UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(RULE 14a-101)
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127 PUBLIC SQUARE
CLEVELAND, OHIO 44114
March 29, 2013
Dear Shareholder,
We are pleased to invite you to attend KeyCorps 2013 Annual Meeting of Shareholders on Thursday, May 16, 2013. The meeting will be held at One Cleveland Center, 1375 East Ninth Street, Cleveland, Ohio 44114, beginning at 8:30 a.m., local time.
The notice and proxy statement contain important information about proxy voting and the business to be conducted at the meeting. We encourage you to read it carefully before voting. We hope you will attend the meeting, but even if you plan to attend, we encourage you to vote your shares by telephone, over the internet, 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 support of KeyCorp. We look forward to seeing you at the annual meeting.
Sincerely, |
|
Beth E. Mooney |
Chairman of the Board |
127 PUBLIC SQUARE
CLEVELAND, OHIO 44114
Notice of Annual Meeting of Shareholders of KeyCorp
Date and Time: | Thursday, May 16, 2013 at 8:30 a.m., local time | |
Place: | 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 2014, 2. Ratification of the appointment by the Audit Committee of the Board of Directors of Ernst & Young LLP as independent auditors for KeyCorp for the fiscal year ending December 31, 2013, 3. Advisory approval of KeyCorps executive compensation, 4. Approval of KeyCorps 2013 Equity Compensation Plan, and 5. The transaction of 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 March 19, 2013 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 mail the Notice of Internet Availability of Proxy Materials to our shareholders on or about April 4, 2013. On or about the same day, we will begin mailing paper copies of our proxy materials to shareholders who have requested them. | |
Internet Availability of Proxy Materials: |
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on May 16, 2013: Our 2013 proxy statement, proxy card, 2012 Annual Review and 2012 Annual Report on Form 10-K are available at www.envisionreports.com/key. | |
Voting: | It is important that your shares are represented and voted at the meeting. You may vote your shares by telephone, the internet, or by mailing your signed proxy card in the enclosed return envelope if the proxy statement was mailed to you. If you decide to attend the meeting, you may withdraw any previously voted proxy and vote personally on any matter properly brought before the meeting. |
By Order of the Board of Directors |
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Paul N. Harris |
Secretary |
March 29, 2013 |
Proxy Statement Summary
This summary contains highlights of information contained elsewhere in our proxy statement. This summary does not contain all information that you should consider, and you should read the entire proxy statement carefully for complete information before you vote.
2013 Annual Meeting Information
Date and Time: | Thursday, May 16, 2013 at 8:30 a.m., local time | |
Place: | One Cleveland Center, 1375 East Ninth Street, Cleveland, Ohio 44114 |
Proposals for the 2013 Annual Meeting
Proposal | Page | Board Recommendation | ||||
1. Election of Directors You are being asked to elect 12 directors. Two of our current directors, Messrs. Sanford and Stevens, will retire from our Board when their respective terms end at the Annual Meeting. Each of our other current directors is standing for election to hold office until the next annual meeting of shareholders or until his or her successor is duly elected or qualified. Effective with Messrs. Sanfords and Stevens retirements, our Board will have 12 members. |
3 | FOR all nominees | ||||
2. Auditor Ratification We are asking shareholders to ratify our Audit Committees appointment of our current independent auditor, Ernst & Young LLP, as our independent auditor for fiscal year 2013. One or more representatives of Ernst & Young will be present at the meeting, will be given the opportunity to present a statement, and will be available to respond to appropriate questions from shareholders. |
58 | FOR | ||||
3. Say-on-Pay We are asking shareholders to give advisory approval of compensation for KeyCorps Named Executive Officers (as defined in the Compensation Discussion and Analysis section beginning on page 27 of this proxy statement). This advisory vote is held on an annual basis. |
59 | FOR | ||||
4. 2013 Equity Compensation Plan We are asking for your approval of KeyCorps 2013 Equity Compensation Plan for KeyCorps employees and non-employee directors. A copy of the 2013 Equity Compensation Plan is attached to this proxy statement as Appendix A. |
60 | FOR |
2012 Performance Highlights
KeyCorp achieved strong business results for the fiscal year ended December 31, 2012, including net income from continuing operations attributable to Key Common Shareholders of $827 million, or $0.88 per Common Share. This strong financial performance was driven by our success on a broad range of initiatives that are intended to position us for future growth:
| On July 13, 2012, we completed our acquisition of 37 retail banking branches in Western New York, adding approximately $2 billion in assets and deposits to our balance sheet. |
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| On August 1, 2012, we acquired approximately $718 million of Key-branded credit card assets from Elan Financial Services as part of our strategy to diversify our revenue stream. |
| We continued our work toward our goal of achieving an expense run-rate reduction of $150 to $200 million by the end of 2013. We achieved $60 million in annualized expense savings in 2012, exceeding the original goal set for the year. |
Additionally, in accordance with the capital plan that we submitted in January 2012 to the Federal Reserve, our Board of Directors announced a Common Share repurchase program in the amount of $344 million in March 2012, and approved an increase in our quarterly cash dividend and declared a quarterly cash dividend of $0.05 per Common Share, or $0.20 per Common Share on an annualized basis, in May 2012. In connection with our January 2013 capital plan submission which was not objected to by the Federal Reserve, our Board of Directors announced a Common Share repurchase program in the amount of $426 million, and will consider increasing our quarterly cash dividend to $0.055 per Common Share, at the Boards May 2013 meeting.
