring at each subsequent Annual Meeting of Shareholders.

Director Recruitment and Qualifications

 

The Nominating and Corporate Governance Committee is responsible for identifying, evaluating, and recommending to the Board a slate of nominees for election at each Annual Meeting of Shareholders. All director nominees must have a record of high integrity and other requisite personal characteristics and must be willing to make the time commitment required of directors. The Nominating and Corporate Governance Committee uses the following criteria when evaluating director nominee candidates:

 

 

demonstrated breadth and depth of management and/or leadership experience, preferably in a senior leadership role with a large or recognized organization (private sector (profit or nonprofit), governmental, or educational);

 

 

a high level of professional or business expertise relevant to KeyCorp (including, among others, information technology, marketing, finance, banking or the financial industry, or risk management);

 

 

in the case of non-employee directors, satisfaction of the “independence” criteria set forth in KeyCorp’s Standards for Determining Independence of Directors;

 

 

service as a director for not more than (i) two other public companies if he or she is a senior executive officer of a public company, or (ii) three other public companies if he or she is not a senior executive officer of a public company; and

 

 

the ability to think and act independently, as well as the ability to work constructively in the overall Board process.

The criteria used in director recruitment are flexible guidelines to assist in evaluating and focusing the search for director candidates.

The Board also considers whether the candidate would enhance the diversity of the Board in terms of gender, race, experience, and/or geography. The current composition of the Board reflects the Nominating and Corporate Governance Committee’s focus in this area and the importance of diversity to the Board as a whole, with five female directors and two minority directors.

In evaluating Board nominees who satisfy the above criteria, the committee also considers:

 

 

the skills and business experience currently needed for the Board by using a comprehensive skills matrix;

 

 

the current and anticipated composition of the Board in light of the business activities and strategic direction of KeyCorp and the diverse communities and geographies served by KeyCorp; and

 

 

the interplay of the candidate’s expertise and professional/business background in relation to the expertise and professional/business background of current Board members, as well as such other factors (including diversity) as the committee deems appropriate.

 

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PROPOSAL ONE: Election of Directors

 

 

The Chair of the Nominating and Corporate Governance Committee extends an invitation to join the Board as a first-time director or to stand for election as a first-time nominee for director after discussion with and approval by the committee as a whole. The Nominating and Corporate Governance Committee then recommends the candidate to the entire Board for final approval.

The Nominating and Corporate Governance Committee retains an independent search firm to assist with identifying director candidates. The Nominating and Corporate Governance Committee has the sole authority to retain and terminate any search firm used to identify director candidates, including sole authority to approve its fees and the other terms of its engagement.

The Nominating and Corporate Governance Committee utilizes a matrix approach that tracks each director’s and director nominee’s qualities and qualifications in a tabular format to assist the committee in maintaining a well-rounded, diverse, and effective Board. In addition, the matrix approach helps the Nominating and Corporate Governance Committee identify any qualities, qualifications, and experience for potential director nominees that would help improve the composition of and add value to the Board. The Nominating and Corporate Governance Committee seeks directors who have held leadership positions in public companies and have experience in the banking or financial industry, cybersecurity, finance, marketing, mergers and acquisitions, regulatory matters, retail and small business, and risk management. The chart below describes the qualifications and experience of our non-management directors who currently serve on the Board:

 

Banking and Financial Industry

LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO       5 Directors

We value directors who have experience in our industry.

Cybersecurity

LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO       8 Directors

We rely heavily on information technology systems to conduct our business. A significant portion of our operations relies on the secure processing, storage, and transmission of personal and confidential information, such as the personal information of our customers. Cybersecurity experience is an important skill that we value in our directors.

Finance

LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO       9 Directors

We use numerous financial metrics to measure our performance and are also required to maintain certain minimum capital ratios. An understanding of finance and accounting is an important qualification for our directors. Two of our current directors qualify as “audit committee financial experts” under SEC regulations.

Marketing

LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO       4 Directors

We operate in a highly competitive industry. As we strive to grow organically and increase our market share, having directors who have marketing experience is important to us.

Mergers and Acquisitions

LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO       9 Directors

We regularly evaluate merger and acquisition and strategic partnership opportunities. We value directors who have experience with mergers and acquisitions.

Regulatory

LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO       7 Directors

Because we are subject to specialized regulations as a financial institution, we find it valuable to have directors with knowledge of banking regulations. Our Board also benefits from having a director who is a former bank regulator.

Retail and Small Business

LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO       3 Directors

We provide banking products to our customers, including small businesses, through our network of branches and ATMs. We believe that directors with retail and small business experience provide valuable insight into our retail branch network.

Risk Management

LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO       7 Directors

Effectively managing risk and reward is one of Key’s strategic priorities. In light of the Board’s role in overseeing risk management and understanding the most significant risks facing Key, having directors with risk management experience is important to us.

 

 

The Nominating and Corporate Governance Committee is continually in the process of identifying potential director candidates, and individual Board members are encouraged to submit any potential nominee to the Chair of the Nominating and Corporate Governance Committee. Shareholders may also submit potential director nominees by providing appropriate prior written notice to the Secretary of KeyCorp. The Nominating and Corporate Governance Committee will consider suggestions by shareholders concerning qualified candidates for election as directors. Page 65 of this proxy statement includes important information for shareholders who intend to submit a director nomination for the 2021 Annual Meeting of Shareholders.

 

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            PROPOSAL ONE: Election of Directors

 

 

Director Assessments

 

Each year, the Nominating and Corporate Governance Committee, led by the Lead Independent Director, conducts a thorough evaluation process to assess the effectiveness of each of our directors. In conjunction with the matrix approach described in the previous section, this evaluation process not only promotes a Board that has an appropriate mix of director backgrounds, skills, and competencies, but also ensures that the directors within that mix are consistently performing their roles at a level that enhances Board effectiveness.

Each director is required to complete a questionnaire designed to assist the director with rating his or her own effectiveness, including providing an opportunity for directors to recommend how they could be utilized on committees or in leadership roles, as well as suggest useful and emerging topics for board education. Each of these questionnaires is reviewed by our Lead Independent Director and the Nominating and Corporate Governance Committee and is then used as a foundation for an individualized discussion of each director’s performance in an executive session of our Nominating and Corporate Governance Committee (which includes each of our Committee Chairs). Ultimately, these discussions are considered when making nomination, committee makeup, and board leadership decisions.

For more information on our Board Assessment practices in general, please see “Board Assessments” on page 11 of this proxy statement.

Election Process

 

KeyCorp has adopted a majority voting standard in uncontested elections of directors and plurality voting in contested elections. In an uncontested election, a nominee must receive a greater number of votes “FOR” than “AGAINST” his or her election. If an uncontested nominee who is already a director receives more “AGAINST” votes than “FOR” votes, that director nominee will continue to serve as a “holdover director,” but must submit to the Board an offer to resign as a director. The Nominating and Corporate Governance Committee will consider the holdover director’s resignation and will submit a recommendation to accept or reject the resignation to the Board. The Board (excluding the holdover director) will act on the committee’s recommendation and publicly disclose its decision.

2020 Nominees for Director

 

Upon the recommendation of the Nominating and Corporate Governance Committee, the Board has nominated the individuals identified on the following pages for election as directors. Each nominee is currently a director of KeyCorp. Biographical information for each nominee is provided as of the most recent practicable date. The Board believes that the qualifications and experience of the director nominees, as described below, will continue to contribute to an effective and well-functioning Board. The Board and the Nominating and Corporate Governance Committee believe that the directors, individually and as a whole, possess the necessary qualifications to provide effective oversight of KeyCorp’s business, as well as quality advice and counsel to KeyCorp’s management.

If elected, each nominee will continue to serve as a director until KeyCorp’s 2021 Annual Meeting of Shareholders or until his or her successor is duly elected and qualified or he or she resigns or is otherwise removed. There is no reason to believe that any of these director nominees will be unable or unwilling to serve if elected. Should any nominee be unable to accept nomination or election, the proxies may be voted for the election of a substitute nominee recommended by the Board. Alternatively, the Board may recommend a shareholder vote holding the position vacant, to be filled by the Board at a later date.

 

The Board of Directors unanimously recommends that shareholders vote “FOR

each of the following director nominees.

 

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PROPOSAL ONE: Election of Directors

 

 

Bruce D. Broussard

LOGO     

 

Age: 57

 

Director Since: 2015

 

KeyCorp Committee(s):

 Compensation and Organization

 Technology

 

Biography:

 

Mr. Broussard is President and Chief Executive Officer and a director of Humana, Inc., a publicly-held health and well-being company. Prior to his election as Humana’s Chief Executive Officer in 2013 and as President in 2011, Mr. Broussard held numerous senior executive and senior financial roles with McKesson Corporation, a health care services company, and its predecessor U.S. Oncology. Mr. Broussard also previously served as a director of U.S. Physical Therapy, Inc. from 1999 to 2011. Mr. Broussard is a member of The Business Council.

 

 

 

Select Qualifications and Experience:

 

   Significant executive leadership experiences in the highly-regulated healthcare and insurance industries, including Chief Executive and Chief Financial Officer roles with Humana, McKesson Corporation, Harbor Dental, Inc., Sun Healthcare Group, Inc., and Regency Health Services, Inc.

 

   Extensive financial and accounting background with healthcare and health insurance companies and major global accounting firms.

 

 

Other Public Directorships:

 

   Humana, Inc. (since 2013)

 

 

Gary M. Crosby

LOGO

 

Age: 65

 

Director Since: 2016

 

Biography:

 

Mr. Crosby joined the Board in August 2016 in connection with the First Niagara merger. Mr. Crosby served as President and Chief Executive Officer and as a director of First Niagara from 2013 through the consummation of the merger. He joined First Niagara as Chief Administrative Officer in 2009 and served as Chief Operating Officer from 2010-2013. In 2004, Mr. Crosby was asked to help the Buffalo City School District as Chief Financial Officer and Chief Operating Officer and provided his service to the district by spearheading its financial management reform until 2009. Mr. Crosby also was a venture capital partner with Seed Capital Partners and a founding shareholder of ClientLogic Corporation, serving as Chief Financial and Chief Operating Officer. He has also held senior financial leadership positions in banking and manufacturing and was a CPA with KPMG Peat Marwick. Mr. Crosby is President of the board of First Niagara Foundation, director of the Buffalo Public Schools Foundation, director of the Community Foundation for Greater Buffalo, a director of AAA Western and Central New York, and a director of Kaleida Health.

 

 

 

Select Qualifications and Experience:

 

   As former Chief Executive Officer of First Niagara, brings extensive knowledge of the First Niagara businesses and the geographic markets in which First Niagara operated as well as leadership experience in the banking industry.

 

   Significant experience in financial management, accounting, operations, risk management, mergers and acquisitions, and integration of acquired companies from a distinguished career as Chief Financial Officer, Chief Operating Officer, and Chief Executive Officer across a wide variety of industries and public companies.

 

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PROPOSAL ONE: Election of Directors

 

 

 

Alexander M. Cutler

LOGO     

 

Age: 68

 

Director Since: 2000

 

KeyCorp Committee(s):

 Nominating and Corporate Governance (Chair)

 Compensation and Organization

 Executive

 

Biography:

 

Mr. Cutler is KeyCorp’s independent Lead Director. From 2000 through May of 2016, he was Chairman and Chief Executive Officer of Eaton Corporation plc, a publicly-held, global diversified power management company with approximately 101,000 employees that sells products to customers in more than 175 countries. He is a member of the board of directors of the United Way of Greater Cleveland and the Musical Arts Association.

 

 

 

Select Qualifications and Experience:

 

   Experience across a wide range of senior management and executive roles with Eaton Corporation plc and certain of its predecessor companies. Significant corporate governance experience and public company board experience through his role as Chairman of Eaton Corporation plc, his service on the DuPont de Nemours, Inc. board, and as a former member of the Executive Committee of the Business Roundtable.

 

   Extensive experience negotiating and completing acquisitions and divestitures and integrating acquired companies gained through leadership positions with Eaton Corporation plc.

 

 

 

Other Public Directorships:

 

   DuPont de Nemours, Inc. (since 2008)

 

   Eaton Corporation plc (2000–2016)

 

 

H. James Dallas

LOGO

 

Age: 61

 

Director Since: 2005

 

KeyCorp Committee(s):

 Audit

 Technology (Chair)

 

Biography:

 

In 2013, Mr. Dallas retired as Senior Vice President of Quality and Operations at Medtronic Inc., a global medical technology company. Mr. Dallas, who joined Medtronic Inc. in 2006, had previously served as Senior Vice President and Chief Information Officer at Medtronic Inc. Mr. Dallas’s responsibilities included executing cross-business initiatives to maximize the company’s global operating leveraging. Mr. Dallas also served as a member of Medtronic Inc.’s executive management team. Mr. Dallas is an independent consultant focusing on change management, information technology strategy, and risk. He also serves as Chairman Emeritus of the Atlanta Community Food Bank and a director of Grady Memorial Hospital Corporation.

 

 

 

Select Qualifications and Experience:

 

   Significant experience with information technology, information technology security, and data privacy, including prior service as the Chief Information Officer of Medtronic Inc. and, prior to that, as Chief Information Officer of Georgia-Pacific Corporation.

 

   As Chief Information Officer for major public corporations, had primary responsibility for risks related to information technology and security. As Senior Vice President of Quality and Operations with Medtronic Inc., held significant responsibility for operational risk management.

 

 

 

Other Public Directorships:

 

   Centene Corporation (since 2020)

 

   Strategic Education, Inc. (formerly Cappella Education Company) (since 2015)

 

   WellCare Health Plans, Inc. (2016-2020)

 

 

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PROPOSAL ONE: Election of Directors

 

 

Elizabeth R. Gile

LOGO     

 

Age: 64

 

Director Since: 2010

 

KeyCorp Committee(s):

 Risk (Chair)

 Nominating and Corporate Governance

 

Biography:

 

In 2005, Ms. Gile retired from Deutsche Bank AG where she was Managing Director and the Global Head of the Loan Exposure Management Group since 2003. From 2007 to 2009, Ms. Gile was Managing Director and Senior Strategic Advisor to BlueMountain Capital Management, a hedge fund management company. Ms. Gile has been a director of Deutsche Bank Trust Corporation and Deutsche Bank Trust Company Americas since 2005. Ms. Gile is a trustee and Secretary of the board of the Brooklyn Botanic Garden.

 

 

 

Select Qualifications and Experience:

 

   A distinguished career in the banking, finance, and capital markets industries with leading global financial institutions. Significant roles with J.P. Morgan, Deutsche Bank AG, and Toronto Dominion Securities managing loan portfolios, capital markets, derivatives and corporate lending transactions, and credit research.

 

   As Global Head of the Loan Exposure Management Group for Deutsche Bank AG, had global responsibility for managing the credit risk of loans and lending-related commitments, giving her experience in identifying, assessing, and managing risk exposures of a large, complex financial firm.

 

 

 

Other Public Directorships:

 

   Watford Re Ltd. (since 2017)

 

 

Ruth Ann M. Gillis

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Age: 65

 

Director Since: 2009

 

KeyCorp Committee(s):

 Risk

 Technology

 

Biography:

 

From 2008 until her retirement in 2014, Ms. Gillis served as Executive Vice President and Chief Administrative Officer of Exelon Corporation, a publicly-held electric utility company. Ms. Gillis also served as President of Exelon Business Services Company, a subsidiary of Exelon Corporation. She served as a member of Exelon Corporation’s executive committee, pension investment committee, and the corporate risk management committee, and was a member of the Exelon Foundation Board. Prior to those roles, she served as Executive Vice President of Commonwealth Edison Company and as Chief Financial Officer of Exelon Corporation. Ms. Gillis is an honorary trustee of the University of Chicago Cancer Research Foundation, serves as a national member and treasurer of the board of directors of the Lyric Opera of Chicago, and is a life trustee of the Goodman Theatre.

 

 

 

Select Qualifications and Experience:

 

   Extensive finance, management, operational and risk management expertise and history of accomplishment and executive ability as Chief Administrative Officer and Chief Financial Officer of Exelon Corporation.

 

   Significant experience leading complex organizations in highly-regulated industries such as banking, healthcare, and utilities.

 

 

 

Other Public Directorships:

 

   Voya Financial Inc. (since 2015)

 

   Snap-on Incorporated (since 2014)

 

 

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            PROPOSAL ONE: Election of Directors

 

 

Christopher M. Gorman

LOGO

 

Age: 59

 

Director Since: 2019

 

Biography:

 

Mr. Gorman was elected President and Chief Operating Officer of KeyCorp in September 2019 and will serve in that role until he becomes Chairman and Chief Executive Officer on May 1, 2020. Mr. Gorman joined KeyCorp in 1998 when it acquired McDonald Investments, a registered broker-dealer, where Mr. Gorman held various leadership roles. Since joining KeyCorp, Mr. Gorman has served in numerous capacities including President of Banking and Vice Chairman from 2017 to 2019, as Merger Integration Executive leading KeyCorp’s integration of First Niagara Financial Group, Inc. from 2016 to 2017, and as President of Key Corporate Bank from 2010 to 2016. Mr. Gorman is a member of The Bank Policy Institute and serves as a board member of the University Hospital Health System, the Catholic Community Foundation of Cleveland, and the Cleveland Museum of Art.

 

 

 

Select Qualifications and Experience:

 

   Over 25 years of financial services leadership experience in corporate, investment, private, and retail banking. Provides critical insight on KeyCorp’s business and operations to the Board of Directors.

 

   Leads the sales, service and operations of one of the largest financial services companies in the United States with 3.5 million clients and 18,000 colleagues. Oversees a $16.5 billion community benefits plan that delivers mortgage lending, community development, affordable housing, small business lending, and transformative philanthropy to the underserved.

 

   Was responsible for leading the integration of First Niagara Financial Group, Inc., a $40 billion financial institution with 400 branches, the largest acquisition in KeyCorp’s 190-year history.

