Directors of KeyCorp (NYSE: KEY) are ready to put issues related to corporate governance and executive compensation behind the banking company. They also are retaining retiring chairman and CEO Henry Meyer III as a non-executive employee for up to an additional year.
Key said its board is taking steps to implement what it called corporate governance enhancements adopted by the board last December, following the recommendations of a special board committee that had studied the matter for nearly nine months.
Key also said it would settle derivative claims filed against the company, certain current and former directors and certain officers over 2009 executive compensation practices. In 2010, the board formed a special committee of independent directors to review Key’s executive compensation practices. Last December, the committee recommended specific enhancements to KeyCorp’s corporate governance practices. “The special committee conducted extensive research into best practices in executive compensation and the board of directors firmly believes these enhancements to be in the best interests of shareholders,” said Alexander “Sandy” Cutler, KeyCorp’s lead director and chairman and CEO of Eaton Corp. Mr. Cutler said the enhancements have been or are in the process of being implemented, and will be reported in full in the proxy statement for KeyCorp’s annual meeting in May. However, Key did highlight certain points in an announcement this afternoon.KeyCorp said once it has repaid the funds it received under the federal TARP program and is able to re-implement in full its Pay for Performance approach to executive compensation, executive incentive compensation will be tied primarily to performance-based measures. Length-of-service measures will be used sparingly and incentive compensation will include risk adjustments where appropriate, KeyCorp said. KeyCorp said its full board also will be briefed on the structure of KeyCorp’s incentive compensation plans and the compensation philosophy that drives them, and will discuss its philosophy on compensation before the Compensation and Organization Committee sets compensation for that year. The board also will provide periodically for a full discussion, consistent with the independence of the Compensation and Organization Committee under applicable law, of KeyCorp’s compensation philosophy, programs and implementation to improve full board awareness and understanding of executive compensation, KeyCorp said. To resolve a pair of shareholder complaints that were consolidated as a single lawsuit last August and alleged in part that the board had breached its fiduciary duties by increasing executive compensation in 2009, KeyCorp agreed to adopt a series of corporate governance principles related to executive compensation. It also awarded plantiffs’ counsel $1.75 million to cover attorneys’ fees and expenses.KeyCorp said the settlement is not evidence of an admission of wrongdoing by the defendants.As for Mr. Meyer, KeyCorp said he would continue with the company beyond his retirement as CEO to help facilitate the transition of his longstanding industry and community relationships. He would be paid an annualized salary of $240,000 after May 1.Beth Mooney will assume the helm of the bank this spring.
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