Executive Compensation
We emphasize performance-based compensation, with approximately 85% and 77% of target total direct compensation being tied to performance for our Chief Executive Officer and other Named Executive Officers (as defined on page 27 of this proxy statement), respectively. Our Named Executive Officers compensation opportunities are dependent upon achieving a balanced mix of financial and strategic goals directly aligned with our approved risk tolerances.
Chief Executive Officers Pay Mix
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Other Named Executive Officers Pay Mix
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In 2012, we revised our compensation program to require the deferral of a fixed percentage of our Named Executive Officers total incentive award over a multi-year period subject to risk-based vestingat least 60% for our Chief Executive Officer and at least 50% for our other Named Executive Officers.
With respect to the financial metrics that were used as targets for our 2012 short-term incentive plan, we achieved a return on average assets from continuing operations in 2012 of 1.05%, completing our second consecutive year of a return on average assets above 1% and within our strategic target range. We increased 2012 pre-provision net revenue by $38 million or 2.9% over 2011, demonstrating improved noninterest income resulting from the early termination of leveraged leases, net gains from loan sales, and the redemption of trust preferred securities. For 2012, KeyCorp had earnings per share
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of $0.88, well within the upper end of the target range set for this metric by the Compensation and Organization Committee in early 2012. Certain of these financial metrics are defined in more detail on page 41 of this proxy statement.
Based on our performance in 2012, our short-term incentive plan was funded at 110% of target. Ms. Mooney and Messrs. Weeden and Stevens participate in our short-term incentive plan and achieved 110% of their short-term targets. Mr. Gorman and Mr. Koehler, due to their roles as the President of the Corporate Bank and the President of the Community Bank, respectively, participate in a modified short-term incentive structure that reflects the KeyCorp performance scorecard (75% of short-term incentive) and the performance of each officers respective line of business (25% of short-term incentive). Mr. Gorman and Mr. Koehler achieved a blended rate of 130% and 103% of their short-term targets, respectively.
The following table sets forth both the annual and long-term incentive compensation awards of our Named Executive Officers, including the percentage of the incentive award that was subject to mandatory deferral:
Name | 2012 Short-Term ($)(1) |
2013 LTI Award ($)(2) |
Total Incentive Award ($) |
% of Total Incentive Award Deferred |
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Beth E. Mooney |
2,035,000 | 4,000,000 | 6,035,000 | 66 | % | |||||||||||
Jeffrey B. Weeden |
650,000 | 1,400,000 | 2,050,000 | 68 | % | |||||||||||
Thomas C. Stevens |
594,000 | | (3 ) | 594,000 | | % | ||||||||||
Christopher M. Gorman |
1,500,000 | 1,900,000 | 3,400,000 | 56 | % | |||||||||||
William R. Koehler |
775,000 | 1,300,000 | 2,075,000 | 63 | % |
(1) | Represents short-term incentive earned in 2012 and awarded in early 2013. |
(2) | Reflects 2013 LTI Award (as that term is defined on page 29 of this proxy statement) consisting of long-term incentives granted in early 2013 based on a combination of 2012 performance and expected future contributions. |
(3) | Due to Mr. Stevens previously announced retirement, effective June 30, 2013, he did not receive a 2013 LTI Award. |
For further discussion, see our Compensation Discussion and Analysis begins on page 27 of this proxy statement and our Summary Compensation Table on page 42 of this proxy statement.