 

 

Carlton L. Highsmith

LOGO     

 

Age: 68

 

Director Since: 2016

 

KeyCorp Committee(s):

 Nominating and Corporate Governance

 Risk

 

Biography:

 

Mr. Highsmith joined the Board in August 2016 in connection with the First Niagara merger. He was a member of the board of First Niagara since 2011, serving on the Governance/Nominating Committee and the Audit Committee. He previously served on the board of NewAlliance Bancshares from 2006 until it was acquired by First Niagara in 2011. He founded The Specialized Packaging Group (“SPG”) based in Hamden, Connecticut in 1983, and served as its President and Chief Executive Officer from 1983 to 2009. Mr. Highsmith is Vice Chairman of the board of trustees of Quinnipiac University, Chairman of the Connecticut Center for Arts & Technology, Treasurer of the National Center for Arts & Technology, a trustee of the Yale-New Haven Hospital System, and a trustee and Chairman of the Investment Committee of the Community Foundation for Greater New Haven. He previously served on the Federal Reserve Bank of Boston Community Development Advisory Council of New England.

 

 

 

Select Qualifications and Experience:

 

   Successful corporate executive and entrepreneur with significant bank board experience, having served on the board of directors of both NewAlliance and First Niagara.

 

   Under Mr. Highsmith’s leadership, SPG grew to become the largest minority owned, and 7th largest overall, manufacturer of paperboard packaging in North America before it merged with PaperWorks Industries in 2009.

 

 

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PROPOSAL ONE: Election of Directors

 

 

 

Richard J. Hipple

LOGO     

 

Age: 67

 

Director Since: 2012

 

KeyCorp Committee(s):

 Audit

 Technology

 

Biography:

 

Mr. Hipple retired as Executive Chairman of Materion Corporation, a publicly-held manufacturer of highly engineered advanced materials and related services, in December 2017. Mr. Hipple previously served as Chairman of the Board and Chief Executive Officer of Materion Corporation from 2006 to 2017 and President from 2005 to 2017. Prior to that, Mr. Hipple served in the steel industry for 26 years in a number of capacities, including project engineer, strategic planning, supply chain management, operations, sales and marketing, and executive management. Mr. Hipple is Chairman of the board of trustees of the Cleveland Institute of Music.

 

 

 

Select Qualifications and Experience:

 

   Extensive exposure to global commerce as former Chief Executive Officer of Materion Corporation, which serves customers in more than 50 countries and employs 2,500 people worldwide. Additionally, experience as a director at Ferro Corporation, Barnes Group Inc., and Luxfer Holdings PLC, which represent manufacturing companies with leading technologies, broad international footprints, and market diversity. With significant experience in the oversight and management of financial risks, Mr. Hipple qualifies as an “audit committee financial expert” as defined by the Securities and Exchange Commission.

 

   Significant corporate governance and executive-level management experience, including as the Executive Chairman and President and Chief Executive Officer of Materion Corporation and as Chairman of the compensation committee of both Ferro Corporation and Luxfer Holdings PLC.

 

 

 

Other Public Directorships:

 

   Luxfer Holdings PLC (since 2018)

 

   Barnes Group Inc. (since 2017)

 

   Ferro Corporation (2007–2018)

 

   Materion Corporation (2006–2017)

 

 

Kristen L. Manos

LOGO

 

Age: 60

 

Director Since: 2009

 

KeyCorp Committee(s):

 Audit

 Executive

 

Biography:

 

Ms. Manos is a partner with Sanderson Berry, a business strategy and advisory services firm. In 2014, Ms. Manos retired as President, Americas of Wilsonart LLC, the leading producer of high pressure decorative laminate products in North America. From 2004 to 2009, Ms. Manos served as President of Herman Miller North American Office and Executive Vice President of Herman Miller Inc., a global manufacturer and distributor of furnishings for a wide variety of professional and residential environments. Ms. Manos serves on the boards of two employee-owned companies, Columbia Forest Products, Inc. and Dexter Apache Holdings, Inc., and two private-equity-backed companies, C.H.I. Overhead Doors, LLC and Innovative Ergonomic Solutions LLC. She previously served on the board of International Relief and Development, where she also served as Interim Chief Executive Officer for four months in 2014.

 

 

 

Select Qualifications and Experience:

 

   As President, Americas, of Wilsonart LLC, responsible for the direction and operation of a $600 million organization, and led the company through its sale to a private equity firm. In prior roles as Executive Vice President and President of Herman Miller North American Office Environments, was responsible for the direction and operation of a $1.5 billion organization. Participated in corporate risk evaluation, risk management, and scenario planning for both Wilsonart and Herman Miller, as well as for Herman Miller clients related to their facilities.

 

   During her tenure with Herman Miller, Inc., held responsibility for marketing and development where she established a branding strategy and a vertical selling strategy in education and healthcare. Responsible for high-level business strategy, development, and assessment as a partner with Sanderson Berry.

 

 

 

Other Public Directorships:

 

   American Capital, Ltd. (2015–2017)

 

 

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            PROPOSAL ONE: Election of Directors

 

 

Barbara R. Snyder

LOGO

 

Age: 64

 

Director Since: 2010

 

KeyCorp Committee(s):

 Compensation and Organization

 Executive

 

Biography:

 

Ms. Snyder has been President of Case Western Reserve University, a private research university located in Cleveland, Ohio, since 2007. In February 2020, it was announced that in the fall of 2020, she will be retiring as President of Case Western University to lead the Association of American Universities. Prior to joining Case Western Reserve University, Ms. Snyder served as Executive Vice President and Provost of The Ohio State University (“OSU”). She served as a faculty member of OSU’s Moritz College of Law from 1998 to 2007. From 2000 to 2007, she held the Joanne W. Murphy/Classes of 1965 and 1973 Professorship at OSU. Ms. Snyder serves on the boards of several nonprofit organizations including the Greater Cleveland Partnership, Unify Labs, University Circle Inc., and Internet 2, a consortium of research organizations to develop networking and advanced technologies for research and education. She was Chair of the board and is currently a director of the Business-Higher Education Forum, an organization of senior business and higher education leaders dedicated to strengthening America’s competitiveness by partnering on workforce solutions, and was Chair of the board and is currently a director of the American Council on Education, which represents 1,800 colleges and universities.

 

 

 

Select Qualifications and Experience:

 

   President of Case Western Reserve University, one of the nation’s leading universities and a major private research institution with significant focus on science, engineering, and technology. Since 2007, Case Western Reserve University has tripled undergraduate admissions applications, become twice as selective, and dramatically increased the academic quality of the entering class.

 

   Under Ms. Snyder’s leadership, Case Western Reserve University has experienced unprecedented fundraising success, setting new records for annual attainment and reaching a $1.5 billion capital campaign goal one and a half years ahead of schedule, with a final attainment of $1.82 billion.

 

 

 

Other Public Directorships:

 

   Progressive Insurance Corporation (since 2014)

 

 

David K. Wilson

LOGO

 

Age: 65

 

Director Since: 2014

 

KeyCorp Committee(s):

 Risk

 

Biography:

 

Until his retirement in January 2014, Mr. Wilson served in a variety of positions with the Office of the Comptroller of the Currency (“OCC”) over the course of a 32-year career, including as Examiner-In-Charge (“EIC”) of two global banks and in a number of policy focused roles. In 2009, Mr. Wilson transitioned from Large Bank EIC into policy work, initially as Senior National Bank Examiner and co-chair of the OCC’s National Risk Committee. In 2010, he was appointed Deputy Comptroller for Credit and Market Risk. He then briefly served as Senior Deputy Comptroller and Chief National Bank Examiner before returning to the field as an EIC. Mr. Wilson is an independent consultant focusing on bank regulatory and risk strategy matters. He is also a member of the board of directors of KeyBank National Association.

 

 

 

Select Qualifications and Experience:

 

   Significant bank regulatory and risk strategy expertise, including providing advice and counsel to the Comptroller of the Currency, testifying before Congress, developing policy, and regulatory rulemaking following the Dodd-Frank Act.

 

   Extensive experience and understanding of the financial services regulatory climate, including participating in the Financial Stability Oversight Council (“FSOC”), serving as the OCC representative on FSOC’s Systemic Risk Committee, and chairing the Federal Financial Institutions Examination Council Task Force on Supervision.

 

 

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The Board of Directors and Its Committees

 

 

The Board of Directors and Its Committees

The Board is currently comprised of 12 independent directors, two members of management (Ms. Mooney and Mr. Gorman), and one non-management, non-independent director (Mr. Crosby). Three of our directors have joined the Board since 2015, including two directors as a result of the First Niagara merger. The average tenure of our current Board members is approximately eight  years.

Board Leadership Structure

 

Our Board is committed to independent Board leadership. The Board’s independent leadership and oversight responsibilities are realized through the guidance of our independent Lead Director, our independent Board committee chairs, and the full involvement of each of our independent directors. KeyCorp’s independent directors have elected Alexander M. Cutler as the Board’s independent Lead Director for 2020.

Among his specific responsibilities, the independent Lead Director:

 

 

presides at all meetings of the Board at which the Chairman is not present, including executive sessions of the independent and non-management directors held after each regularly scheduled Board meeting;

 

 

serves as liaison between the Chairman and the independent and non-management directors;

 

 

approves Board meeting schedules as well as meeting materials and agendas for each full Board meeting and executive sessions of independent and non-management directors;

 

 

has the authority to call meetings of the independent and non-management directors or the full Board at any time;

 

 

participates in discussions with major shareholders regarding governance matters as part of KeyCorp’s proactive shareholder engagement;

 

 

is in frequent contact with the Chairman with respect to major issues and strategic opportunities before KeyCorp, and any significant actions contemplated by KeyCorp are discussed with the Lead Director at an early stage;

 

 

advises on the retention of independent consultants to the Board;

 

 

interviews all candidates for election to the Board;

 

 

oversees changes to the composition of Board committees;

 

 

assists the Board and management in assuring compliance with applicable securities laws and fiduciary duties to shareholders;

 

 

oversees initiatives to implement enhancements to KeyCorp’s governance policies and the Corporate Governance Guidelines;

 

 

serves as a focal point for independent Committee Chairs, providing guidance, coordination, and advice for the committees;

 

 

together with the Chair of the Compensation and Organization Committee, facilitates the evaluation of the performance of KeyCorp’s Chief Executive Officer; and

 

 

is available for additional duties as they may arise.

The Lead Director seeks input from independent and non-management directors during executive sessions with respect to items to be included on the agenda for each Board meeting and provides feedback from the independent and non-management directors while engaging in the agenda-building process.

Each standing committee of the Board is chaired by an independent director and consists solely of independent directors. Our independent directors have extensive corporate governance and leadership experience, and many have significant public company experience. Three of our independent directors are or have been chief executive officers with public companies.

On September 19, 2019, Beth Mooney announced that she will retire as Chairman and Chief Executive Officer of KeyCorp, effective May 1, 2020. Christopher M. Gorman will succeed Ms. Mooney as Chairman and Chief Executive Officer on May 1, 2020. The Board believes that KeyCorp will be well served by Mr. Gorman’s combined role as Chairman and Chief Executive Officer. Mr. Gorman’s combined leadership role will allow him to set the overall tone and direction for KeyCorp, maintain consistency in the internal and external communication of our strategic and business priorities, and have primary responsibility for managing KeyCorp’s operations. Our many conversations between our directors and our shareholders regarding their views on Board leadership and independent oversight have confirmed our view that a strong, effective Lead Director, like Mr. Cutler, an independent Board, and independent key committees provide the independent leadership necessary to balance the combined Chairman and Chief Executive Officer role and, with the formal and informal mechanisms we have in place to facilitate the work of the Board and its committees, results in the Board effectiveness and efficiency that our shareholders expect.

 

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The Board of Directors and Its Committees

 

 

In connection with Mr. Gorman’s upcoming appointment, the Board evaluated KeyCorp’s leadership structure and determined that it remains appropriate for and in the best interests of the Company, taking into account a variety of factors including KeyCorp’s size, the nature of its business, the regulatory framework in which it operates, and the leadership structure of its peers. The Board will continue to annually (or more often in the event that a new Chief Executive Officer is selected) assess KeyCorp’s leadership structure. Our Regulations provide the Board with flexibility to separate or combine the roles of Chairman and Chief Executive Officer as it deems necessary from time to time and on a case-by-case basis. The Board continues to believe that a primary consideration for KeyCorp is that, as a large financial institution subject to significant regulation, KeyCorp must communicate swiftly and consistently with our stakeholders, including our regulators. We believe that swift and consistent communication is significantly furthered by KeyCorp’s leadership, through our Chairman and Chief Executive Officer, speaking as a single voice on behalf of both the Board and management.

Board Assessments

 

Our Board believes that a robust and constructive Board and committee evaluation process is an essential component of board effectiveness. Each year, the Board conducts a comprehensive evaluation process, overseen by the Nominating and Corporate Governance Committee, of both its own effectiveness, as well as the effectiveness of each of its members and its Lead Director. Additionally, each of our committees conducts its own tailored evaluation. Below are further details on our assessment processes:

 

Annual Evaluation Processes

Board

Assessment

 

g The Board Assessment Questionnaire is reviewed by the Nominating and Corporate Governance Committee and any enhancements are incorporated into the Questionnaire.

 

g The Questionnaire is released to all directors for their consideration, with topics including board oversight, meeting cadence and materials, and composition and structure.

 

g Responses to the Questionnaire inform a discussion, led by our Lead Director, during an executive session of the full Board.

     
Committee Assessments  

g Each Committee Assessment Questionnaire is reviewed by its respective committee and any enhancements are incorporated into the Questionnaire.

 

g The Questionnaire is released to each committee’s respective directors for completion, with topics including materials, access to management, and meeting tenor.

 

g Responses to the Questionnaire are used by each Committee Chair to lead a discussion during the next session of the committee.

     

Director

    Assessments    

 

g The Director Assessment Questionnaire is reviewed by the Nominating and Corporate Governance Committee and any enhancements are incorporated into the Questionnaire.

 

g The Questionnaire is released to all directors for their completion, asking each director to rate his or her performance and identify areas of opportunity.

 

g Responses to the Questionnaire serve as a foundation for an individualized discussion of each director’s performance in an executive session of our Nominating and Corporate Governance Committee.

     
Lead Director Assessment  

g The Lead Director Assessment is reviewed by the Nominating and Corporate Governance Committee and any enhancements are incorporated into the Questionnaire.

 

g The Questionnaire is released to all directors for their completion, to provide feedback on the Lead Director’s performance against the role’s specified responsibilities.

 

g Responses to the Questionnaire inform a discussion of our Board, with the Lead Director excused from participation, in connection with the annual appointment of a Lead Director.

Board and Committee Responsibilities

 

The Board delegates various responsibilities and authority to its five standing committees: Audit, Nominating and Corporate Governance, Compensation and Organization (the “Compensation Committee”), Risk, and Technology. The Board has also established an Executive Committee that serves the functions described on page 14 of this proxy statement. The committees regularly report on their activities and actions to the full Board. The Board, with the recommendation of the Nominating and Corporate Governance Committee and in consultation with the Lead Director, appoints the members of the committees, and has determined that each member of a standing committee is an independent director under New York Stock Exchange independence standards.

The Board held six meetings during 2019. At every regularly-scheduled Board meeting, the independent and non-management members of the Board met in executive session (i.e., without the Chair or any other employee of KeyCorp present). The members of the Board attended, on average, approximately 97% of Board meetings and committee meetings held during 2019. No director attended less than 75% of such meetings. KeyCorp Board members are expected to attend the Annual Meeting of Shareholders, and all Board members but two serving at that time did so for the 2019 Annual Meeting of Shareholders.

 

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The Board of Directors and Its Committees

 

 

The following describes the responsibilities and current membership of the standing committees of the Board and the number of times each committee met in 2019.

 

Audit Committee

Chair:

Charles P. Cooley

 

Other Members:

H. James Dallas

Richard J. Hipple

Kristen L. Manos

 

Number of

Meetings in 2019: 16

  

Primary Responsibilities

   Oversees the development of, and reviews, the financial information provided to KeyCorp’s shareholders

 

   Is directly responsible for the appointment, compensation, retention, and oversight of our independent auditor, oversees the audit fees negotiations with our independent auditor, and has sole authority to approve audit fees

 

   Has responsibility over all KeyCorp internal audit and credit risk review functions, financial reporting, legal matters, and fraud risk

 

   Oversees any material examinations of KeyCorp and its affiliates conducted by federal, state, or other authorities, and may supervise and direct any other special projects or investigations the committee deems necessary

 

   Together with the Risk Committee, oversees and reviews our allowance for loan and lease losses methodology and monitors operational risk, and

 

   Serves as the audit committee for KeyCorp’s subsidiary, KeyBank National Association.

 

Independence

The Audit Committee has been established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934 (the “Exchange Act”). The Board has determined that all members of the Audit Committee are “independent” as that term is defined in Section 303A.02 of the New York Stock Exchange’s listing standards.

 

Audit Committee Financial Experts

The Board of Directors has determined that Mr. Cooley and Mr. Hipple each qualify as an “audit committee financial expert,” as defined in Item 407(d)(5) of Regulation S-K.

 

Nominating and Corporate Governance Committee

Chair:

Alexander M. Cutler

 

Other Members:

Charles P. Cooley

Elizabeth R. Gile

William G. Gisel, Jr.

Carlton L. Highsmith

 

Number of

Meetings in 2019: 6

  

Primary Responsibilities

   Recommends to the Board nominees to stand for election as directors

 

   Oversees the annual Board self-assessment process (including individual director self-assessments and the evaluation of the Lead Director), as well as KeyCorp’s policies and practices on significant issues of corporate social responsibility

 

   Oversees corporate governance matters generally

 

   Oversees and reviews KeyCorp’s directors’ and officers’ liability insurance program

 

   Supports the Compensation and Risk Committees by facilitating a meeting of all independent Board committee Chairs to discuss the linkage between enterprise risk and compensation at KeyCorp, and

 

   With the aid of market data, annually reviews and recommends to the Board a director compensation program that may include equity-based incentive compensation (no executive officer of KeyCorp has any role in determining the amount of director compensation, although the committee may seek assistance from our executive officers in designing equity compensation programs for directors).

 

 

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Compensation and Organization Committee

Chair:

William G. Gisel, Jr.

 

Other Members:

Bruce D. Broussard

Alexander M. Cutler

Barbara R. Snyder

 

Number of

Meetings in 2019: 7

  

Primary Responsibilities

   Supports KeyCorp’s efforts to attract, retain, develop, and reward talent so that we can achieve our business objectives

   Is responsible for overseeing the compensation of our senior executives, certain of our compensation programs, and our talent management and organizational development processes

   Evaluates the competitiveness of our compensation programs and assesses the effectiveness of our succession planning, leadership development, and strategic hiring objectives

   Approves the performance goals, performance objectives, and the compensation of our Chief Executive Officer and other senior executives and evaluates their performance relative to those goals and objectives

   Establishes our overall compensation philosophy and oversees the implementation of this philosophy as it relates to our incentive compensation arrangements, including through approval of our incentive compensation policy

   Is responsible for enforcing the compensation clawback policy

   Appoints, directs, and oversees its independent advisors and performs additional duties described in its Charter, and

   May delegate its authority to a subcommittee of its members and may allow limited delegations to management.