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Director Nominees
Name | Age | Director Since |
Independent | Committee Memberships | ||||||||||
Edward P. Campbell |
63 | 1999 | Yes | (1) | Compensation and Organization (Chair) Nominating and Corporate Governance | |||||||||
Joseph A. Carrabba |
60 | 2009 | Yes | Compensation and Organization Nominating and Corporate Governance Executive | ||||||||||
Charles P. Cooley |
57 | 2011 | Yes | (2 ) | Audit Executive | |||||||||
Alexander M. Cutler |
61 | 2000 | Yes | (3 ) | Compensation and Organization Nominating and Corporate Governance (Chair) Executive | |||||||||
H. James Dallas |
54 | 2005 | Yes | Risk (Chair) Nominating and Corporate Governance | ||||||||||
Elizabeth R. Gile |
57 | 2010 | Yes | (1 ) | Risk | |||||||||
Ruth Ann M. Gillis |
58 | 2009 | Yes | (2 ) | Audit (Chair) Nominating and Corporate Governance | |||||||||
William G. Gisel, Jr. |
60 | 2011 | Yes | Risk | ||||||||||
Richard J. Hipple |
60 | 2012 | Yes | Risk | ||||||||||
Kristen L. Manos |
53 | 2009 | Yes | Audit Executive | ||||||||||
Beth E. Mooney |
57 | 2010 | No | Executive (Chair) | ||||||||||
Barbara R. Snyder |
57 | 2010 | Yes | Compensation and Organization Executive |
(1) | Qualifies as an audit committee financial expert, but does not serve on the Audit Committee. |
(2) | Qualifies as an audit committee financial expert. |
(3) | Serves as KeyCorps Lead Director. |
Corporate Governance
We are committed to meeting high standards of ethical behavior, corporate governance, and business conduct. Some highlights of our corporate governance practices include:
Director Elections
| Annual elections for all directors |
| Majority voting in uncontested elections (Page 3) |
| Director skills and qualifications (Page 3) |
Board Independence
| Other than Ms. Mooney, all director nominees are independent under the New York Stock Exchanges and KeyCorps standards of independence (Page 16) |
| Standing Board committees consist solely of independent directors (Page 14) |
| Lead DirectorAlexander M. Cutler (Page 14) |
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Standing Board Committees
| Audit Committee14 meetings in 2012 (Page 10) |
| Compensation and Organization Committee10 meetings in 2012 (Page 11) |
| Nominating and Corporate Governance Committee6 meetings in 2012 (Page 12) |
| Risk Committee7 meetings in 2012 (Page 14) |
Board Practices and Policies
| The independent directors met in executive session at every regularly scheduled 2012 Board meeting |
| 98.2% average attendance by directors at Board and committee meetings |
| Governance policies are disclosed on Keys website at www.key.com/ir |
¡ | Director retirement policy |
¡ | Director and senior executive officer stock ownership guidelines |
| Clawback policy (Page 29) |
| Expanded Lead Director Role (Page 14) |
| Active Shareholder Engagement Program (Pages 14 and 32) |
| Board Oversight of Risk (Page 15) |
| Communications with the Board (Page 18) |
| Insider Trading Policy prohibits the hedging or pledging of Common Shares by directors or the management committee (Page 31) |
| No Tax Gross-Ups on Perquisites or on a Change of Control (Page 30) |
Voting Information
Who May Vote: | Shareholders of record as of the close of business on March 19, 2013. | |
Voting by Internet: | 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. | |
Voting by Telephone: | Follow the instructions in the Notice of Internet Availability of Proxy Materials or on the proxy card. | |
Voting by Mail: | Complete, sign, and date the proxy card and return it in the envelope provided if the proxy statement was mailed to you. |
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Compensation Realized by Our Chief Executive Officer in 2012 |
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Outstanding Equity Awards of Directors at 2012 Fiscal Year-End |
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PROPOSAL THREE: Advisory Approval of KeyCorps Executive Compensation |
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PROPOSAL FOUR: Approval of KeyCorps 2013 Equity Compensation Plan |
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Proxy Statement Proposals for the 2014 Annual Meeting of Shareholders |
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Other Proposals and Nominations for the 2014 Annual Meeting of Shareholders |
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Appendices |
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Policy Statement on Independent Auditing Firms Services and Related Fees |
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127 PUBLIC SQUARE
CLEVELAND, OHIO 44114
Proxy Statement
This proxy statement is first being mailed to our shareholders on or about April 4, 2013 in connection with the solicitation on behalf of KeyCorps Board of Directors of shareholder proxies to be voted at the 2013 Annual Meeting of Shareholders to be held on May 16, 2013 (the Annual Meeting), and at all postponements and adjournments thereof. All holders of record of KeyCorp Common Shares at the close of business on March 19, 2013 are entitled to vote. On that date, there were 923,117,024 KeyCorp Common Shares outstanding and entitled to vote at the meeting.
KeyCorp employs the cost-effective and environmentally-conscious notice and access delivery method that allows us to give our shareholders access to the full set of our proxy materials over the internet. As a result, beginning on or about April 4, 2013, we are sending to most of our shareholders, by mail or e-mail, a notice detailing how to access our proxy materials on the internet and to vote online. The notice is not a proxy card and cannot be used to vote your shares.
General Information About the 2013 Annual Meeting
KeyCorps Board of Directors (sometimes referred to herein as the Board of Directors or the Board) does not know of any matters to be presented at the Annual Meeting other than those described in this proxy statement. However, if other matters properly come before the Annual Meeting or any adjournment or postponement of the Annual Meeting, the person or persons voting your shares according to the instructions you provided by proxy card, internet, or telephone will vote your shares in accordance with their best judgment on such matters.
Each KeyCorp Common Share is entitled to one vote on each matter to be considered at the Annual Meeting.
To transact business at the Annual Meeting, a majority of the outstanding KeyCorp Common Shares must be present either in person or by proxy. This is known as a quorum. If you have returned a valid proxy, your shares will be counted for the purpose of determining whether there is a quorum.
You may vote FOR or AGAINST or choose to ABSTAIN from voting for each nominee for the Board of Directors and for each of the other proposals. Generally, choosing to ABSTAIN from a vote is counted as a vote AGAINST a particular proposal. However, a vote to ABSTAIN from the election of any director (as in Proposal One of this proxy statement) will not be counted FOR or AGAINST that director. Even if you choose to ABSTAIN on any or every proposal, your proxy still will be counted towards the quorum.
A brokers ability to vote your shares on your behalf is governed by the rules of the New York Stock Exchange. Without your specific instruction, your broker or other nominee may only vote your shares on routine proposals. A broker non-vote occurs when a broker submits a proxy on your behalf but leaves certain proposals (typically, the non-routine proposals) unvoted. Broker non-votes will be counted towards the quorum at the Annual Meeting. The further effect of your brokers non-vote
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depends on whether the non-vote relates to a routine or non-routine proposal. Your brokers non-vote with respect to Proposals One, Three, and Four, which the New York Stock Exchange considers non-routine proposals, will not be counted FOR or AGAINST that proposal. Proposal Two is considered a routine matter than your broker may vote on without your instruction.
You are urged to vote your KeyCorp Common Shares promptly by telephone, the internet, or by mailing your signed proxy card in the enclosed envelopes to ensure your shares are voted at the meeting. KeyCorp Common Shares represented by properly executed proxy cards, internet instructions, or telephone instructions will be voted in accordance with any specification made. If no specification whatsoever is made on an otherwise properly executed proxy card or your internet vote makes no specification whatsoever, except in the case of broker non-votes the proxies will vote FOR the election of the nominees named herein as directors (Proposal One of this proxy statement), FOR the ratification of the appointment of Ernst & Young as independent auditors for the fiscal year ending December 31, 2013 (Proposal Two of this proxy statement), FOR advisory approval of KeyCorps executive compensation (Proposal Three of this proxy statement), and FOR approval of KeyCorps 2013 Equity Compensation Plan (Proposal Four of this proxy statement).
You may revoke your previously submitted proxy at any time prior to its exercise at the Annual Meeting by: (i) filing a notice to revoke the proxy with the Secretary of KeyCorp, (ii) filing a subsequently dated proxy (whether by proxy card, internet, or telephone), or (iii) by attending the Annual Meeting and electing to vote your shares in person. Even if you plan to attend the Annual Meeting in person, you are encouraged to vote your shares by proxy. Your mere presence at the Annual Meeting will not automatically revoke your previously submitted vote.
KeyCorp will bear all of the expense of preparing, printing, and mailing these proxy materials. Officers and other employees of KeyCorp and its subsidiaries may solicit the return of proxies, but will not receive any additional compensation for these efforts. KeyCorp has engaged D.F. King to assist in the solicitation of proxies at an anticipated cost of $12,500 plus expenses. KeyCorp will request that brokers, banks, custodians, nominees, and other fiduciaries send proxy materials to all beneficial owners and upon request will reimburse them for their expenses. Solicitations may be made by mail, telephone, or other means.
In Person
If you attend the Annual Meeting in person, you will be asked to present photo identification, such as a state-issued drivers license. If you are a holder of record, the top half of your proxy card or your Notice of Internet Availability serves as your admission ticket. If you hold your shares in street name, you will need proof of ownership to be admitted to the meeting. A recent brokerage statement or a letter from your bank or broker are examples of proof of ownership. If you want to vote your shares held in street name in person at the meeting, you must obtain and bring with you a legal proxy in your name from the broker, bank, or other nominee that holds your shares.