 

Independence

The Board of Directors has determined that all members of the Compensation Committee are “independent” as that term is defined in Section 303A.02 of the New York Stock Exchange’s listing standards.

 

Further discussion of the Compensation Committee can be found beginning on page 22 of this proxy statement under the heading “Compensation Discussion and Analysis.”

 

Risk Committee

Chair:

Elizabeth R. Gile

 

Other Members:

Ruth Ann M. Gillis

Carlton L. Highsmith

David K. Wilson

 

Number of

Meetings in 2019: 8

  

Primary Responsibilities

   Is responsible for assisting the Board with strategies, policies, procedures, and practices relating to the assessment and management of KeyCorp’s enterprise-wide risks, including credit risk, market risk, liquidity risk, compliance risk, operational risk, and other risks

 

   Plays a crucial role in overseeing KeyCorp’s capital adequacy and compliance with regulatory capital requirements

 

   Reviews and approves KeyCorp’s capital plan and recommends share repurchase authorizations to the Board consistent with approved capital plans

 

   May exercise such authority as the Board delegates in connection with the authorization, sale, and issuance by KeyCorp of debt and other equity securities, and

 

   Together with the Audit Committee, oversees and reviews our allowance for loan and lease losses methodology.

 

 

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Technology Committee

Chair:

H. James Dallas

 

Other Members:

Bruce D. Broussard

Ruth Ann M. Gillis

Richard J. Hipple

 

Number of

Meetings in 2019:

0 (New in 2020)

  

Primary Responsibilities

   Reviews and approves KeyCorp’s technology planning and strategy including investments related to cybersecurity and reviews significant technology investments and expenditures

 

   Monitors and evaluates existing and future trends in technology that may affect KeyCorp’s strategic plans or competitive position, including monitoring of overall industry trends

 

   Provides oversight of management’s activities relating to technology strategy, performance, and innovation and monitors KeyCorp’s innovation and technology acquisition process and systems in place designed to achieve successful innovation

 

   Reviews strategic IT projects with business and IT personnel to understand the functionality, business benefits, and user/customer adoption, and

 

   Reports to the Risk Committee on risk management issues associated with the technology strategic investment plan and major technology vendor relationships.

 

The Board also has an Executive Committee, comprised of Ms. Mooney (Chair), Mr. Cooley, Mr. Cutler, Ms. Manos, and Ms. Snyder, which may exercise the authority of the Board, to the extent permitted by law, on any matter requiring Board or committee action between Board or committee meetings. The Executive Committee did not hold any meetings in 2019.

Upon the retirement of Ms. Mooney, Mr. Gisel, and Mr. Cooley at this Annual Meeting of Shareholders, Mr. Gorman will become the Chair of the Executive Committee, Ms. Snyder will become the Chair of the Compensation and Organization Committee, and Mr. Hipple will become the Chair of the Audit Committee, in each case, subject to their reelection to the Board.

Board Oversight of Risk

 

Our Board leadership and committee structure supports the Board’s risk oversight function. Generally, each Board committee oversees the following risks:

 

 

The Risk Committee has primary oversight responsibility for enterprise-wide risk at KeyCorp, including credit risk, market risk, liquidity risk, compliance risk, operational risk (including cybersecurity), as well as reputational and strategic risks, and oversight of the actions taken to mitigate these risks.

 

 

The Audit Committee has primary oversight responsibility for internal audit, financial reporting, legal matters, and fraud risk.

 

 

The Compensation Committee has primary oversight responsibility for risks related to our compensation policies and practices.

 

 

The Nominating and Corporate Governance Committee has primary oversight responsibility for significant issues of corporate social responsibility.

 

 

The Technology Committee provides additional oversight of risk management issues stemming from KeyCorp’s technology strategic investment plan, cybersecurity investments, and major technology vendor relationships.

The Audit and Risk Committees jointly oversee and review the allowance for loan and lease losses methodology and monitor operational risk. The committees receive, review, and evaluate management reports on risk for their areas of risk oversight. At each Board meeting, the Chair of each Board committee reports to the full Board on risk oversight issues.

Our Board structure enables the Board to exercise vigorous oversight of key issues relating to management development, succession and compensation, compliance and integrity, corporate governance, cybersecurity, and company strategy and risk. With respect to risk, the Board oversees that KeyCorp’s risks are managed in a manner that is effective and balanced and adds value for KeyCorp’s shareholders. The Board understands KeyCorp’s risk philosophy, approves KeyCorp’s risk appetite, inquires about risk practices, reviews the portfolio of risks, compares the actual risks to the risk appetite, and is apprised of significant risks, both current and emerging, and determines whether management is responding appropriately. With respect to risk and other areas that it oversees, the Board challenges management and promotes accountability.

KeyCorp has formed a senior level management committee, the Enterprise Risk Management Committee (“ERM Committee”), consisting of Mr. Gorman and other senior officers at KeyCorp, including KeyCorp’s Chief Risk Officer. The ERM Committee meets weekly and is central to ensuring that the corporate risk profile is managed in a manner consistent with KeyCorp’s risk appetite. The ERM Committee is also responsible for implementation of KeyCorp’s Enterprise Risk Management Policy, encompassing our risk philosophy, policy framework, and governance structure for the management of risks across the entire company. The Risk Committee of the Board oversees KeyCorp’s risk management program, including the ERM Committee. The Board approves the Enterprise Risk Management Policy and sets the overall level of risk KeyCorp is willing to accept and manage in pursuit of its strategic objectives.

 

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Oversight of Compensation-Related Risks

 

KeyCorp’s compensation program is designed to offer competitive pay for performance, aligned with KeyCorp’s short- and long-term business strategies, approved risk appetite and defined risk tolerances, and shareholders’ interests. Reviews of KeyCorp’s compensation plans by the Compensation Committee and KeyCorp management did not identify any plan that was reasonably likely to have a material adverse impact on KeyCorp or that would incentivize excessive risk-taking. The Compensation Committee also reviewed KeyCorp’s compensation plans to monitor compliance with KeyCorp’s risk management tolerances and safety and soundness requirements.

KeyCorp has a well-developed governance structure for its incentive compensation programs, including roles for the Board of Directors, senior management, lines of business, and control functions. The Board oversees KeyCorp’s incentive compensation programs, primarily through the Compensation Committee, with additional input and guidance from its Nominating and Corporate Governance, Risk, and Audit Committees. In addition to directly approving compensation decisions for senior executives, the Compensation Committee also approves KeyCorp’s overall Incentive Compensation Policy and Program so that KeyCorp’s incentive compensation practices remain in alignment with KeyCorp’s risk management practices. KeyCorp’s Incentive Compensation Policy and Program are intended to enhance KeyCorp’s risk management practices by rewarding appropriate risk-based performance.

We maintain a detailed and effective strategy for implementing and executing incentive compensation arrangements that provide balanced risk-taking incentives. KeyCorp’s incentive compensation arrangements are designed, monitored, administered, and tested by a multidisciplinary team drawn from various areas of KeyCorp, including Risk Management. This team is charged with seeing that our incentive compensation arrangements align with risk management practices and support the safety and soundness of the organization. From initial plan design to individual awards, KeyCorp’s program incorporates sound compensation principles and risk-balancing at every stage of the incentive compensation process, including:

 

 

the identification of employees who have the ability to influence or control material risk;

 

 

the use of risk-balancing mechanisms across all incentive plans that take into account the primary risks associated with employee roles;

 

 

the deferral of incentive compensation to balance risk and align an employee’s individual interests with KeyCorp’s future success and safety and soundness;

 

 

the development of clawback policies and procedures to recoup certain incentive compensation paid to employees in the event of certain risk-based events; and

 

 

the annual assessment of risk-balancing features, the degree to which selective plan design features affect risk-taking, the alignment of incentive metrics with business objectives, the overall competitiveness of the pay opportunity, the participation of control functions, and the effectiveness of monitoring and administration of the plans.

Director Independence

 

The Board of Directors has determined that all current members of the Board of Directors (i.e., Mss. Gile, Gillis, Manos, and Snyder, and Messrs. Broussard, Cooley, Cutler, Dallas, Gisel, Highsmith, Hipple, and Wilson), other than Ms. Mooney, Mr. Gorman, and Mr. Crosby, are independent directors and independent for purposes of the committees on which they serve. These determinations were made after reviewing the relationship of these individuals to KeyCorp in light of KeyCorp’s Standards for Determining Independence of Directors and the independence requirements of the New York Stock Exchange. Due to Mr. Crosby’s former position as Chief Executive Officer of First Niagara, the Board determined that Mr. Crosby is not an independent director.

To determine the independence of the members of the Board, the Board considered certain transactions, relationships, or arrangements between those directors, their immediate family members, or their affiliated entities, on the one hand, and KeyCorp or one or more of its subsidiaries, on the other hand. Certain directors, their respective immediate family members, and/or affiliated entities have banking relationships with Key, such as consumer banking products or credit relationships, and/or receive wealth management services. In addition, an affiliated entity of one of the directors received a charitable contribution from Key.

The Board determined that all of these transactions, relationships, or arrangements were made in the ordinary course of business, were made on terms comparable to those that could be obtained in arms’ length dealings with an unrelated third party, were not criticized or classified, non-accrual, past due, restructured or a potential problem, complied with applicable banking laws, were immaterial, and did not otherwise impair any director’s independence. Additionally, during the last three

 

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fiscal years, there were no transactions between KeyCorp and any affiliated entities of the directors under which payments made or received exceeded 1% of the consolidated gross revenue of either KeyCorp, on the one hand, or the affiliated entity, on the other hand.

Related Party Transactions

 

Any transaction, relationship, or arrangement with KeyCorp or its subsidiaries in which a KeyCorp director, executive officer, or other related person has a direct or indirect material interest is subject to KeyCorp’s Policy for Review of Transactions between KeyCorp and its Directors, Executive Officers, and Other Related Persons. The Nominating and Corporate Governance Committee is responsible for applying the policy and uses the following factors identified in the policy in making its determinations:

 

 

whether the transaction conforms to KeyCorp’s Code of Business Conduct and Ethics and Corporate Governance Guidelines and is in KeyCorp’s best interests;

 

 

whether the transaction is entered into in the ordinary course of KeyCorp’s business;

 

 

whether the terms of the transaction are comparable to terms that could be obtained in arms’ length dealings with an unrelated third party;

 

 

whether the transaction must be disclosed under Item 404 of Regulation S-K under the Exchange Act; and

 

 

whether the transaction could call into question the independence of any of KeyCorp’s non-employee directors.

The policy provides exceptions for certain transactions, including those available to all KeyCorp employees generally, those involving compensation or indemnification of executive officers or directors authorized by the Board of Directors or one of its committees, those involving the reimbursement of routine business expenses, and those occurring in the ordinary course of business.

Banking and Credit Transactions with KeyCorp Executive Officers and Directors

From time to time during 2019, many of our directors and executive officers and some of their immediate family members and affiliated entities had deposit or credit relationships with or received investment or wealth management services from KeyBank National Association (“KeyBank”) or other KeyCorp subsidiaries in the ordinary course of business. Additional transactions and banking relationships may continue in the future.

First Niagara Bank, National Association, which has since merged into KeyBank, previously made a residential mortgage loan to an immediate family member of Mr. Crosby under First Niagara’s loan program for employees, which included an interest rate discount. At December 31, 2019, the amount outstanding on the loan to Mr. Crosby’s immediate family member was $173,221.25, and the largest amount outstanding on the loan during 2019 was $178,171.27. The amount of principal and interest paid during 2019 was $10,897.92, and the amount of interest payable during the remainder of the loan is $65,180.80.

All other credit relationships with our directors, executive officers, and other related persons were made in the ordinary course of business on substantially the same terms, including interest rate and collateral terms, as those prevailing at the time for comparable transactions with unrelated third parties and did not present heightened risks of collectability or other unfavorable features to KeyCorp or its subsidiaries.

Additionally, loans and extensions of credit by KeyBank to our directors, executive officers, and their related interests were made in compliance with Regulation O under federal banking law and KeyBank’s related policies and procedures. In addition to satisfying the standard set forth in the preceding paragraph, our Regulation O policies and procedures require that:

 

 

the amount of credit extended does not exceed individual and aggregate lending limits, depending upon the identity of the borrower and the nature of the loan; and

 

 

any extension of credit in excess of $500,000 be approved by the Board of Directors of KeyBank.

Shareholder Engagement

 

In order for management and the Board to better understand and consider shareholders’ perspectives, we regularly communicate with our shareholders, including to solicit and discuss their views on governance, executive compensation, and other matters. We believe our regular engagement has been productive and provides an open exchange of ideas and perspectives for both the Company and our shareholders.

Throughout 2019, members of management and our independent Lead Director participated in discussions with a number of institutional shareholders, including many of our largest shareholders. Overall, participating investors expressed support for the Company’s governance and compensation practices. Feedback received during these meetings was presented to and discussed by the Nominating and Corporate Governance Committee, Compensation Committee and, as appropriate, other Board committees and the entire Board.

 

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After considering feedback received from shareholders in recent years, we:

 

 

amended our Regulations to adopt a meaningful proxy access right for shareholders;

 

 

formalized additional responsibilities for the independent Lead Director and added disclosure about the Lead Director’s activities (see page 10 of this proxy statement);

 

 

formalized an annual evaluation of the Lead Director and incorporated the evaluation process in our Corporate Governance Guidelines;

 

 

increased our website disclosure with respect to our political spending and activity;

 

 

enhanced our public disclosures about employee diversity and pay equity, including through the publishing of an annual Diversity and Inclusion Report;

 

 

provided additional disclosure about the Audit Committee’s oversight and engagement of the independent auditor in the Audit Committee Report at page 58 in this proxy statement; and

 

 

created a robust summary (at pages i to iv in this proxy statement) and enhanced our Compensation Discussion and Analysis that begins at page 22 in this proxy statement.

In addition, our Chief Executive Officer, Chief Financial Officer, Director of Investor Relations, and other members of our senior management team receive regular feedback from the investment community—through ongoing communication, on- and off-site investor visits, meetings, and conferences—regarding our strategy, financial results, and other topics of interest, and regularly brief our Board on this feedback.

Director Education

 

Throughout the year, our directors participate in continuing education activities and receive educational materials on a wide variety of topics (including, corporate governance, the financial services industry, cybersecurity, executive compensation, risk management, finance, and accounting). Annually, the Board holds director education sessions focusing on topics suggested by the directors, including through feedback obtained in connection with our Board Assessment processes, at the November meeting of the Board and its committees. From time to time, our directors may also attend seminars and other educational programs at KeyCorp’s expense. These educational opportunities provide our directors with timely updates on best practices among our peers and in the general marketplace and further supplement our directors’ significant business and leadership experiences.

Communication with the Board

 

Interested parties may submit comments about KeyCorp to the directors in writing at KeyCorp’s headquarters at 127 Public Square, Cleveland, Ohio 44114. Correspondence should be addressed to “Lead Director, KeyCorp Board of Directors, care of the Secretary of KeyCorp” and marked “Confidential.”

Interested parties wishing to communicate with the Audit Committee regarding accounting, internal accounting controls, or auditing matters may directly contact the Audit Committee by mailing a statement of their comments and views to KeyCorp at its corporate headquarters at 127 Public Square, Cleveland, Ohio 44114. Such correspondence should be addressed to “Chair, Audit Committee, KeyCorp Board of Directors, care of the Secretary of KeyCorp” and should be marked “Confidential.”

 

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Corporate Governance Documents

 

 

Corporate Governance Documents

The KeyCorp Board of Directors’ Committee Charters, KeyCorp’s Standards for Determining Independence of Directors, KeyCorp’s Policy for Review of Transactions between KeyCorp and its Directors, Executive Officers, and Other Related Persons, as well as the documents listed below, are available at www.key.com/ir under the “ESG Information” tab or elsewhere on KeyCorp’s website. Copies of these documents will be delivered, free of charge, to any shareholder who contacts KeyCorp’s Investor Relations Department at (216) 689-4221.

Corporate Governance Guidelines

 

The Board has adopted written Corporate Governance Guidelines (the “Guidelines”) that detail the Board’s corporate governance duties and responsibilities, many of which are described herein. The Guidelines take into consideration, and are reviewed annually and updated periodically to reflect, best practices in corporate governance and applicable laws and regulations. The Guidelines address a number of matters applicable to directors (such as director qualification standards and independence requirements, share ownership guidelines, and succession planning and management) and management (such as stock ownership guidelines for management and procedures for the annual evaluation of our Chief Executive Officer).

Code of Business Conduct and Ethics

 

We are committed to the highest standards of ethical integrity. Accordingly, the Board of Directors has adopted a Code of Business Conduct and Ethics for all of KeyCorp’s (and its subsidiaries’) employees, officers, and directors, which was last amended in July 2019. We will promptly disclose any waiver or amendment to our Code of Business Conduct and Ethics for our executive officers or directors on our website. Our Code of Business Conduct and Ethics ensures that each employee, officer, and director understands the basic principles that govern our corporate conduct and our core values of Teamwork, Respect, Accountability, Integrity, and Leadership.

Statement of Political Activity

 

An important part of our commitment to our community includes active participation in the political and public policy process that impacts the lives of our customers, shareholders, and business. As a large financial institution, our business is highly regulated at the federal, state, and local levels. We believe it is critically important to take a constructive role in the political process that will shape the future of business, our industry, and our community.

The Nominating and Corporate Governance Committee of the Board meets annually with a member of KeyCorp’s Government Relations team to review KeyCorp’s policies and practices regarding political contributions. Policies and practices reviewed by the Nominating and Corporate Governance Committee include KeyCorp’s policies regarding doing business with public entities, the Government Relations pre-approval process for ballot issue support, and the KeyCorp Advocates Fund (political action committee) annual report.

Corporate Responsibility Report

 

Our purpose is to help our clients and communities thrive, which we drive through our commitment to responsible banking, responsible citizenship, and responsible operations. We are more focused than ever on participating in the economic expansion, revitalization, and resurgence of the communities we so proudly serve, as well as helping to strengthen the financial wellness of every client. Beyond traditional banking, we do this best through philanthropy, community development, sustainability, and diversity and inclusion.