Internet Access
You may listen to the Annual Meeting on the Internet by visiting our website: www.key.com/ir. You may wish to visit the website a few minutes prior to the start of the meeting if you need to download any required software.
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Election of Directors
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In accordance with KeyCorps Amended and Restated Code of Regulations (the Regulations), the Board of Directors has been fixed at 12 members, effective as of the Annual Meeting. Messrs. Sanford and Stevens will continue to serve as directors of KeyCorp until this Annual Meeting, when each will retire and their respective terms as directors will end. Under the Regulations, directors are elected to one-year terms that expire at each annual shareholder meeting. If elected, the 12 director nominees will serve one-year terms expiring at the 2014 annual shareholder meeting (or until their respective successors are elected and qualified).
The director nominees for this Annual Meeting are listed below. All nominees are current members of the Board. Should any nominee be unable to accept nomination or election, the proxies will be voted for the election of a substitute nominee recommended by the Board. Alternatively, the Board may, at its option, recommend a vote to hold a vacancy to be filled by the Board at a later date. The Board has no reason to believe that any of the individuals identified below will be unable to accept nomination or election.
KeyCorp has adopted majority voting 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 incumbent nominee receives more AGAINST votes than FOR votes, the nominee will be elected as a holdover director and must submit an offer to resign as a director to the Board. Thereafter, the Nominating and Corporate Governance Committee of the Board will consider the holdover directors resignation and will submit its recommendation to accept or reject the resignation to the Board. The Board (excluding the holdover director) will act on the Committees recommendation and publicly disclose its decision.
The next pages set forth each director nominees biographical information and information concerning his or her qualifications to serve as a director of KeyCorp. The information provided is as of January 1, 2013 unless otherwise indicated. The following chart summarizes each director nominees skills, qualifications and relevant experience.
Director Qualifications and Experience
Name | Financial Expert |
Specialized Industry Skills | Committee Skills |
Public Company Experience |
M & A Experience |
Risk Management |
Banking or Financial Industry | |||||||
Edward P. Campbell |
Yes | Industrial (Foreign/Domestic) | All | Yes | Yes | |||||||||
Joseph A. Carrabba |
Mining/Environment | All | Yes | Yes | Yes | |||||||||
Charles P. Cooley |
Yes | Specialty Chemical | Audit | Yes | Yes | Yes | ||||||||
Alexander M. Cutler |
Industrial (Foreign/Domestic) | All | Yes | Yes | ||||||||||
H. James Dallas |
Technology | Risk/Audit | Yes | Yes | Yes | Yes | ||||||||
Elizabeth R. Gile |
Yes | Risk Management | Risk | Yes | Yes | |||||||||
Ruth Ann M. Gillis |
Yes | Utility | All | Yes | Yes | Yes | Yes | |||||||
William G. Gisel, Jr. |
Food Services | Risk | Yes | Yes | Yes | |||||||||
Richard J. Hipple |
Manufacturing | All | Yes | Yes | ||||||||||
Kristen L. Manos |
Marketing/Manufacturing | Audit | Yes | |||||||||||
Beth E. Mooney |
Banking/Financial Services | Yes | Yes | Yes | Yes | |||||||||
Barbara R. Snyder |
Education | All |
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EDWARD P. CAMPBELL | |||||
Age: 63 Director Since: 1999 |
KeyCorp Committee(s): Compensation and Organization (Chair) Nominating and Corporate Governance |
Former Public Directorships (in last five years): The Lubrizol Corporation (2009-2011) Nordson Corporation OMNOVA Solutions, Inc. (1999-2009) | ||||
Mr. Campbell previously served on the Risk Committee and the Audit Committee where he served as Chair. Mr. Campbell qualifies as an audit committee financial expert as that term is defined by the Securities and Exchange Commission.
In 2010, Mr. Campbell retired as Chairman, Chief Executive Officer and President of Nordson Corporation. Nordson is a multi-national maker of capital equipment, which as of 2012 had approximately 5,400 employees and direct operations and sales support offices in over 30 countries. Mr. Campbell joined Nordson in 1988 as Vice President of Corporate Development and rose to positions of greater responsibility. He was elected Chief Executive Officer in 1997 and Chairman of the Board and Chief Executive Officer in 2004.
Prior to joining Nordson, Mr. Campbell spent 11 years in operating and financial management positions at The Standard Oil Company/British Petroleum, with responsibility for such functions as capital markets, treasury, cash management, financial planning, pension asset management, equity and fixed income management, and investment management functions, including fixed income and foreign exchange and derivatives trading. Mr. Campbell also had experience leading the retail operations of the company.