The Nominating and Corporate Governance Committee of the Board oversees KeyCorp’s policies and practices on significant issues of corporate social responsibility. Detailed information regarding KeyCorp’s (and its subsidiaries’) and the KeyBank Foundation’s corporate responsibility priorities and progress can be found in our annual Corporate Responsibility Report. We use the Global Reporting Initiative (GRI) framework to provide transparent disclosure of KeyCorp’s most significant areas of impact in a manner comparable with peers and industry benchmarks.

Diversity and Inclusion Report

 

At KeyCorp, diversity is who we are; inclusive is what we choose to be. For us, diversity and inclusion are about building an intentional and committed workplace environment and organizational culture where all people are engaged, valued, supported, respected, affirmed, and encouraged to bring their best, authentic selves to work. This culture is a reflection of who we are and adds value to and alignment with our business objectives. Further information regarding KeyCorp’s efforts to promote diversity and inclusion in our company, our industry, and our society can be found in our annual Diversity and Inclusion Report.

 

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    Ownership of KeyCorp Equity Securities

 

 

Ownership of KeyCorp Equity Securities

The following table reports the number of KeyCorp equity securities that were beneficially owned by the directors and director nominees of KeyCorp, the Named Executive Officers, and all directors and executive officers of KeyCorp as a group, and each person reported to us to beneficially own more than 5% of our common shares. Beneficially-owned KeyCorp equity securities include directly or indirectly owned KeyCorp common shares and any KeyCorp common shares that could be acquired within 60 days of the record date through the exercise of an option or through the vesting or distribution of deferred shares. The column “Other Deferred Shares Owned” reports the number of deferred shares owned that will not vest or be distributed within 60 days of the record date.

This information is provided as of the record date, March 27, 2020.

 

 

Name

 

Common

Shares

   

Options

(1)

   

Deferred

Shares

(2)(3)(4)

   

Total

Beneficial

Ownership
(5)

   

Total

Beneficial

Ownership

as a % of

Outstanding

Common

Shares

(6)

                 

Other

Deferred

Shares

Owned

(2)(3)(4)

   

Combined
Beneficial
Ownership
and Other
Deferred
Shares
Owned

(5)

 

Amy G. Brady

    135,262       100,534             235,796                 123,015       358,811  

Bruce D. Broussard

    20,529             7,859       28,388                 6,402       34,791  

Charles P. Cooley

    25,005             7,312       32,316                 89,242       121,558  

Gary M. Crosby

    536,989             11,061       548,050                       548,050  

Alexander M. Cutler

    195,581                   195,581                 52,781       248,362  

H. James Dallas

    103,596             11,061       114,657                       114,657  

Elizabeth R. Gile

    33,018             3,749       36,767                 47,071       83,838  

Ruth Ann M. Gillis

    115,323                   115,323                 40,828       156,150  

William G. Gisel, Jr.

    17,900                   17,900                 82,413       100,313  

Christopher M. Gorman

    510,760       772,408             1,283,168                 222,669       1,505,837  

Carlton L. Highsmith

    61,125             11,061       72,186                       72,186  

Richard J. Hipple

    24,360             3,202       27,561                 39,660       67,222  

Donald R. Kimble

    370,441       177,180             547,621                 161,223       708,844  

Kristen L. Manos

    121,231                   121,231                 81,266       202,496  

Beth E. Mooney

    1,374,398       549,726             1,924,124                 655,007       2,579,131  

Andrew J. “Randy” Paine III

    193,527       241,407             434,934                 152,365       587,299  

Barbara R. Snyder

    15,217                   15,217                 118,538       133,755  

David K. Wilson

    23,029                   23,029                             22,118       45,148  

All directors and executive officers as a group (27 persons)

    4,523,180       2,179,686       55,304       6,758,170                             2,460,303       9,218,473  

The Vanguard Group (7)

    113,752,101                   113,752,101       11.81        

BlackRock, Inc. (8)

    81,072,832                   81,072,832       8.41        

State Street Corporation (9)

    49,563,985                   49,563,985       5.14        

 

(1)

This column includes options (including in-the-money and out-of-the-money options) to acquire KeyCorp common shares exercisable on or within 60 days of March 27, 2020.

 

(2)

Deferred shares issued under the prior KeyCorp Directors’ Deferred Share Plan or the current Directors’ Deferred Share Sub-Plan to the KeyCorp 2019 Equity Compensation Plan (the “Directors’ Deferred Share Sub-Plan”) are payable three years from their award date, one-half in cash and one-half in common shares, or immediately if a director separates from the Board for any reason prior to the third anniversary of the award. A director may elect to defer the payment of all or some of his or her deferred shares beyond the third anniversary of the award date (“Further Deferred Shares”). In that case, the Further Deferred Shares will be distributed entirely in common shares on (and only on) the deferral date selected by the director. Deferred shares payable in common shares (other than Further Deferred Shares) are included in the column “Deferred Shares” because they may be distributed to the director as common

 

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  shares immediately upon separation from the Board. Further Deferred Shares, and directors’ fees that have been deferred under the Directors’ Deferred Share Sub-Plan or, previously, the KeyCorp Second Directors’ Deferred Compensation Plan, are included in the column “Other Deferred Shares Owned” because they are only payable on the deferral date selected by the director, which is not on or within 60 days of March 27, 2020 for any director. Deferred shares payable in cash are not reflected in this table. For more information, please see “Directors’ Compensation” on page 54 of this proxy statement.

 

(3)

The column “Deferred Shares” includes deferred shares, performance units, and restricted stock units held by executive officers that will be payable in KeyCorp common shares on or within 60 days of March 27, 2020. Deferred shares, performance units, and restricted stock units payable in common shares to executive officers, but not on or within 60 days of March 27, 2020, are reported in the column “Other Deferred Shares Owned.” Performance units are subject to vesting based on the achievement of certain performance goals, as discussed in the Compensation Discussion and Analysis beginning on page 22 of this proxy statement. The number of performance units set forth in these columns reflects a “target” amount of performance units determined for each executive officer on the grant date. The number of performance units that ultimately vest as common shares for each executive officer may be higher or lower depending upon actual performance relative to the performance goals at the end of the measurement period.

 

(4)

Deferred shares, performance units, and restricted stock units payable in common shares do not have common share voting rights or investment power until the shares or units have been distributed as common shares in accordance with the plan or agreement under which they were granted or awarded.

 

(5)

Totals may not foot due to rounding.

 

(6)

No director, director nominee, or executive officer beneficially owns (and collectively all 27 directors and executive officers do not beneficially own) common shares, and options, deferred shares, performance units, and restricted stock units payable in common shares on or within 60 days of March 27, 2020, totaling more than 1% of the outstanding common shares of KeyCorp. The percentages set forth in this column for the holders of more than 5% of our common shares appear as reported by each such holder to the Securities and Exchange Commission on Schedules 13G, as discussed below.

 

(7)

Based solely upon information contained in the Schedule 13G/A filed by The Vanguard Group, Inc. (“Vanguard”) with the Securities and Exchange Commission on February 12, 2020. Vanguard reported that it owned beneficially 113,752,101 common shares, held sole voting power over 1,458,975 common shares, held sole power to dispose or to direct the disposition of 112,101,509 common shares, held shared voting power over 259,042 common shares, and held shared power to dispose or to direct the disposition of 1,650,592 common shares. Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of Vanguard, is the beneficial owner of 1,114,754 common shares as a result of its serving as investment manager of collective trust accounts. Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of Vanguard, is the beneficial owner of 858,304 common shares as a result of its serving as investment manager of Australian investment offerings. The reported address of Vanguard is 100 Vanguard Blvd., Malvern, PA 19355.

 

(8)

Based solely upon information contained in the Schedule 13G/A filed by BlackRock, Inc. (“BlackRock”), for itself and on behalf of various subsidiaries identified therein, with the Securities and Exchange Commission on February 5, 2020. BlackRock reported that it owned beneficially 81,072,832 common shares, held sole power to dispose or to direct the disposition of 81,072,832 common shares, and held sole power to vote or direct the voting power over 72,116,970 common shares. Each of the following entities has been identified by BlackRock as a direct or indirect subsidiary that beneficially owns KeyCorp common shares: BlackRock Life Limited, BlackRock International Limited, BlackRock Advisors, LLC, BlackRock (Netherlands) B.V., BlackRock Institutional Trust Company, National Association, BlackRock Asset Management Ireland Limited, BlackRock Financial Management, Inc., BlackRock Japan Co., Ltd., BlackRock Asset Management Schweiz AG, BlackRock Investment Management, LLC, BlackRock Investment Management (UK) Limited, BlackRock Asset Management Canada Limited, BlackRock Asset Management Deutschland AG, BlackRock (Luxembourg) S.A., BlackRock Investment Management (Australia) Limited, BlackRock Advisors (UK) Limited, BlackRock Fund Advisors, BlackRock Asset Management North Asia Limited, BlackRock (Singapore) Limited, and BlackRock Fund Managers Ltd. The reported address of BlackRock is 55 East 52nd Street, New York, NY 10055.

 

(9)

Based solely upon information contained in the Schedule 13G filed by State Street Corporation (“State Street”), for itself and on behalf of various subsidiaries identified therein, with the Securities and Exchange Commission on February 13, 2020. State Street reported that it owned beneficially 49,563,985 common shares, held shared voting power over 44,894,231 common shares, and held shared power to dispose or to direct the disposition of 49,553,557 common shares. Each of the following entities has been identified by State Street as a direct or indirect subsidiary that beneficially owns KeyCorp common shares: State Street Bank and Trust Company, SSGA Funds Management, Inc., State Street Global Advisors Limited (UK), State Street Global Advisors LTD (Canada), State Street Global Advisors, Australia Limited, State Street Global Advisors (Japan) Co., LTD, State Street Global Advisors Asia LTD, State Street Global Advisors Singapore LTD, State Street Global Advisors GmbH, State Street Global Advisors Ireland Limited, and State Street Global Advisors Trust Company. The reported address of State Street is One Lincoln Street, Boston, MA 02111.

 

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            Ownership of KeyCorp Equity Securities

 

 

Executive Officer and Director Equity Ownership Guidelines

 

KeyCorp’s Corporate Governance Guidelines state that, by the fifth anniversary of his or her initial election to the Board or as an officer of KeyCorp: (i) each non-employee director should own KeyCorp equity securities with a value at least equal to five times KeyCorp’s non-employee director annual retainer, including at least 1,000 directly-owned KeyCorp common shares; (ii) the Chief Executive Officer should own KeyCorp equity securities with a value at least equal to six times his or her base salary, including at least 10,000 directly-owned KeyCorp common shares; (iii) the senior executives who are members of KeyCorp’s Management Committee should own KeyCorp equity securities with a value at least equal to three times his or her base salary, including at least 5,000 directly-owned KeyCorp common shares; and (iv) other senior executives should own KeyCorp equity securities with a value at least equal to two times his or her base salary, including at least 2,500 directly-owned KeyCorp common shares. For more information, please see our Compensation Discussion and Analysis beginning on page  22 of this proxy statement.

Policy Restricting Hedging, Pledging and Speculative Trading of KeyCorp Securities

 

KeyCorp has determined that there may be a heightened legal risk and/or the appearance of improper or inappropriate conduct if our officers, directors or employees engage in certain speculative transactions involving KeyCorp securities. Therefore, our insider trading policy prohibits our officers, directors and all employees from engaging in hedging transactions with respect to KeyCorp securities (whether those securities are obtained through our employee benefit programs or otherwise). For this purpose, hedging is considered to include, but not be limited to, the use of prepaid variable forwards, equity swaps, collars, and exchange funds. The KeyCorp insider trading policy also prohibits our officers, directors and all employees from pledging KeyCorp securities as collateral for margin purchases or loans and from engaging in short sales with respect to KeyCorp securities.

Equity Compensation Plan Information

 

KeyCorp is authorized to issue its common shares under the KeyCorp 2019 Equity Compensation Plan (the “2019 Plan”) and the KeyCorp Amended and Restated Discounted Stock Purchase Plan (the “DSP Plan”). KeyCorp is no longer authorized to issue its common shares under, but still has awards outstanding under: (i) the KeyCorp 2013 Equity Compensation Plan (the “2013 Plan”) (ii) the KeyCorp 2010 Equity Compensation Plan (the “2010 Plan”); (iii) the KeyCorp Deferred Equity Allocation Plan; and (iv) the KeyCorp Directors’ Deferred Share Plan.

Shareholders approved the 2019 Plan at the 2019 Annual Meeting of Shareholders. At December 31, 2019, 59,991,178 common shares remained available for future issuance under the 2019 Plan. Shareholders approved the DSP Plan in 2003. At December 31, 2019, 1,166,354 common shares remained available for future issuance under the DSP Plan.

The following table provides information about KeyCorp’s equity compensation plans as of December 31, 2019:

 

     (a)      (b)      (c)  

Plan Category

   Securities to
be issued
upon exercise
of outstanding
options,
warrants and
rights (#)
     Weighted-average
exercise price of
outstanding
options,
warrants
and rights ($)
     Securities
remaining available
for future issuance
under equity
compensation
plans (excluding
securities reflected
in column (a))(#)(2)
 

Equity compensation plans approved by security holders (1)

     6,640,807        13.32        61,157,532  

Equity compensation plans not approved by security holders (3)

              

Total

     6,640,807        13.32        61,157,532  

 

(1)

The table does not include 17,725,431 unvested shares of time-lapsed and performance-based restricted stock awarded under the 2019 Plan, the 2013 Plan, and the 2010 Plan. These unvested restricted shares were issued when awarded and consequently are included in KeyCorp’s common shares outstanding.

 

(2)

The Compensation Committee of the Board has determined that KeyCorp may not grant options to purchase KeyCorp common shares, shares of restricted stock, or other share grants under its long-term compensation plans in an amount that exceeds six percent of KeyCorp’s outstanding common shares in any rolling three-year period.

 

(3)

The table does not include outstanding options to purchase 45,001 common shares assumed in connection with the First Niagara merger in 2016. At December 31, 2019, these assumed options had a weighted-average exercise price of $13.75 per share. No additional options may be granted under the plan that governs these options.

More information about these awards can be found in Note 17 (“Stock-Based Compensation”) to the Consolidated Financial Statements beginning on page 152 of our Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Annual Report”), which was filed with the Securities and Exchange Commission on February 26, 2020.

 

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Compensation Discussion and Analysis

 

 

Compensation Discussion and Analysis

This Compensation Discussion and Analysis provides information regarding the compensation of our executive officers.

Table of Contents

 

The contents of the Compensation Discussion and Analysis are organized as follows:

 

 

 

Objectives of Our Compensation Program

 

Our success depends on the ability to attract, retain, motivate, and develop our people. Competition for talent in our business is ongoing, and we make investments to hire and retain the people we need to serve our customers. Our compensation program is designed to reward employees based on performance, be informed by the market, and align with the interests of our shareholders and the expectations of regulators.

In consideration of these objectives, as well as our compensation philosophy and identified best practices described below, this Compensation Discussion and Analysis describes the pay of our “Named Executive Officers” listed below, along with their titles as of December 31, 2019:

 

Beth E. Mooney

   Andrew J. “Randy” Paine III

Chairman and Chief Executive Officer

   Head of Institutional Bank

Donald R. Kimble

   Amy G. Brady

Chief Financial Officer and Vice Chairman

   Chief Information Officer

Christopher M. Gorman

  

President and Chief Operating Officer

  

Additional information on the compensation of our Named Executive Officers can be found in the 2019 Summary Compensation Table on page 41 of this proxy statement.

 

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Compensation Philosophy

Our compensation philosophy is guided by the following three principles:

 

Our Principles...    How They Are Applied...
Pay decisions are based on Key’s performance, business unit performance, and individual performance—as assessed by our Chairman and Chief Executive Officer (our “CEO”) and the relevant committee of our Board (or, in the case of our CEO, by the Compensation Committee with input from the full Board);   

We emphasize variable and performance-based compensation: Only 15% of the average target total pay opportunity for our Named Executive Officers (12% of our CEO) is delivered as base salary.

 

We provide competitive pay opportunities to our employees: Our programs are designed to provide a total compensation package that is competitive in order to attract, reward, and retain top performers.

 

We deliver pay in a way that reinforces focus on balancing short- and long-term financial performance objectives; and   

We require executive officers to defer a significant portion of their annual compensation and subject it to risk adjustment: While we manage to “total pay” opportunity (i.e., the sum of base salary and incentives) when making pay decisions, we require that a significant amount of each executive officer’s annual “total incentive” (the sum of the annual incentive paid and the value of long-term incentives granted in a particular year) be deferred over a multi-year period and subject to risk adjustment, as described in more detail below.

 

We choose metrics for our incentive plans that encourage and reward consistent performance in both the short- and long-term: For example, we incentivize strong and sustainable EPS growth by rewarding, among other things, one-year earnings per share (EPS) performance through our annual incentive plan and three-year EPS performance through our long-term incentive program. Similarly, our annual incentive plan uses absolute Return on Tangible Common Equity (ROTCE) and our long-term incentive program uses relative ROTCE as a measure of performance, as we believe ROTCE provides strong alignment between short- and long-term shareholder value and employee compensation.

 

We support sustainable performance with policies that focus on prudent risk-taking and the balance between risk and reward.   

We balance compensation risk and reward through a robust governance process overseen by the Compensation Committee: We work closely with our regulators to design our compensation programs to appropriately balance risk and reward, and we regularly monitor these programs to determine whether they create incentives that encourage risk-taking outside of our risk tolerances, as described below in more detail.

 

We subject our compensation to adjustment based on actual risk and financial outcomes: Compensation paid under our programs is subject to a robust risk-adjustment policy based on actual risk outcomes and financial results, including possible clawback, as described below in more detail.

 

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Compensation Discussion and Analysis

 

 

Compensation & Governance Best Practices

We support our compensation program with a number of best practices in governance and executive compensation, including those summarized in the following chart. In addition, the Compensation Committee regularly evaluates our compensation practices in light of feedback that may be provided by our shareholders or shareholder advisory firms.

 

What We Do:    What We Don’t Do:

  Impose Robust Stock Ownership Guidelines ranging from six times base salary for our CEO to three times base salary for our other executive officers. Executives are encouraged to meet share ownership guidelines within three years and are required to comply within five years.

 

  Subject Shares to Post-Vesting Holding Requirements, so that each Named Executive Officer must hold the net shares acquired upon vesting of equity awards until he or she satisfies our share ownership guidelines.

 

  Use Tally Sheets annually for our Named Executive Officers, allowing our Compensation Committee to review total pay for our Named Executive Officers.

 

  Review Share Utilization regularly, including overhang levels and run-rates, and maintain share utilization levels well within industry norms.

 

  Use an Independent Consultant Retained by the Compensation Committee to assist in developing and reviewing our executive compensation strategy and program to ensure that our compensation programs are consistent with market practice.

 

  Maintain Clawback and Forfeiture Policies as further described below, which begin before grant and extend beyond payment.

  

×   No Employment Agreements for any executive officer, including any Named Executive Officer.

 

×   No Tax Gross-Ups on change of control payments or for perquisites, other than on relocation benefits provided to certain senior-level employees upon hire.

 

×    No “Single Trigger” Change of Control Agreements, meaning that, following a change of control, severance benefits are due, and equity awards that are assumed in a change of control transaction vest, only upon a qualifying termination of employment.

 

×   No Active SERPs, as our executive pension plans were frozen in 2009. No Named Executive Officer participates in an active supplemental defined benefit plan, although vesting service continues for those Named Executive Officers who participated in such a plan prior to 2009.

 

×   No Hedging or Pledging of KeyCorp Securities is permitted under our insider trading policy, which prohibits our employees, officers, and directors from engaging in hedging transactions involving our common shares and from pledging our common shares.

 

×    No “Timing” of Equity Grants is allowed under our equity approval policy. We do not grant equity awards in anticipation of the release of material, non-public information. Similarly, we do not time the release of material, non-public information based on equity grant dates.

 

×    No Repricing or back-dating of stock options.

Overview of 2019 Performance

 

In 2019, we delivered results for our stakeholders and continued to position the Company for the future. Our distinctive business model, targeted relationship strategy, and strong team enable us to continue to grow, manage efficiency, manage risk, and drive shareholder returns. Highlights of our 2019 performance include:

 

 

The seventh consecutive year of positive operating leverage, driven by momentum in our core businesses and strong expense management.

 

 

Broad-based balance sheet growth driven by strength in our commercial and consumer businesses, resulting in an increase of over 4% in both average loans and average deposits.

 

 

Significantly exceeded our targeted expense reduction of $200 million, as we continued to build a more efficient organization while investing to drive future returns.

 

 

Maintained sound credit quality and disciplined capital management, including a 9% increase in our common share dividend.

The Compensation Committee considered Key’s performance with respect to these financial metrics and strategic objectives when evaluating the performance of our Named Executive Officers and establishing actual 2019 pay.

 

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            Compensation Discussion and Analysis

 

 

Elements of Our Pay Program

 

We manage to “total pay” opportunity, rather than make separate decisions on each element of pay. We define target total pay opportunity for our Named Executive Officers as the sum of base salary and short- and long-term incentive targets, which are established as described below. Actual total pay for each Named Executive Officer for a given performance year is the sum of actual base salary for the performance year (i.e., salary paid for 2019), the annual incentive earned for the performance year (i.e., bonus paid in 2020 for 2019 performance year), and the long-term incentive granted in respect of the performance year (i.e., long-term incentive granted in 2020). We generally consider the long-term incentive as part of the total pay opportunity for the prior year even though it is granted early in the following year, as the amount is determined based on an executive’s performance in the immediately preceding performance year (which differs from how long-term incentives are required to be reported in the Summary Compensation Table).

Consistent with our pay philosophy, we generally provide our executive officers with a target total pay opportunity comprised of the following elements of pay: base salary, annual (short-term) incentive, and deferred (long-term) incentive compensation (which may consist of performance awards (which may be settled either in cash or in shares), restricted stock units (RSUs) and stock options). The average distribution of compensation across the three elements of target total pay opportunity for 2019 to our Named Executive Officers is demonstrated in the chart below. The actual average pay of each of our Named Executive Officers may differ from the target pay opportunity depending on a number of factors, including the performance of our annual incentive plan, which may cause the variable cash component of pay to be larger or smaller than the target amount, and whether a Named Executive Officer receives stock-based compensation in excess of the target amount, including any stock-based retention awards.

Average Named Executive Officer (“NEO”) 2019 Target Total Pay Opportunity Mix

 

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Alignment of Pay and Performance

 

The target total pay opportunity for each Named Executive Officer is established after considering a number of factors including the level of pay for similar roles in our industry and among our peers, the executive’s tenure and experience, the complexity of the executive’s role, the executive’s performance, insights from consultants about market practices and trends, as well as regulatory expectations regarding our pay practices. The Compensation Committee reviews and approves the target total pay of each Named Executive Officer each year. For additional information on how we establish target pay for our Named Executive Officers, see the discussion under “How We Make Pay Decisions” beginning on page 34 of this proxy statement.

 

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Compensation Discussion and Analysis

 

 

Balancing Risk and Reward

Achieving a balance between risk and reward is a central focus of our compensation program. As a result, we subject all incentives paid to our employees to a risk-adjustment process that begins before grant and extends beyond payment.

LOGO

In response to the fraud loss, we took the following actions: the incentive compensation pool for our Named Executive Officers reflected the full financial impact of the loss and we reduced the incentive compensation pools for lines of business with a direct role in the fraud loss event; none of our executive officers received an award higher than the funding of the pool, and some of our executive officers received awards lower than the approved funding level; we terminated the employment of certain employees deemed to share in responsibility for the fraud loss; we exercised our rights, as described above, to forfeit previously-granted incentives; and we closely monitored and scrutinized any incentive payment for employees who were not terminated but who were deemed to share in responsibility for the fraud loss with respect to the 2019 performance year.

Base Salary

Base salaries represent the sole fixed portion of our Named Executive Officers’ total pay opportunity. Base salaries are reviewed and approved by the Compensation Committee on a competitive basis each year based on salaries paid to comparable executives at peer companies, including those in our Peer Group, and considering internal equity. Base salary adjustments generally occur no more frequently than bi-annually. In 2019, all of our Named Executive Officers, except for our CEO, received a base salary increase. The 2018 and 2019 base salaries of our Named Executive Officers are reported in the “Salary” column of the 2019 Summary Compensation Table on page 41 of this proxy statement.

Incentive Programs

The actual amount a Named Executive Officer may receive under our annual and long-term incentive programs generally is subject to continued employment during the applicable performance period or restriction period and/or the attainment of specified performance goals. Key’s performance is an important factor in determining payouts under our Annual Incentive Plan and determining the final value of a grantee’s performance award. With respect to the 2019 Annual Incentive Plan and the performance awards granted in 2020, our Compensation Committee focused on selecting performance metrics that promote both short- and long-term growth, as well as creating and maintaining a link between pay and shareholder value. As a result, in addition to other performance measures, both the 2019 Annual Incentive Plan and the performance awards granted in 2020 incentivize EPS growth (over one year in the 2019 Annual Incentive Plan and over three years in the

 

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performance awards granted in 2020) and ROTCE (absolute ROTCE in the 2019 Annual Incentive Plan and relative ROTCE in the performance awards granted in 2020). When selecting the performance goals, the Compensation Committee wanted to balance short-term performance (i.e., one-year EPS) with sustainable growth (i.e., three-year EPS). In addition, the Compensation Committee selected absolute ROTCE as a metric under our 2019 Annual Incentive Plan due to its strong correlation to our share price and ability to drive overall shareholder value, and relative ROTCE under performance awards granted in 2020 to focus on growing ROTCE relative to our peers.

In addition, both the 2019 Annual Incentive Plan and the performance awards granted in 2020 are subject to additional metrics that do not overlap between the programs. The 2019 Annual Incentive Plan also takes into account our Cash Efficiency Ratio, our relative performance versus that of our peers, and our achievement of operational excellence goals. The performance awards granted in 2020 are subject to a total shareholder return (TSR) modifier that does not apply to the 2019 Annual Incentive Plan.

Annual Incentive Plan

All executive officers, along with most employees who are not paid from a business unit-specific incentive plan, are eligible to receive discretionary cash incentives under our Annual Incentive Plan. The funding of the overall bonus pool under our Annual Incentive Plan is based on the achievement of various financial and strategic goals compared to pre-established targets, as described below (see “2019 Performance Measures”). Annual Incentive Plan funding is capped at 150%, with 0% funding for our executive officers if a threshold level of performance is not achieved.

The actual annual incentive that may be paid to any individual Named Executive Officer with respect to a performance year is determined by the Compensation Committee after considering the approved funding level of the bonus pool, the executive’s experience and performance, market information, the occurrence of any adverse risk events, our deferral expectations, the range of pay decisions for the other executive officers and similarly situated executives, as well as any decision we made to direct an executive’s total pay opportunity towards other elements of pay (e.g., base salary and/or long-term incentives). As a result, while the overall funding level of the Annual Incentive Plan serves to guide the amount of annual incentive an executive officer may receive, actual awards under the Annual Incentive Plan may and do vary from this funding level. Our practices generally do not allow for more than 200% of the annual incentive target to be paid in cash.

2019 Performance Measures

In 2019, 60% of our Annual Incentive Plan pool funding was based on our performance on the following three equally-weighted metrics as compared to pre-established targets, as described below in “2019 Performance & Funding”:

 

 

EPS (as defined in “Certain Financial Goals” on page 37 below)

 

 

Cash Efficiency Ratio (as defined in “Certain Financial Goals” on page 37 below)

 

 

Return on Tangible Common Equity (ROTCE) (non-GAAP measure), which, for purposes of the 2019 Annual Incentive Plan, had the following definition: Income from continuing operations attributable to Key common shareholders (GAAP) divided by average KeyCorp shareholders’ equity, less average intangible assets, adjusted for average purchased credit card relationships, less average preferred stock, calculated without regard to the impact that lower interest rates had on the accounting value of certain financial instruments held as part of our investment security portfolio that resulted in higher Tangible Common Equity than planned.

The Compensation Committee selected Cash Efficiency Ratio to reflect our ongoing focus on growing revenue and managing expenses, ROTCE due to its high correlation to shareholder value creation and to place greater emphasis on credit quality, and EPS to reflect core profitability.

An additional 20% of our Annual Incentive Plan pool funding was based on our performance, relative to the performance of our Peer Group, on the following metrics: revenue growth, pre-provision net revenue (PPNR) growth, and the ratio of Net Charge-Offs to Average Loans. We selected these measures (each as defined in “Certain Financial Goals” on page 37 below) to evaluate our performance, relative to our peers, with respect to growth and management of risk.

The remaining 20% of our Annual Incentive Plan pool funding was based on: (i) the extent of our achievement of the objective of reducing expenses by a target amount and (ii) delivery against a portfolio of initiatives to increase collaboration across the organization for the benefit of our clients. The initiatives chosen reflect our ability to run the business more efficiently and productively and create future revenue or expense benefits. The initiatives were supported by specific objectives and clear measures of success. These objectives were collectively referred to as “operational excellence.”

 

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Compensation Discussion and Analysis

 

 

2019 Performance & Funding

For the 2019 performance period, the Compensation Committee approved an 80% funding rate for our 2019 Annual Incentive Plan pool as applicable to our senior executives, including our Named Executive Officers, based on our performance against the financial and strategic goals in our Annual Incentive Plan as set forth in the table below.

 

KeyCorp 2019 Annual Incentive Plan
     Performance Required for Payout               

Performance Goals*

Funding %

  

Min.

50%

  

Middle

100%

  

Max.

150%

   Actual
Result
   Funding
Rate
   Weight   

Final

Funding

Earnings Per Share (EPS)

   $1.66    $1.84    $1.99    $1.68    58%    20%    12%

Return on Tangible Common Equity (ROTCE)

   14.7%    16.4%    17.7%    14.1%    50%    20%    10%

Cash Efficiency Ratio

   59.9%    57.3%    55.5%    58%    87%    20%    17%

Relative Progress to Peers

   Bottom

Quartile

   Middle

Quartile

   Top

Quartile

   Middle
Quartile
   67%    20%    13%

Operational Excellence

   Objective Assessment    Exceeds    138%    20%    28%

Compensation Committee Approved Funding

   80%

 

*

EPS, Cash Efficiency Ratio, and ROTCE exclude notable items and any other major restructuring charges agreed to by the Compensation Committee. Please see slides 20 and 21 of our Fourth Quarter 2019 Earnings Review filed as Exhibit 99.2 to Form 8-K on January 23, 2020 for the identification of notable items.

Our EPS and ROTCE performance were impacted by the previously disclosed fraud loss. Absent this loss, our EPS would have been $1.79, our ROTCE would have been 15%, and the performance of our Annual Incentive Plan would have been 95%.

The Compensation Committee determined that our overall performance relative to peers on the applicable performance measures was in the middle quartile, as described below.

Relative Performance to Peers

 

Measure

   Actual Result  

Revenue Growth

   Bottom Quartiles  

PPNR Growth

   Middle Quartiles  

Net Charge-Offs / Average Loans 

   Middle Quartiles  

Our performance against the operational excellence metrics was strong: (i) the Compensation Committee determined that we “Exceeded” expectations by achieving a reduction in expenses that significantly exceeded the targeted amount of $200 million; and (ii) we “Met” our objectives to increase collaboration. The Compensation Committee weighed the expense initiative as 75% of our Operational Excellence metric and the collaboration initiative as 25% of our Operational Excellence metric, resulting in an aggregate “Exceeds” result.

Based on the aggregate results, the Compensation Committee approved a funding rate for our 2019 Annual Incentive Plan pool of 80%, as applicable to our senior executives, including our Named Executive Officers. In addition, none of our Named Executive Officers were paid over 80% of their individual target to reflect shared accountability for the full impact of the previously disclosed fraud loss.

2020 Long-Term Incentives

All Named Executive Officers are eligible to receive long-term incentive awards that are granted annually based on prior year performance but anticipate future contributions through the use of a vesting schedule generally requiring the executive officer to remain employed for three to four years from the date of grant in order to realize the full value of the award (subject to acceleration of vesting in connection with retirements and certain other terminations of employment). All Named Executive Officers received their long-term incentives in the vehicles described in the table below, other than Ms. Mooney whose long-term incentive was delivered 100% as RSUs for the reasons described below in “Additional Awards of Restricted Stock Units.”

 

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2020 Long-Term Incentive Design

2020 Long-Term Incentive Compensation Program

 

Vehicle   % of
Total LTIC
Value (2)
  Vesting Period   Performance Features

Performance

Awards (1)

      50%(2)   3-year cliff vesting  

   Final payout can range between 0% to 150% of target based on our performance measured against the following goals (3):

 

1.  Adjusted Return on Tangible Common Equity vs. Peers

 

2.  Adjusted Cumulative Earnings Per Share

 

   Performance score is subject to further adjustment by application of a modifier based on our relative TSR performance.

 

   Value of final payout depends on the performance of our stock price.

 

     

Restricted

Stock Units

(“RSUs”) (4)

  40%   4-year
annual ratable vesting
 

   Value directly linked to our stock price.

 

   Encourages strong levels of share ownership among our executives.

 

   Provides a balance to the risk-taking incentive that may be associated with stock options or performance awards.

 

     
Stock Options   10%   4-year

annual ratable vesting

 

   Ability to exercise depends on the positive performance of our stock price, which is driven by our financial performance.

 

   Option expires 10 years from the date of grant.

 

   Encourages preservation of long-term stock value.

 

   Usage limited to no more than 10% of each Named Executive Officer’s annual long-term incentive opportunity since 2013.

 

 

(1)

In 2020, 100% of the performance awards granted to Ms. Brady and Messrs. Paine and Gorman were delivered as cash-settled performance shares. Two-thirds of Mr. Kimble’s performance award was delivered as cash-settled performance shares, and one-third was delivered as stock-settled performance shares. Mr. Kimble plays an important role on our executive leadership team and our upcoming Chief Executive Officer transition and, starting in January 2020, has taken on increased responsibilities as our Chief Administrative Officer in addition to his role as our Chief Financial Officer.

 

(2)

The percentages included in this chart reflect the long-term incentive compensation awards made in 2020 to all of our Named Executive Officers except Ms. Mooney and Mr. Kimble. As described below under the heading “Additional Awards of Restricted Stock Units,” 100% of Ms. Mooney’s long-term incentive compensation award granted in 2020 was awarded in the form of restricted stock units. Mr. Kimble’s performance awards represented approximately 59% of his total long-term incentives.

 

(3)

The performance metrics applicable to Mr. Kimble’s stock-settled performance award are described below under “2020 Performance Awards.”

 

(4)

As described below under the heading “Additional Awards of Restricted Stock Units,” 100% of Ms. Mooney’s long-term incentive compensation award granted in 2020 was awarded in the form of restricted stock units. In addition to the RSU grant described in this chart, Ms. Brady was granted a retention award of restricted stock units on February 24, 2020, in the amount of $1,000,000, which is subject to three-year cliff vesting. The Compensation Committee determined this award was appropriate in recognition of the expansion of Ms. Brady’s role in connection with our continuous improvement expense initiative and the impact of her leadership as we transition our Chief Executive Officer.

 

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Compensation Discussion and Analysis

 

 

2020 Performance Awards

The cash-settled performance awards granted in 2020 provide our Named Executive Officers (other than Ms. Mooney, whose long-term incentive compensation award granted in 2020 was allocated entirely to RSUs) with the opportunity to receive between 0% and 150% of their “target” number of cash performance shares based on our level of achievement of the following performance goals during the three-year performance period beginning on January 1, 2020, and ending on December 31, 2022. Although the value of these cash performance awards is directly tied to share price, payout upon vesting will be in the form of cash.

 

2020-2022 Long-Term Incentive Plan
   

Performance Required for Payout

        

Other Factors

(Vesting Reduction Only)

Performance Goals

  Weight   Min.   Target   Max.      

Adjusted Return on Tangible Common Equity vs. Peers

  50%   25% ile   50% ile   75% ile     LOGO     

   ERM Dashboard

   Execution of Strategic Priorities

   Other factors, as  appropriate

Adjusted Cumulative Earnings Per Share

  50%   75% of Plan*   100% of Plan*   125% of Plan*
*

”Plan” refers to Key’s overall financial plan.