Mr. Campbell has held leadership roles in a number of civic and community organizations. | ||||||
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JOSEPH A. CARRABBA | |||||
Age: 60 Director Since: 2009 |
KeyCorp Committee(s): Compensation and Organization Nominating and Corporate Governance Executive |
Public Directorships: Cliffs Natural Resources (since 2006) Newmont Mining Corporation (since 2008) | ||||
Since 2007, Mr. Carrabba has been the Chairman, President, and Chief Executive Officer of Cliffs Natural Resources, Inc. Cliffs is an international mining and natural resources company with 2012 revenues of $5.9 billion and approximately 7,600 employees. Mr. Carrabba joined Cliffs in 2005 as President and Chief Operating Officer and became President and Chief Executive Officer in 2006.
Mr. Carrabba joined Cliffs from Rio Tinto, a global mining company where he served for 22 years in a variety of leadership capacities at locations worldwide, including the United States, Asia, Australia, Canada, and Europe. Before relocating to Rio Tintos Diavik Diamond Mines, Inc. in Canadas Northwest Territory where he served most recently as President, he spearheaded the development and implementation of Rio Tintos Six Sigma initiative (an initiative using data measurements and statistics to identify factors to reduce waste, defects and costs and thereby increase bottom line benefits to customers and shareholders) at its bauxite mining operation in Australia.
Mr. Carrabba serves in leadership roles in a number of civic and community organizations. |
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CHARLES P. COOLEY | |||||
Age: 57 Director Since: 2011 |
KeyCorp Committee(s): Audit Executive |
Public Directorships: Modine Manufacturing (since 2006) | ||||
Mr. Cooley qualifies as an audit committee financial expert as that term is defined by the Securities and Exchange Commission.
Mr. Cooley was Chief Financial Officer of The Lubrizol Corporation from 1998 until he retired in 2011 following Berkshire Hathaways purchase of the company. Lubrizol, with annual revenues of approximately $6.1 billion in 2011, is a specialty chemical company that produces and supplies technologies to customers in the global transportation, industrial and consumer markets. At Lubrizol, Mr. Cooley had global responsibility for all aspects of its finance function and also oversaw its corporate development and strategic planning activities.
Prior to joining Lubrizol, Mr. Cooley held positions of increasing responsibility in finance at Atlantic Richfield Company for 15 years, including treasury, capital markets, corporate development, and operating segment financial management. Mr. Cooley began his career in the National Banking Division of Manufacturers Hanover Trust Company following completion of the banks management training program.
Mr. Cooley serves in leadership roles in a number of civic and community organizations.
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ALEXANDER M. CUTLER | |||||
Age: 61 Director Since: 2000 |
KeyCorp Committee(s): Compensation and Organization Nominating and Corporate Governance (Chair) Executive |
Public Directorships: Eaton E.I. du Pont Nemours (since 2008) | ||||
Mr. Cutler is KeyCorps Lead Director.
Mr. Cutler is the Chairman, Chief Executive Officer, and President of Eaton, a global diversified power management company with approximately 103,000 employees that sells products in more than 170 countries. As chairman and chief executive officer of a Fortune 200 company, Mr. Cutler regularly reviews financial reports, risk management structure, policies and compliance activities, controls systems, information technology systems, company pension and deferred compensation plans, and foreign exchange and interest rate risks. He also has extensive experience in acquisition/divestiture negotiations and integrations. Mr. Cutler assumed his current position at Eaton in 2000 after 25 years with the company and its predecessors.
Mr. Cutler serves in leadership roles in civic and community organizations. He chairs The Business Roundtable Corporate Governance Committee and is also a member of The Business Council. |
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H. JAMES DALLAS | |||||
Age: 54 Director Since: 2005 |
KeyCorp Committee(s): Risk (Chair) Nominating and Corporate Governance |
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Mr. Dallas is Senior Vice President of Quality and Operations at Medtronic, Inc., a global medical technology company that employs approximately 45,000 people and does business in more than 120 countries. Mr. Dallas previously served as Senior Vice President and Chief Information Officer at Medtronic.
In his role as Senior Vice President of Quality and Operations, Mr. Dallas has responsibility for executing cross-business initiatives to maximize the companys global operating leveraging. Mr. Dallas also serves as a member of Medtronics executive management team. Prior to joining Medtronic in 2006, Mr. Dallas was Vice President and Chief Information Officer at Georgia-Pacific Corporation, a maker of forest products. At Georgia Pacific, Mr. Dallas held a series of progressively more responsible information technology and operating roles. Mr. Dallas began his career as an internal auditor for C&S National Bank, a large regional bank in Atlanta, Georgia, and has experience as a cost accountant with a focus on profitability and key profit drivers. The majority of Mr. Dallass career has been focused on bridging the gap between strategy and execution; specifically, leading large, enterprise-wide projects and acquisition integration. In addition, he has years of experience with IT security and data privacy.
Mr. Dallas serves on the boards of civic and community organizations. | ||||||
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ELIZABETH R. GILE | |||||
Age: 57 Director Since: 2010 |
KeyCorp Committee(s): Risk
KeyBank Board of Directors |
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In 2005, Ms. Gile retired from Deutsche Bank AG (Deutsche Bank) where she was Managing Director and the Global Head of the Loan Exposure Management Group (2003 to 2005). During her career, Ms. Gile had the opportunity to focus on many aspects of credit origination and risk management. In her role at Deutsche Bank, she created and ran a business division to manage the banks $80 billion wholesale loan portfolio using capital market instruments and derivatives to reduce the volatility of financial results. Ms. Gile also spent the first 24 years of her career at J.P. Morgan (1977 to 2001) where she was responsible at varying points for J.P. Morgans North American business involving high grade credit markets trading, credit portfolio management, corporate lending and credit research. Following her service at J.P. Morgan, Ms. Gile served as Vice Chair of Toronto Dominion Securities and Head of Portfolio Management for the company from 2001 to 2002.
Since her retirement, Ms. Gile served from 2007 to 2009 as 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 Americas since 2005 and serves in leadership roles in a number of civic and community organizations.
Ms. Gile has been designated as an audit committee financial expert as that term is defined by the Securities and Exchange Commission, although she does not serve on the Audit Committee. |
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RUTH ANN M. GILLIS | |||||
Age: 58 Director Since: 2009 |
KeyCorp Committee(s): Audit (Chair) Nominating and Corporate Governance |
Public Directorships: Potlatch Corporation (since 2003) | ||||
Ms. Gillis has been designated as an audit committee financial expert as that term is defined by the Securities and Exchange Commission.
Since 2008, Ms. Gillis has been an Executive Vice President of the Exelon Corporation, serving as Chief Administrative Officer. Exelon is an electric utility company. Previously, Ms. Gillis was a Senior Vice President at Exelon from 2005 to 2008. Ms. Gillis serves as President of Exelon Business Services Company, a subsidiary of Exelon, which encompasses information technology, supply chain, legal, communications, human resources and finance, as well as other advisory, professional, technical and support services. As President of Exelon Business Services Company, Ms. Gillis is responsible for providing oversight for transactional and corporate services for the Exelon system of companies. Ms. Gillis is a member of Exelons executive committee, pension investment committee, and the corporate risk management committee as well as a member of the Exelon Foundation Board. Ms. Gillis previously served as Chief Financial Officer of Exelon.
Ms. Gillis previous experience includes service as Unicom Corporations Chief Financial Officer and prior thereto as Treasurer where she was responsible for overseeing Unicom Corporations financing activities, cash management, financial risk management, and treasury functions. She began her professional career in banking and held leadership positions at First Chicago and American National Bank & Trust (now J.P. Morgan).
Ms. Gillis serves in leadership roles in a number of civic and community organizations. | ||||||
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WILLIAM G. GISEL, JR. | |||||
Age: 60 Director Since: 2011 |
KeyCorp Committee(s): Risk |
Public Directorships: MOD-PAC CORP. Moog Inc. | ||||
Mr. Gisel serves as President and Chief Executive Officer of Rich Products Corporation, a global manufacturer and supplier of frozen foods with annual sales of approximately $3 billion. Rich Products is a leading supplier to the food service and in-store bakery segment of the food industry internationally.
Prior to becoming Chief Executive Officer in 2006, Mr. Gisel held positions of increasing responsibility with the company, including Chief Operating Officer and President of the companys Food Group and Executive Vice President for International and Strategic Planning. Mr. Gisel began his career at Richs as General Counsel and also spent four years at Philips, Lytle, LLC.
Mr. Gisel is a member of the Board of Directors of the Grocery Manufacturers Association and holds leadership roles in a number of civic and community organizations. |
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RICHARD J. HIPPLE | |||||
Age: 60 Director Since: 2012 |
KeyCorp Committee(s): Risk |
Public Directorships: Materion Corporation (since 2006) Ferro Corporation | ||||
Mr. Hipple is the Chairman of the Board, President and Chief Executive Officer of Materion Corporation (formerly known as Brush Engineered Materials Inc.), a manufacturer of highly engineered advanced materials and related services. Materion Corporation had sales of approximately $1.5 billion in 2011. Mr. Hipple has served as Chairman of the Board and Chief Executive Officer of Materion since 2006 and President since 2005. Mr. Hipple was Vice President of Strip Products, Performance Alloys of Materion from July 2001 to May 2002, when he became President of Performance Alloys of Materion.