 

TSR vs Peers Modifier:

Percentile Rank    Payout Adjustment
<25% ile    -15%
25% ile to 75% ile    No Adjustment
>75% ile    +15%

The Compensation Committee believes that each of the performance goals set forth above strongly correlates to long-term shareholder value creation. Adjusted Cumulative EPS and Adjusted ROTCE under our 2020 performance awards will be subject to adjustment to remove the increase in the allowance for loan and lease losses using the new accounting standard known as current expected credit losses (“CECL”), which we expect may introduce volatility to EPS and ROTCE that could otherwise have an outsized impact on ROTCE and EPS as performance metrics under the 2020 performance awards.

For the 2020 performance awards, TSR is introduced as a modifier, which will be applied as a multiplier that may increase or decrease the final payout otherwise calculated using Adjusted ROTCE vs. peers and Adjusted Cumulative EPS. We have added TSR as a modifier, instead of including it as an equally-weighted performance metric, to align our pay practices with those of our Peer Group, while still preserving the important link between payout to our executives and shareholder value. Finally, the “other factors” included in the performance metrics above may only reduce the vesting of cash performance shares if, in the Compensation Committee’s judgment, performance with regard to these “other factors” is insufficient.

As noted above, approximately one-third of Mr. Kimble’s performance awards for the 2020-2022 performance period are stock-settled, and those performance awards will be earned based on whether the ratio of average PPNR to average assets (from continuing operations) for this period is at least 75% of the same ratio for the preceding three-year period, which is a metric that has historically been used by Key in connection with performance awards.

The Compensation Committee believes that performance awards encourage our Named Executive Officers to make decisions and to deliver results over a multi-year time period, thereby keeping a focus on our long-term performance objectives. In addition, performance awards enable us to retain executive talent, because executives generally must remain employed through the end of the performance period to realize the full value of the award.

Additional Awards of Restricted Stock Units

As noted above, Ms. Mooney’s 2020 long-term incentive award consisted entirely of RSUs. We encourage our executives to provide advance notice of their retirement plans. This advance notice provides time for us to carefully plan executive transitions while maximizing shareholder value. In order to incentivize orderly transitions that may cross calendar years and to be consistent with our compensation philosophy, which considers long-term incentive awards to be part of total pay for prior year performance, we typically provide the transitioning executive with a long-term incentive award to reflect his or her performance for the immediately preceding year. We may also decide to grant a pro-rated long-term incentive award for the portion of the year the executive is employed in the year the executive retires.

 

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We typically adjust the standard allocation among performance awards, restricted stock units, and stock options to reflect the circumstances of the executive’s retirement and to maintain a core concept of our compensation program that at least 50% of an executive’s compensation (and at least 60% of our CEO’s compensation) be deferred over a multi-year period and remain subject to risk adjustment.

In connection with Ms. Mooney’s retirement, after considering her carefully planned departure and her ongoing efforts to ensure a smooth transition of her duties to Mr. Gorman, the Compensation Committee decided to deliver Ms. Mooney’s entire 2020 long-term incentive compensation in the form of RSUs subject to a four-year ratable vesting schedule. The value of these RSUs remains subject to the performance of our share price over the vesting period, and the award itself remains subject to our risk-adjustment policy based on actual risk outcomes and financial results, including possible forfeiture or clawback. The Compensation Committee decided not to grant Ms. Mooney performance awards because she would not be contributing to the performance results during the performance period after her retirement. In addition, the Compensation Committee did not want to provide a potential windfall to Ms. Mooney if we exceeded our operating objectives after her retirement.

In addition to the award to Ms. Mooney and our RSU grants during our annual long-term incentive compensation process, we may also grant RSUs in select other circumstances, including as a replacement for stock-based or deferred compensation being forfeited by an executive when he or she joins Key, or as part of an award to induce an executive’s continued employment in connection with a reorganization or transition, such as with Ms. Brady, who received an additional retention grant as described in footnote 4 to the chart on page 29, or under other circumstances approved by the Compensation Committee.

Total Pay of Our Named Executive Officers

 

The following information highlights the 2019 compensation actions approved by the Compensation Committee for our Named Executive Officers with respect to their performance in 2019, as well as the approved payout level of our 2017 awards of performance shares, which vested in 2020, based on our performance between 2017 and 2019.

Actual Total Pay for 2019 Performance

The following table shows the Compensation Committee’s 2019 total pay decisions for our Named Executive Officers. The amounts reported in the table differ substantially from those reported for 2019 in the Summary Compensation Table on page 41, which reflects long-term incentives granted during a year, rather than after year-end, even if awarded for services performed in that year. We generally consider long-term incentives granted during a given year to be part of the prior year’s total pay opportunity.

After assessing each individual’s performance during 2019, the Compensation Committee approved the annual and long-term incentive awards for our Named Executive Officers described below.

 

     Actual Total Pay                

Name

  

Base

Salary

     Actual 2019
Annual
Incentive
Award
($)(1)
     Actual 2020
Long-Term
Incentive
Award
($)(1)
     Total
Actual
Pay
    

Total

Incentive

Deferred

(%)(2)

 

Beth E. Mooney

     1,200,000        2,000,000        7,500,000        10,700,000        79

Donald R. Kimble

     800,000        1,200,000        2,700,000        4,700,000        69

Christopher M. Gorman

     800,000        1,360,000        3,200,000        5,360,000        70

Andrew J. “Randy” Paine III

     600,000        1,280,000        2,300,000        4,180,000        64

Amy G. Brady

     700,000        880,000        1,400,000        2,980,000        61

 

(1)

We require that at least 50% of the “total incentive”—that is, the sum of the 2019 annual incentive actually earned and the target value of 2020 long-term incentives—of each Named Executive Officer (60% for our CEO) be delivered in the form of deferred compensation, subject to a multi-year vesting schedule and risk-adjusted vesting. If the total incentive does not satisfy this requirement, a portion of the Named Executive Officer’s actual discretionary annual cash incentive is delivered as deferred compensation. 2020 long-term incentive awards reported in this table do not include Ms. Brady’s special retention award, as described above, which we do not consider to be part of the 2019 total pay opportunity.

 

(2)

This column shows the actual percentage of each Named Executive Officer’s total incentive delivered as deferred incentive compensation, including any portion of the Named Executive Officer’s annual cash incentive required to be deferred. This percentage does not include Ms. Brady’s special retention award, as described above, which we do not consider to be part of the 2019 total pay opportunity.

 

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When making pay decisions, the Compensation Committee considers a number of factors, including the funding level of our Annual Incentive Plan, each executive officer’s individual performance, the relative pay levels for the other executive officers, and our deferral expectations, which require that at least 50% of the total incentives—the sum of annual and long-term incentives—of each Named Executive Officer (60% for our CEO) be deferred and subject to risk adjustment, including forfeiture and clawback.

The 2019 pay decisions for our Named Executive Officers were made after consideration of the following, as well as the impact of the previously disclosed fraud loss, as described above in “Balancing Risk and Reward”:

Ms. Mooney

Ms. Mooney’s 2019 target total pay opportunity was $9,700,000. When evaluating Ms. Mooney’s 2019 performance, the Board heavily weighted the planful, well-executed, and well-received announcement of her transition of her role as our Chief Executive Officer to Mr. Gorman. In addition, while our 2019 financial performance was impacted both by the previously disclosed fraud loss and a declining rate environment, through Ms. Mooney’s leadership, Key was able to balance growth with the achievement of our continuous improvement expense reduction initiative significantly in excess of the targeted amount of $200 million and, in the second half of 2019, achieve the high end of our long-term cash efficiency ratio target of 54-56%. Based on this assessment, the Compensation Committee approved actual 2019 pay for Ms. Mooney of $10,700,000.

 

 

Mr. Kimble

Mr. Kimble’s target total pay opportunity for 2019 was $4,000,000. When evaluating Mr. Kimble’s performance for 2019, the Compensation Committee recognized his instrumental role in our continuous improvement expense reduction initiative, the leadership he brought to our response to the previously disclosed fraud loss, and his credibility with our investors and rating agencies. Mr. Kimble is well-respected in our industry and is a long-tenured Chief Financial Officer in our Peer Group, having served as Chief Financial Officer of another member of our Peer Group prior to joining Key. In addition, Mr. Kimble has taken on increased responsibilities, adding the role of Chief Administrative Officer to his existing duties as our Chief Financial Officer and Vice Chair, effective January 2020, and plays a critical role in Mr. Gorman’s transition to Chief Executive Officer. Based on this evaluation, the Compensation Committee approved actual total pay for 2019 of $4,700,000.

 

 

Mr. Gorman

Mr. Gorman’s 2019 target total pay opportunity was $5,700,000. The Compensation Committee approved actual total pay for 2019 of $5,360,000. Mr. Gorman’s pay reflects the Compensation Committee’s recognition of his success in leading our revenue-generating businesses, which grew despite headwinds from a falling rate environment. Specifically, Mr. Gorman led the successful integration of Laurel Road, established traction in residential mortgage, and contributed significantly to the over-achievement of our continuous improvement expense reduction initiative, which were balanced with his continued development as our future Chief Executive Officer. In addition to Mr. Gorman’s specific contributions, the Compensation Committee considered our unique business mix as compared to our Peer Group, including our distinctive commercial and investment capabilities that are not represented at all of the other peer banks, and Mr. Gorman’s unique role compared to other executives in our Peer Group, which includes the careful succession planning and preparation for Mr. Gorman as our next Chief Executive Officer.

 

 

Mr. Paine

Mr. Paine’s target total pay opportunity for 2019 was $4,200,000, and the Compensation Committee approved actual total pay for 2019 of $4,180,000. The pay determination for Mr. Paine reflects the Compensation Committee’s assessment that, despite a challenging first quarter, due to Mr. Paine’s leadership KeyBanc Capital Markets had another successful year with strong growth in M&A and equity fee revenue, including a second year of strong performance from the Cain Brothers franchise. KeyBanc Capital Markets represents a distinctive capability among our Peer Group and among regional banks generally that comes with pay expectations that differ from our peers, which the Compensation Committee took into consideration when establishing Mr. Paine’s pay opportunity and setting his actual pay.

 

 

Ms. Brady

Ms. Brady’s 2019 target total pay opportunity was $3,200,000. The Compensation Committee approved actual total pay for 2019 of $2,980,000. When making this determination, the Compensation Committee considered Ms. Brady’s central role in our continuous improvement expense reduction initiative, her selective addition of talent to her organization, and, along with Mr. Kimble, her strong leadership in our response to the previously disclosed fraud loss. Ms. Brady’s 2019 target total pay opportunity does not include the special retention award described above.

 

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Payout of 2017 Performance Awards

On February 20, 2017, each Named Executive Officer received an award of performance shares as part of his or her long-term incentive opportunity. The Named Executive Officers could earn between 0% and 150% of the performance shares granted based on the achievement of our 2017 long-term incentive plan, described below.

On February 17, 2020, the Compensation Committee approved a final performance level for our 2017 long-term incentive plan of 91.3%, as described below.

 

2017-2019 Long-Term Incentive Plan      
          Performance Req’d
for Payout
    

Performance Goals (1)

   Weight    Min.    Target    Max.    Actual
Result
   Final
Funding

Total Shareholder Return vs. Peer Group

   25%    25% ile    50% ile    75% ile    27% ile    13.6%

Return on Tangible Common Equity vs. Peer Group

   25%    25% ile    50% ile    75% ile    45% ile    22.7%

Cumulative Earnings Per Share

   50%    $3.41    $4.55    $5.68    $4.77    55.0%

Calculated Performance

   91.3%

Committee Approved Performance

   91.3%

 

(1)

EPS and ROTCE actual results are based on continuing operations and exclude notable items, as described below under the heading “Definitions of Certain Financial Goals.”

Performance of our 2017 long-term incentive plan was driven by Return on Tangible Common Equity against the Peer Group and cumulative EPS above target. The EPS target excludes the impact of interest rates and if rates rise, a corresponding adjustment is made to the EPS target. During the performance period for the 2017 performance share awards, the EPS target was increased $0.63 over the original target to reflect interest rate increases.

Before approving this final performance level, the Compensation Committee considered our ERM Dashboard and our execution against strategic priorities and, based on this review, concluded that no reduction in calculated performance was warranted.

Other Elements of Compensation

 

Perquisites

The perquisites currently made available to all Named Executive Officers include an annual executive physical, tax and financial planning perquisite, with a set per participant cost to Key, and home security monitoring for a subset of executive officers. The executives who receive security monitoring were determined by Key’s Corporate Security team based on an assessment of the executive’s profile, the potential risks posed to the executive, and the risks to Key if a crime were to occur. We also provide Ms. Mooney with residential security services and, in some instances, require that she use a secure automobile and professionally trained driver as a matter of security. Ms. Mooney compensates Key for the cost of the automobile and driver when used solely for personal purposes. In addition, we pay the annual premium on an individual disability insurance policy for Mr. Gorman that was put into place before he became an executive officer.

Retirement Programs

Our Named Executive Officers are eligible to participate in our qualified 401(k) Savings Plan on the same basis as all other eligible employees. The 401(k) Savings Plan provides for matching contributions up to 6% on amounts deferred and a discretionary profit sharing contribution on participants’ eligible compensation, each subject to applicable Internal Revenue Service (“IRS”) limitations. The Compensation Committee established the profit sharing contribution for 2019 at 1% of a participant’s eligible earnings.

Our Named Executive Officers also are eligible to participate in our non-qualified Second Deferred Savings Plan, which provides a select group of highly compensated individuals with the ability to defer compensation in excess of what is eligible to be deferred to the 401(k) Savings Plan. There are no mandatory company matching contributions under the Second Deferred Savings Plan, but Key has the ability to make discretionary company contributions to participant accounts under the Second Deferred Savings Plan. We eliminated company matching contributions to the Deferred Savings Plan (the predecessor to the Second Deferred Savings Plan) in 2019.

 

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Beginning with performance awards granted in 2019, Named Executive Officers are also eligible to participate in our non-qualified Long-Term Incentive Deferral Plan, which provides select executives (including Named Executive Officers) the ability to defer receipt of a portion of their performance award beyond the original vesting date to a date not sooner than their termination date.

The matching and profit sharing contributions made to the 401(k) Savings Plan and any matching contributions made to the Deferred Savings Plan on behalf of the Named Executive Officers are included in the “All Other Compensation” column to the 2019 Summary Compensation Table on page 41 of this proxy statement.

Ms. Mooney and Messrs. Gorman and Paine participated in our Cash Balance Pension Plan and Second Excess Cash Balance Pension Plan, each of which we froze effective December 31, 2009. Additional information about our pension programs is included in the narrative to the 2019 Pension Benefits Table beginning on page 47 of this proxy statement.

Separation Pay

We maintain the KeyCorp Separation Pay Plan, which generally covers all of our employees, including our Named Executive Officers, and provides separation pay upon termination as a result of a reduction in staff. The amount of separation pay provided under the KeyCorp Separation Pay Plan may not exceed 52 weeks of separation pay, capped at an amount equal to two times the limit in effect under Section 401(a)(17) of the Internal Revenue Code for the year of separation (that cap was $560,000 in 2019). In addition, in the event of a termination of employment in connection with which we enter into a separation agreement with an executive officer (which we refer to as a “Termination Under Limited Circumstances”), our executive officers, including our Named Executive Officers, would be eligible to receive a similar separation pay benefit of up to 52 weeks of severance pay, and such other payments and benefits as may be negotiated at the time of separation and set out in the separation agreement. Our separation practices for executive officers are described in the Potential Payments Upon Termination or Change of Control table on page 50 of this proxy statement.

Change of Control Agreements

Each Named Executive Officer has entered into a Change of Control Agreement with us. We use Change of Control Agreements to help attract and retain executive talent. The Compensation Committee and the Board of Directors each believes that it is in the best interests of shareholders to ensure that our Named Executive Officers are able to evaluate objectively the merits of a potential transaction without being distracted by its potential impact on their personal employment situations. The Compensation Committee believes that most companies in our Peer Group maintain similar change of control arrangements for their executive officers. Our Change of Control Agreements are described in the Potential Payments Upon Termination or Change of Control table on page 50 of this proxy statement.

How We Make Pay Decisions

 

We seek to maintain a competitive level and mix of pay reflective of the market in which we compete for talent. We do this by reviewing the levels and types of compensation paid to executive officers in similar positions at companies in our Peer Group and the other companies with which we compete for talent.

Peer Group

In setting compensation for our Named Executive Officers, the Compensation Committee examines the compensation data of our peer companies provided by Compensation Advisory Partners (“CAP”), an independent executive compensation advisory firm, to better understand whether our pay practices remain appropriate when measured against the competitive landscape. While this market data is useful, the Compensation Committee does not rely only on this data for targeting compensation levels, but uses it as a basis for validating relative competitive pay for our Named Executive Officers. The Compensation Committee also considers market conditions, promotions, individual performance, survey data provided by CAP, and other relevant circumstances as it determines our Named Executive Officers’ compensation levels.

For 2019, the Compensation Committee continued to use the same Peer Group as 2018. This Peer Group was identified based on a multi-dimensional review, focusing on regional bank peers and considering factors such as the regulatory environment and expectations, as well as relative asset size, revenue, and market capitalization. Although we consider the Peer Group listed below to generally be the best group of comparators for compensation purposes, differences in business model and focus areas for each member of the Peer Group may cause challenges in making comparisons among members of the Peer Group. For example, Key’s distinctive commercial and investment banking capabilities focused on middle-market clients often lead Key to compete with large universal banks and boutique investment firms, rather than the peers identified below. In addition, our commercial and investment banks often compete on a national scale, and leaders of those lines of business are aligned with higher relative pay expectations as a result of our need to attract and retain top talent in these areas.

 

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The companies in our Peer Group maintain a strong brand and reputation and actively compete with us for executive talent. The companies in our 2019 Peer Group are listed below in alphabetical order. The list reflects Truist Financial Corporation, which was formed as a result of the 2019 merger of BB&T Corporation and SunTrust Banks, Inc., both of which were members of our Peer Group prior to the completion of that merger.

 

  Citizens Financial Group, Inc.

 

  Comerica Incorporated

 

  Fifth Third Bancorp

 

  Huntington Bancshares Incorporated
  M&T Bank Corporation

 

  The PNC Financial Services Group, Inc.

 

  Regions Financial Corporation
  Truist Financial Corporation

 

  U.S. Bancorp

 

  Zions Bancorporation
 

 

As of December 31, 2019, the median asset size, full year revenue, and market capitalization of the Peer Group compared to our asset size, total revenue, and market capitalization is set forth in the table below:

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Role of the Compensation Committee

The Compensation Committee sets the pay and evaluates the performance of our CEO, with input from the full Board, and reviews and approves the compensation of a select group of other executives, including the Named Executive Officers. The Compensation Committee, as part of its oversight of the management and organizational structure of Key, annually reviews KeyCorp’s management succession plan for the CEO and other senior executives and oversees leadership development and diversity and inclusion efforts.

Our CEO attends Compensation Committee meetings and provides information and input about the pay levels and performance of our Named Executive Officers, other than herself. The Compensation Committee regularly meets in executive session, during which no member of management is present, to discuss the recommendations and approve pay actions for our Named Executive Officers, including our CEO.

Compensation Consultant

The Compensation Committee has retained the services of CAP, an independent executive compensation advisory firm. At the Compensation Committee’s request, CAP provides it with information on current trends in compensation design and emerging compensation practices. CAP also provides the Compensation Committee with an annual review and analysis of the compensation programs of our Peer Group, which it updates during the latter half of the year to determine whether the compensation targets of our Named Executive Officers remain competitive. CAP reports directly to, and serves at the sole pleasure of, the Compensation Committee. CAP provided no services to us other than the executive compensation consulting services that were requested by the Compensation Committee.

As part of its annual evaluation of its advisors, the Compensation Committee solicited information from CAP regarding any actual or perceived conflicts of interest and to evaluate its independence. Based on the information received from CAP, the Compensation Committee believes that the work CAP performed in 2019 did not raise a conflict of interest and that CAP is independent.

Tally Sheets

The Compensation Committee reviews Tally Sheets annually for our Named Executive Officers, which include a review of the estimated value of severance payments, the accumulated value of vested and unvested equity awards, and retirement benefits. The Compensation Committee also reviews the levels and types of compensation provided to executive officers in

 

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similar positions at companies in our Peer Group. This practice allows the Compensation Committee to evaluate the total compensation package provided to our Named Executive Officers and consider the impact of isolated adjustments or incremental changes to specific elements of compensation.

Stock Ownership Guidelines

We impose robust stock ownership guidelines, ranging from six times base salary for our CEO, with a minimum direct ownership requirement of 10,000 common shares, to three times base salary for our other executive officers, with a minimum direct ownership requirement of 5,000 common shares. As of February 28, 2020, all of our Named Executive Officers, including our CEO, satisfied his or her share ownership requirements. Executives are encouraged to meet share ownership guidelines within three years and are required to comply within five years.

In furtherance of these guidelines, we subject shares earned through our long-term incentive compensation program to post-vesting holding requirements, so that each Named Executive Officer must hold the net shares acquired upon vesting of equity awards until he or she satisfies our share ownership guidelines. Further, our insider trading policy requires that our CEO notify the Chair of the Compensation Committee before she engages in any discretionary transactions involving our shares and does not permit the use of so-called “10b5-1” trading plans for our executive officers.

Consideration of Our Say-on-Pay Shareholder Vote

We continue to receive strong shareholder support for our Named Executive Officers’ compensation program, as reflected in the results of our annual “say-on-pay” proposals, which has received an average of 94% support over the past five years. We view the results of our say-on-pay votes as evidence that our executive compensation program provides pay for performance and appropriately aligns the interests of our Named Executive Officers with those of our shareholders.

Shareholder Outreach

Key maintains an active shareholder engagement program through which we periodically receive feedback from and have discussions with investors around our compensation philosophy and structure. These continuing conversations with our investors help us better understand matters of importance to our investors regarding our executive compensation program and help us to shape our pay-for-performance strategy. For more information, please see “Shareholder Engagement” on pages 16 and 17 of this proxy statement.

Compensation Committee Independence, Interlocks and Insider Participation

The current members of the Compensation Committee are Bruce Broussard, Alexander M. Cutler, William G. Gisel, Jr. (Chair), and Barbara R. Snyder, each of whom is an independent director under KeyCorp’s categorical independence standards, the general independence standards for directors established by the New York Stock Exchange, and the heightened independence standards required of Compensation Committee members by the New York Stock Exchange. No member of the Compensation Committee is a current, or during 2019 was, a former, officer or employee of KeyCorp or any of its subsidiaries or affiliates. During 2019, no member of the Compensation Committee had a relationship that must be described under the SEC rules relating to disclosure of related party transactions. In 2019, none of our executive officers served on the board of directors or compensation committee of any entity that had one or more of its executive officers serving on our Board or Compensation Committee.

Tax and Accounting Considerations

In structuring our executive compensation program, the Compensation Committee takes into account the tax and accounting treatment of our executive compensation arrangements; however, those considerations are not controlling factors in the design of our executive compensation program. For example, the Tax Cuts and Jobs Act, enacted in December 2017, included a number of significant changes to Section 162(m) of the Internal Revenue Code, as amended (“Section 162(m)”), such as the repeal of the qualified performance-based compensation exemption and the expansion of the definition of “covered employees” (for example, by including the chief financial officer and certain former named executive officers as covered employees). As a result of these changes, except as otherwise provided in the transition relief provisions of the Tax Cuts and Jobs Act, compensation paid to any of our covered employees generally will not be deductible, to the extent that it exceeds $1,000,000 in the applicable taxable year. As has historically been the case, the Compensation Committee reserves the ability to pay compensation to our executives in appropriate circumstances, even if such compensation is not deductible under Section 162(m).

 

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Definitions of Certain Financial Goals

As described previously in this Compensation Discussion and Analysis, we use a balanced mix of financial and strategic goals to measure performance under our Annual Incentive Plan and for purposes of determining the vesting of performance awards. The financial goals are defined as follows:

 

 

Adjusted Cumulative EPS (non-GAAP measure): Income from continuing operations attributable to KeyCorp common shareholders, divided by weighted-average common shares and potential common shares outstanding, adjusted to remove the impact of changes in allowance for loan losses in consideration of CECL.

 

 

Adjusted Return on Tangible Common Equity (non-GAAP measure): Income from continuing operations attributable to Key common shareholders (GAAP) divided by average KeyCorp shareholders’ equity, less average intangible assets, adjusted for average purchased credit card relationships, less average preferred stock, adjusted to remove the impact of changes in allowance for loan losses in consideration of CECL.

 

 

Cash Efficiency Ratio (non-GAAP measure): Noninterest expense (GAAP) less intangible asset amortization divided by net interest income (GAAP) plus taxable-equivalent adjustment (non-GAAP) plus noninterest income (GAAP).

 

 

EPS: Income from continuing operations attributable to KeyCorp common shareholders, divided by weighted-average common shares and potential common shares outstanding.

 

 

PPNR (non-GAAP measure): Net interest income (GAAP) plus taxable-equivalent adjustment (non-GAAP) plus noninterest income (GAAP) less noninterest expense (GAAP), all from continuing operations.

 

 

Return on Tangible Common Equity (non-GAAP measure): Income from continuing operations attributable to Key common shareholders (GAAP) divided by average KeyCorp shareholders’ equity, less average intangible assets, less average purchased credit card relationships, less average preferred stock, and subject to additional adjustments as applicable and as described above.

 

 

Net Charge-Offs: Total loans charged off less total loan recoveries, all from continuing operations.

 

 

Tangible Common Equity (non-GAAP measure): KeyCorp shareholders’ equity (GAAP) less intangible assets, less purchased credit card relationships, less preferred stock.

 

 

Total Shareholder Return: Based on average closing share price over the last 20 trading days in the base year (i.e., for performance shares awarded in 2020, the last 20 trading days of 2019) versus average closing share price in the last 20 days in year three, plus investment of dividends paid during the measurement period.

Cash Efficiency Ratio, EPS, PPNR, and Return on Tangible Common Equity also exclude notable items. A reconciliation of GAAP to non-GAAP financial measures and the identification of notable items can be found on pages 14 and 24, respectively, of our Fourth Quarter 2019 Earnings Release attached as Exhibit 99.1 to Form 8-K filed on January 23, 2020.

In its judgment, the Compensation Committee may adjust the performance goals for certain extraordinary items identified by the Compensation Committee to reflect changes in accounting, the regulatory environment, strategic corporate transactions, and other unusual or unplanned events.

CEO Realized and Realizable Pay

 

Our executive compensation program is designed so that a substantial portion of the pay of our CEO is delivered in the form of long-term incentives—which means that both her Realized Pay (the amount she actually may receive in a given year) as well as her Realizable Pay (her future pay opportunity) are tied directly to our share price performance and achievement of our long-term financial goals.

 

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Ms. Mooney’s pay, as reported in the Summary Compensation Table (“SCT”), reflects the accounting value of long-term incentives at the time of grant, and not the value actually received by Ms. Mooney from these grants or their potential future value. As a result, we believe that it is useful to compare Ms. Mooney’s Adjusted SCT Pay, Realized Pay, and Realizable Pay, in each case between 2017 and 2019, with our total shareholder return for the same period. This comparison shows the alignment of Ms. Mooney’s pay and the return to our shareholders, and demonstrates the differences between the Adjusted SCT Pay, actual Realized Pay and Realizable Pay for the same period, as illustrated below:

CEO Pay vs. Performance—

Adjusted SCT, Realizable and Realized Compensation

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The comparison of Ms. Mooney’s Realizable Pay to her Adjusted SCT Compensation in each given year demonstrates the alignment of Ms. Mooney’s pay and the return to shareholders. For example, in 2018 Ms. Mooney’s Adjusted Summary Compensation was higher than her Realizable Pay due to the reduction in Key’s share price from 2017 to 2018.

Ms. Mooney’s Realized Pay between 2017 and 2019 consisted of the following elements. As noted in the chart above and the table below, Ms. Mooney’s Realized Pay for 2017 and 2019 included compensation from her exercise during that year of a significant number of previously granted stock options.

 

     

2017

($)

    

2018

($)

    

2019

($)

 

Base salary received

     1,000,000      1,153,846        1,200,000  

Annual incentive payments

     2,675,000        2,500,000        2,000,000  

Restricted stock units vesting

     2,919,298        2,765,377        2,224,275  

Performance share vesting

     2,860,006        3,415,593        3,887,893  

Stock option exercise*

     5,946,119               7,904,674  

Total

     15,400,423        9,834,816        17,216,842  

 

*

Ms. Mooney did not exercise any stock options in 2018.

The preceding chart and table are not substitutes for the information required to be contained in the Summary Compensation Table, but provide additional information with regard to our CEO’s pay, specifically demonstrating the alignment between Ms. Mooney’s pay and our performance.

 

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            Compensation Discussion and Analysis

 

 

For purposes of this “CEO Realized and Realizable Pay” section, we define:

 

 

“Adjusted SCT” Pay as the compensation reported in the Summary Compensation Table for the applicable year (i.e., 2017, 2018, or 2019), adjusted by excluding “Changes in Pension Value and Nonqualified Deferred Compensation Earnings” and “All Other Compensation.” We excluded these items because they represent amounts that are not Realizable Pay or that will never become Realized Pay or which will not become Realized Pay until termination of employment or later, and do not have a realizable value.

 

 

“Realizable Pay” as the sum of: (i) actual base salary and incentives paid for the applicable year; (ii) the value of all restricted stock units granted during the applicable year based on the December 31, 2019, closing price of our common shares; (iii) the intrinsic value (i.e., the excess, if any, of the December 31, 2019, closing price of our common shares over the option exercise price) of all stock options granted during the applicable year; and (iv) the target value of all performance awards granted during the applicable year based on the December 31, 2019, closing price of our common shares.

 

 

“Realized Pay” as the sum of (i) actual base salary and incentives paid for the applicable year plus (ii) the amount reported as income upon vesting of performance awards, restricted stock units, or exercise of stock options, in each case occurring during the applicable year.

 

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Compensation and Organization Committee Report

 

 

Compensation and Organization Committee Report

The Compensation and Organization Committee has reviewed and discussed with management the Compensation Discussion and Analysis set forth beginning on page 22 of this proxy statement and, based on this review and discussion,

has recommended to the KeyCorp Board of Directors the inclusion of the Compensation Discussion and Analysis in this proxy statement.

Compensation and Organization Committee of the KeyCorp Board of Directors

Bruce Broussard

Alexander M. Cutler

William G. Gisel, Jr. (Chair)

Barbara R. Snyder

 

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            Compensation of Executive Officers and Directors

 

 

Compensation of Executive Officers and Directors

2019 Summary Compensation Table

 

The following table sets forth the compensation paid to, awarded to, or earned by the Named Executive Officers with respect to the years ended December 31, 2019, 2018, and 2017, to the extent applicable.

 

Name and Principal

Position

  Year     Salary
($)
    Bonus
($)
  Stock
Awards
($)(1)
    Option
Awards
($)(2)
    Non-Equity
Incentive Plan
Compensation
($)(3)
  Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)(4)
  All Other
Compensation
($)
(See chart
below)(5)
  Total
($)
 

Beth E. Mooney

    2019       1,200,000         5,741,984       637,998     2,000,000   4,880   79,126     9,663,988  

Chairman and CEO

    2018       1,153,846         4,792,497       532,495     2,500,000   4,565   81,067     9,064,470  
      2017       1,000,000         3,959,986       439,999     2,675,000   3,932   67,553     8,146,470  

Donald R. Kimble

CFO, CAO and Vice Chair

    2019       776,923         2,119,971       179,997     1,200,000     32,800     4,309,691  
    2018       688,462         1,394,971       154,998     1,200,000     35,500     3,473,931  
    2017       650,000         1,349,971       149,997     1,400,000     35,400     3,585,368  

Christopher M. Gorman

President and COO

    2019       776,923         2,519,987       279,999     1,360,000   27,398   19,600     4,983,907  
    2018       700,000         2,339,968       259,999     1,700,000   25,636   34,780     5,060,383  
    2017       678,846         2,159,980       239,996     2,000,000   22,079   35,400     5,136,301  

Andrew J. “Randy” Paine III

Head of Institutional Bank

    2019       576,923         1,799,975       199,998     1,280,000   21,048   32,800     3,910,744  
    2018       500,000         1,709,998       189,998     1,500,000   19,695   50,202     3,969,893  
    2017       500,000         1,619,980       179,998     1,700,000   16,962   35,400     4,052,340  

Amy G. Brady

Chief Information Officer

    2019       688,462         1,259,984       139,998     880,000     32,800     3,001,244  
    2018       650,000         899,972       99,999     1,100,000     54,403     2,804,374  
    2017       633,846         1,597,475       64,998     1,000,000     35,400     3,331,719  

 

  (1)

Amounts reported as “Stock Awards” reflect the grant date fair value of stock awards calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation (FASB ASC Topic 718). See Note 17 to the Consolidated Financial Statements contained in our 2019 Annual Report for an explanation of the assumptions made in valuing these awards.

 

 

      

On February 18, 2019, Mss. Mooney and Brady and Messrs. Gorman and Paine received stock awards consisting of a target number of cash performance shares and restricted stock units representing 50% and 40%, respectively, of each executive’s long-term incentive opportunity. Mr. Kimble received stock awards consisting of a target number of performance shares (two-thirds cash-settled, one-third stock-settled) and restricted stock units representing 61% and 31%, respectively, of his long-term incentive award opportunity. The target number of cash performance shares and restricted stock units awarded to each Named Executive Officer was determined by dividing the dollar amount of the Named Executive Officer’s cash performance share and restricted stock unit awards by the grant date closing price of our common shares (rounded down to the nearest whole share). February 18, 2019, was not a trading day and our equity compensation plan requires that in that circumstance, the closing price of our common shares on the most recent trading day—in this case February 15, 2019—be used as the grant date closing price. On February 15, 2019, the closing price of our common shares was $17.51.

 

 

      

Mr. Kimble’s grant of stock-settled performance shares granted to him on February 18, 2019, was based on the grant date closing price of our common shares as described above (rounded down to the nearest whole share). Additional information about the award granted to Mr. Kimble can be found in the 2019 Grants of Plan-Based Awards Table on page 43 of this proxy statement.

 

 

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Compensation of Executive Officers and Directors

 

 

      

If our performance during the measurement period resulted in the maximum number of 2019 cash performance shares vesting, our executives would be entitled to a maximum award with a grant date fair value of the maximum award set forth in the following table. The stock-settled performance shares granted to Mr. Kimble in 2019 do not have maximum or threshold payout levels and will be earned in full at the target level if the applicable performance objective is met or exceeded.

 

 

Named Executive Officer

  

Grant Date Fair Value of

Performance Shares at

Maximum Award ($)

Beth E. Mooney

   $4,784,984

Donald R. Kimble

   $1,849,967

Christopher M. Gorman

   $2,099,993

Andrew J. “Randy” Paine III

   $1,499,967

Amy G. Brady

   $1,049,996

 

  (2)

Amounts reported in the “Option Awards” column reflect the aggregate grant date fair value of options using the Black-Scholes option pricing model. On February 18, 2019, each Named Executive Officer received an annual long-term incentive award consisting, in part, of an award of nonqualified stock options. See Note 17 to the Consolidated Financial Statements contained in our 2019 Annual Report for an explanation of the assumptions made in valuing stock options granted to our Named Executive Officers in 2019.

 

 

  (3)

Amounts reported as “Non-Equity Incentive Plan Compensation” reflect annual incentives earned by each Named Executive Officer for the applicable year.

 

 

  (4)

Amounts reported in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column reflect the interest credits allocated to Ms. Mooney, Mr. Gorman, and Mr. Paine under the frozen Cash Balance Pension Plan and Second Excess Cash Balance Pension Plan. We froze our pension benefits for all employees, including the Named Executive Officers, effective December 31, 2009, as described in the narrative to the 2019 Pension Benefits Table beginning on page 47 of this proxy statement. No above market or preferential earnings were paid to any Named Executive Officer on nonqualified deferred compensation.

 

 

  (5)

The following table sets forth detail about the amounts reported in the “All Other Compensation” column.

 

 

Name

   Executive
Physical
($)(a)
     Executive
Security
($)(b)
     Car and
Driver
($)(c)
     Financial
Planning
($)(d)
     Matching
Contribution
($)(e)
     Profit
Sharing
($)(f)
     Total
($)
 

Beth E. Mooney

     2,326        7,101        20,399        16,500        30,000        2,800        79,126  

Donald R. Kimble

                                 30,000        2,800        32,800  

Christopher M. Gorman

                                 16,800        2,800        19,600  

Andrew J. “Randy” Paine III

                                 30,000        2,800        32,800  

Amy G. Brady

                                 30,000        2,800        32,800  

 

  (a)

The maximum benefit utilized by any Named Executive Officer was $2,326. For privacy reasons, this amount is shown for Ms. Mooney, regardless of actual usage.

 

 

  (b)

Based on the recommendations of an independent security study, the Compensation Committee approved a comprehensive security program for Ms. Mooney and select executives. Under this program, we pay for certain security upgrades and ongoing monitoring.

 

 

  (c)

The Compensation Committee has authorized, and in some instances required, Ms. Mooney to use a secure automobile and professionally-trained driver for business and personal travel. Ms. Mooney reimburses us for the cost of automobile and driver when used solely for personal purposes.

 

 

  (d)

The Compensation Committee approved a tax and financial planning perquisite, which was introduced in 2016. The amount shown in this column represents the cost to Key for any Named Executive Officer who utilized this benefit.

 

 

  (e)

The amounts in this column consist of Company contributions to the qualified 401(k) Savings Plan and the nonqualified Deferred Compensation Plan. For more information about these plans, see page 33 of this proxy statement.

 

 

  (f)

Employees participating in our 401(k) Savings Plan receive a discretionary profit sharing contribution equal to a percentage of their plan-eligible compensation. The contribution percentage is determined annually by the Compensation Committee. For 2019, the profit sharing contribution to this plan was 1.0%. For more information about this plan, see page 33 of this proxy statement.

 

 

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            Compensation of Executive Officers and Directors

 

 

2019 Grants of Plan-Based Awards Table

 

 

   

Grant

Date

    Estimated Possible Payouts
Under Non-
Equity Incentive Plan
Awards
($)(1)
   

Estimated Future Payouts

Under Equity Incentive Plan

Awards

(#)(2)

    All
Other
Stock
Awards
(# of
Shares or
Units)(3)
   

All Other

Option

Awards

(# of
Shares

Underlying

Options)(4)

   

Exercise

or Base

Price of

Option

Awards

($/Sh)(5)

   

Grant

Date Fair

Value of

Stock
and

Option

Awards

($)(6)

 
Name   Threshold     Target     Maximum     Threshold     Target     Maximum  
                       

Beth E. Mooney

      1,250,000       2,500,000       5,000,000                                        
    2/18/19                         91,091       182,181       273,272                     3,189,989  
    2/18/19                                                 207,817     17.51     637,998  
    2/18/19                                           145,745               2,551,995  
                       

Donald R. Kimble

      750,000       1,500,000       3,000,000                                        
    2/18/19                         25,699       51,398       77,097                     899,979  
    2/18/19                           28,555                       499,998  
    2/18/19                                                 58,631     17.51     179,997  
      2/18/19                                                       41,119               719,994  

Christopher M. Gorman

      850,000       1,700,000       3,400,000                                        
    2/18/19                         39,977       79,954       119,931                     1,399,995  
    2/18/19                                                 91,205     17.51     279,999  
      2/18/19                                           63,963               1,119,992  

Andrew J. “Randy” Paine III

      800,000       1,600,000       3,200,000                                        
    2/18/19                         28,555       57,109       85,664                     999,978  
    2/18/19                                                 65,146     17.51     199,998  
      2/18/19                                           45,688               799,997  

Amy G. Brady

      550,000       1,100,000       2,200,000                                        
    2/18/19                         19,989       39,977       59,966                     699,997  
    2/18/19                                                 45,602     17.51     139,998  
      2/18/19                                           31,981               559,987  

 

(1)

Amounts reported as “Estimated Possible Payouts Under Non-Equity Incentive Plan Awards” reflect the individual annual incentive opportunity each of the Named Executive Officers could receive at threshold (50% of target), at target, and at maximum (200% of target) performance for the one-year performance period ended December 31, 2019. The maximum individual opportunity that any Named Executive Officer can earn is different than the maximum funding level of our Annual Incentive Plan described in the Compensation Discussion and Analysis section of this proxy statement. Actual annual incentive payments are reflected in the 2019 Summary Compensation Table on page 41 of this proxy statement.

 

(2)

Amounts reported in the “Estimated Future Payouts Under Equity Incentive Plan Awards” column reflect the threshold (50% of target), target, and maximum (150% of target) long-term incentive awards in the form of cash performance shares that each Named Executive Officer could earn for the three-year performance period beginning on January 1, 2019, and ending December 31, 2021. Our performance share awards are discussed in the Compensation Discussion and Analysis section of this proxy statement. The dollar value awarded to each of the Named Executive Officers as cash performance shares was converted into a book entry target number of phantom shares that track our stock price and pay out in the form of cash. The price at which the cash performance shares were converted into phantom shares was based on the grant date closing price of our common shares of $17.51. Please see footnote 1 to the 2019 Summary Compensation Table for a discussion of how we arrive at the grant date fair value. For Mr. Kimble, this column also reflects his grant of stock-settled performance shares on February 18, 2019, which cliff-vest on March 1, 2022, subject to our performance against a performance condition as described in the Compensation Discussion and Analysis section of this proxy statement. Mr. Kimble’s stock-settled performance shares do not have maximum or threshold payout levels and will be earned in full at the target level if the applicable performance objective is met or exceeded. All performance shares earn dividend equivalents on the target number of shares, which are reinvested and subject to the same terms and restrictions otherwise applicable to the underlying performance shares.

 

(3)

Amounts reported in the “All Other Stock Awards” column are the number of restricted stock units granted to each of the Named Executive Officers on February 18, 2019, which vest in four equal annual installments following the grant date.

 

(4)

Amounts reported in the “All Other Option Awards” column are the number of KeyCorp common shares underlying the stock options granted to each of the Named Executive Officers on February 18, 2019. Stock options granted in 2019 vest in four equal annual installments following the grant date.

 

(5)

We set the exercise price of all stock options using the grant date closing price of our common shares of $17.51. Please see footnote 1 to the 2019 Summary Compensation Table for a discussion of how we arrive at the grant date fair value. The Compensation Committee does not reprice options. We have not and will not back-date options, nor do we provide loans to employees in order to exercise options.

 

(6)

Amounts reported in the “Grant Date Fair Value of Stock and Options Awards” column represent the aggregate grant date fair value of equity awards granted during the respective year. The accounting assumptions used in calculating the grant date fair value for the equity awards are described in Note 17 to the Consolidated Financial Statements contained in our 2019 Annual Report.

The impact of terminations and a change of control on the Grants of Plan-Based Awards is shown in more detail in the Potential Payments Upon Termination or Change of Control table on page 50 of this proxy statement.

 

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Compensation of Executive Officers and Directors

 

 

2019 Outstanding Equity Awards at Fiscal Year-End Table

 

The following table sets forth information for each Named Executive Officer with respect to (i) each stock option that had not been exercised and remained outstanding as of December 31, 2019, (ii) each award of restricted stock units that had not vested and remained outstanding as of December 31, 2019, and (iii) each award of performance shares or cash performance shares that had not vested and remained outstanding as of December 31, 2019.

 

          Option Awards     Stock Awards  

Name

  Grant Date    

Number of
Securities
Underlying
Unexercised
Options

Exercisable
(#)(1)

    Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)(2)
    Option
Exercise
Price
($)(3)
    Option
Expiration
Date
   

Number
of
Shares
or
Units
of
Stock
That
Have
Not
Vested

(#)(4)

   

Market
Value of
Shares
or Units
of Stock
That
Have
Not
Vested

($)

   

Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested

(#)(5)

   

Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested

($)

 

Beth E. Mooney

    2/17/2014       76,045           12.92     2/17/2024                          
    2/16/2015       92,378           14.11     2/16/2025                          
    2/15/2016       154,206     51,401       10.49     2/15/2026                          
    2/20/2017       47,826     47,826       18.96     2/20/2027                          
    2/19/2018       26,001     78,002       21.02     2/19/2028                          
    2/18/2019           207,817       17.51     2/18/2029                          
     
Aggregate non-
option awards
 
 
                        446,686       9,040,925       487,748       9,872,020  

Donald R. Kimble

    2/17/2014       22,813           12.92     2/17/2024                          
    2/16/2015       30,023           14.11     2/16/2025                          
    2/15/2016       52,570     17,523       10.49     2/15/2026                          
    2/20/2017       16,304     16,304       18.96     2/20/2027          
    2/19/2018       7,569     22,704       21.02     2/19/2028                          
    2/18/2019           58,631       17.51     2/18/2029                          
     
Aggregate non-
option awards
 
 
                        139,311       2,819,655       169,114       3,422,867  

Christopher M. Gorman

    5/19/2011       188,442           8.59     5/19/2021                          
    3/2/2012       235,215           7.98     3/2/2022                          
    3/1/2013       53,521           9.33     3/1/2023                          
    2/17/2014       38,022           12.92     2/17/2024                          
    2/16/2015       57,736           14.11     2/16/2025                          
    2/15/2016       84,112     28,037       10.49     2/15/2026                          
    2/20/2017       26,087     26,086       18.96     2/20/2027                          
    2/19/2018       12,696     38,085       21.02     2/19/2028                          
    2/18/2019           91,205       17.51     2/18/2029                          
     
Aggregate non-
option awards
 
 
                        222,836       4,510,201       224,115       4,536,088  

Andrew J. “Randy” Paine III

    3/2/2012       39,919           7.98     3/2/2022                          
    3/1/2013       12,676           9.33     3/1/2023                          
    2/17/2014       13,307           12.92     2/17/2024                          
    2/16/2015       21,362           14.11     2/16/2025                          
    2/15/2016       67,465     22,488       10.49     2/15/2026                          
    2/20/2017       19,566     19,564       18.96     2/20/2027                          
    2/19/2018       9,278     27,831       21.02     2/19/2028                          
    2/18/2019           65,146       17.51     2/18/2029                          
     
Aggregate non-
option awards
 
 
                        175,619       3,554,529       161,721       3,273,233  

Amy G. Brady

    3/1/2013       14,084           9.33     3/1/2023                          
    2/17/2014       10,456           12.92     2/17/2024                          
    2/16/2015       13,856           14.11     2/16/2025                          
    2/15/2016       22,780     7,593       10.49     2/15/2026                          
    2/20/2017       7,066     7,064       18.96     2/20/2027                          
    2/19/2018       4,883     14,648       21.02     2/19/2028                          
    2/18/2019           45,602       17.51     2/18/2029                          
     
Aggregate non-
option awards
 
 
                        99,702       2,017,968       100,584       2,035,820  
  (1)

This column shows the number of common shares underlying outstanding stock options that have vested as of December 31, 2019.

 

 

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            Compensation of Executive Officers and Directors

 

 

  (2)

This column shows the number of common shares underlying outstanding stock options that have not vested as of December 31, 2019. The remaining vesting dates are shown in the following table. All options described below vest in four equal annual installments from the grant date, unless otherwise noted.

 

 

Name

   Grant
Date
     Options
Outstanding
     Remaining Vesting Dates

Beth E. Mooney

     2/15/2016        51,401    2/17/2020
     2/20/2017        47,826    2/17/2020, 2/17/2021
     2/19/2018        78,002    2/17/2020, 2/17/2021, 2/17/2022
       2/18/2019        207,817    2/17/2020, 2/17/2021, 2/17/2022, 2/17/2023

Donald R. Kimble

     2/15/2016        17,523    2/17/2020
     2/20/2017        16,304    2/17/2020, 2/17/2021
     2/19/2018        22,704    2/17/2020, 2/17/2021, 2/17/2022
       2/18/2019        58,631    2/17/2020, 2/17/2021, 2/17/2022, 2/17/2023

Christopher M. Gorman

     2/15/2016        28,037    2/17/2020
     2/20/2017        26,086    2/17/2020, 2/17/2021
     2/19/2018        38,085    2/17/2020, 2/17/2021, 2/17/2022
       2/18/2019        91,205    2/17/2020, 2/17/2021, 2/17/2022, 2/17/2023

Andrew J. “Randy” Paine III

     2/15/2016        22,488    2/17/2020
     2/20/2017        19,564    2/17/2020, 2/17/2021
     2/19/2018        27,831    2/17/2020, 2/17/2021, 2/17/2022
       2/18/2019        65,146    2/17/2020, 2/17/2021, 2/17/2022, 2/17/2023

Amy G. Brady

     2/15/2016        7,593    2/17/2020
     2/20/2017        7,064    2/17/2020, 2/17/2021
     2/19/2018        14,648    2/17/2020, 2/17/2021, 2/17/2022
       2/18/2019        45,602    2/17/2020, 2/17/2021, 2/17/2022, 2/17/2023

 

  (3)

This column shows the exercise price for each stock option reported in the table, which was at least 100% of the fair market value of our common shares on the grant date.

 

 

  (4)

This column shows the aggregate number of restricted stock units outstanding as of December 31, 2019, and the number of 2017 performance shares or cash performance shares earned based on performance of 91.3% through December 31, 2019, that remain outstanding as of that date. The remaining vesting dates are shown in the following table. All awards described below vest in four equal annual installments from the grant date, unless otherwise noted under “Vesting Schedules.”

 

 

Name

   Grant
Date
     Shares or
Units
Outstanding
   Remaining Vesting Dates    Vesting Schedules

Beth E. Mooney

     2/15/2016      47,061    2/17/2020   
     2/20/2017      115,878    2/17/2020    Performance shares vest in full on 2/17/2020.
     2/20/2017      50,768    2/17/2020, 2/17/2021   
     2/19/2018      81,460    2/17/2020, 2/17/2021, 2/17/2022   
       2/18/2019      151,519    2/17/2020, 2/17/2021, 2/17/2022, 2/17/2023     

Donald R. Kimble

     2/15/2016      16,043    2/17/2020   
     2/20/2017      39,503    2/17/2020    Performance shares vest in full on 2/17/2020.
     2/20/2017      17,306    2/17/2020, 2/17/2021   
     2/19/2018      23,711    2/17/2020, 2/17/2021, 2/17/2022   
       2/18/2019      42,748    2/17/2020, 2/17/2021, 2/17/2022, 2/17/2023     

Christopher M. Gorman

     2/15/2016      25,669    2/17/2020   
     2/20/2017      63,206    2/17/2020    Performance shares vest in full on 2/17/2020.
     2/20/2017      27,691    2/17/2020, 2/17/2021   
     2/19/2018      39,773    2/17/2020, 2/17/2021, 2/17/2022   
       2/18/2019      66,497    2/17/2020, 2/17/2021, 2/17/2022, 2/17/2023     

Andrew J. “Randy” Paine III

     2/15/2016      30,884    2/17/2020    Performance shares vest in full on 2/17/2020.
     2/20/2017      47,404    2/17/2020   
     2/20/2017      20,767    2/17/2020, 2/17/2021   
     2/19/2018      29,066    2/17/2020, 2/17/2021, 2/17/2022   
       2/18/2019      47,498    2/17/2020, 2/17/2021, 2/17/2022, 2/17/2023     

Amy G. Brady

     2/15/2016      6,952    2/17/2020   
     2/20/2017      17,118    2/17/2020    Performance shares vest in full on 2/17/2020.
     2/20/2017      19,229    2/20/2020    33% vests each year for three years after the grant date.
     2/20/2017      7,499    2/17/2020, 2/17/2021
     2/20/2017      360    2/17/2020, 2/17/2021   
     2/19/2018      15,296    2/17/2020, 2/17/2021, 2/17/2022   
       2/18/2019      33,248    2/17/2020, 2/17/2021, 2/17/2022, 2/17/2023     

 

   LOGO    45


Table of Contents

Compensation of Executive Officers and Directors

 

 

  (5)

This column shows the aggregate number of performance shares or cash performance shares outstanding and shown at the target value of 150% based on performance as of December 31, 2019, other than the 2017 award of performance shares or cash performance shares which were earned based on performance between 2017 and 2019, vested in full on February 17, 2020, and are shown in the prior column as described in footnote 4. This column also includes the share-settled performance award granted to Mr. Kimble in 2019. The vesting dates for each award of performance shares or cash performance shares (including reinvested dividends) are shown in the following table. All awards described below vest in full after three years from the grant date, unless otherwise noted.

 

 

Name

   Grant Date     

Shares or
Units

Outstanding

     Remaining
Vesting
Dates
 

Beth E. Mooney

     2/19/2018        203,650        2/17/2021  
       2/18/2019        284,098        2/17/2022  

Donald R. Kimble

     2/19/2018        59,277        2/17/2021  
     2/18/2019        80,151        2/17/2022  
       2/18/2019        29,686        3/1/2022  

Christopher M. Gorman

     2/19/2018        99,433        2/17/2021  
       2/18/2019        124,682        2/17/2022  

Andrew J. “Randy” Paine III

     2/19/2018        72,664        2/17/2021  
       2/18/2019        89,057        2/17/2022  

Amy G. Brady

     2/19/2018        38,243        2/17/2021  
       2/18/2019        62,341        2/17/2022  

2019 Option Exercises and Stock Vested Table

 

The following table provides information regarding the exercise of stock options and the vesting of restricted stock units during the year ended December 31, 2019, for the Named Executive Officers.

 

     Option Awards      Stock Awards  

Name

   Number of
Shares
Acquired on
Exercise
(#)
     Value
Realized
on Exercise
($)(9)
     Award
Vesting Date
     Number of
Shares
Acquired on
Vesting (#)
     Value
Realized on
Vesting ($)
 
           

Beth E. Mooney

     800,292      7,904,674        2/17/2019(1)        31,226      546,769
                 2/17/2019(2)        45,267      792,627
                 2/17/2019(3)        24,417      427,542
                 2/17/2019(4)        26,119      457,337
                 2/17/2019(5)        222,038      3,887,893
              349,067      6,112,168
           

Donald R. Kimble

                 2/17/2019(1)        10,148      177,698
                 2/17/2019(2)        15,432      270,212
                 2/17/2019(3)        8,323      145,744
                 2/17/2019(4)        7,603      133,123
                 2/17/2019(5)        75,694      1,325,409
              117,200      2,052,186
           

Christopher M. Gorman

                 2/17/2019(1)        19,516      341,721
                 2/17/2019(2)        24,692      432,351
                 2/17/2019(3)        13,318      233,198
                 2/17/2019(4)        12,753      223,298
                 2/17/2019(5)        121,111      2,120,662
              191,390      3,351,230
           

Andrew J. “Randy” Paine III

                 2/17/2019(1)        10,831      189,656
                 2/17/2019(2)        29,707      520,167
                 2/17/2019(3)        9,989      174,908
                 2/17/2019(4)        9,319      163,181
                 2/17/2019(6)        58,285      1,020,567