Prior to joining Materion, 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 a member of the boards of a number of civic and community organizations. | ||||||
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KRISTEN L. MANOS | |||||
Age: 53 Director Since: 2009 |
KeyCorp Committee(s): Audit Executive |
Public Directorships: Select Comfort Corporation (2007-2008) | ||||
Ms. Manos has been President of Wilsonart Americas since February 2012. Located in Temple, Texas, Wilsonart is the leading producer of high pressure decorative laminate in North America.
Ms. Manos was a partner at Sanderson Berry Co., a private investment advisory services firm located in Holland, Michigan from 2009 to February 2012, where she was involved in business strategy and marketing consulting.
Ms. Manos is a former Executive Vice President of Herman Miller, Inc. (2004 to 2009). Herman Miller researches, designs, manufactures, and distributes furnishings for use worldwide in various environments including office, healthcare, educational, and residential settings. Ms. Manos was President of Herman Millers North American office business, where she directly participated in corporate risk evaluation, risk management and scenario planning for clients and their facilities.
Ms. Manos experience spans marketing, finance, manufacturing, and general management. She has led global product development, business development, customer service, and manufacturing teams, and has experience in mergers and acquisitions.
Ms. Manos serves on the Board and Finance Committee of International Relief and Development, a non-governmental organization that delivers approximately $500 million in development assistance annually. |
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BETH E. MOONEY | |||||
Age: 57 Director Since: 2010 |
KeyCorp Committee(s): Executive (Chair) |
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Ms. Mooney has been KeyCorps Chairman and Chief Executive Officer since May 1, 2011. She was elected President and Chief Operating Officer on November 18, 2010 and served in that role until she became Chairman and Chief Executive Officer. Ms. Mooney joined KeyCorp in 2006 as a Vice Chair and head of Key Community Bank.
Ms. Mooney has over 30 years of banking experience in retail banking, commercial lending, and real estate financing. Prior to joining KeyCorp, beginning in 2000 she served as Senior Executive Vice President at AmSouth Bancorp, a large regional bank holding company that has merged with Regions Financial Corporation, and became Chief Financial Officer at AmSouth Bancorp as well in 2004. Ms. Mooney ran AmSouths banking operations in Tennessee and Northern Louisiana before becoming its Senior Executive Vice President and Chief Financial Officer.
Prior to joining AmSouth, Ms. Mooney completed line assignments of increasing responsibility at Bank One Corporation, Citicorp Real Estate, Inc., Hall Financial Group and Republic Bank of Texas/First Republic. At Bank One, Ms. Mooney served as Regional President in Akron and Dayton, Ohio, and then as President of Bank One Ohio, managing major markets throughout the state.
Ms. Mooney is a member of the Financial Services Roundtable and serves in leadership roles in a number of civic and community organizations. | ||||||
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BARBARA R. SNYDER | |||||
Age: 57 Director Since: 2010 |
KeyCorp Committee(s): Compensation and Executive |
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Ms. Snyder is President of Case Western Reserve University, a private research university located in Cleveland, Ohio, and has held this post since 2007.
Prior to becoming President of Case Western Reserve University, Ms. Snyder served as Executive Vice President and Provost of The Ohio State University (OSU). She previously served as Vice Provost for Academic Affairs and Human Resources at OSU. She served as a faculty member of the universitys 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 began her academic career in 1983 as an assistant professor at Case Western Reserve Universitys School of Law.
Ms. Snyder has taken a leadership role on the boards of several nonprofit organizations including BioEnterprise, whose focus is on healthcare and bioresearch. |
The Board of Directors unanimously recommends that shareholders vote FOR each of the Director Nominees named above. |
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The Board of Directors and Its Committees
Our Board of Directors, elected by KeyCorps shareholders, oversees the management of KeyCorp and its business and is committed to sound and effective corporate governance principles and practices. During the year ended December 31, 2012, there were seven meetings of KeyCorps Board of Directors. At every regularly scheduled Board meeting, the independent members of the Board met in executive session (i.e., without Ms. Mooney, Mr. Stevens, or any other employee of KeyCorp present).
Each incumbent member of the Board attended at least 75% of the aggregate of the meetings held by the Board of Directors and committees of the Board on which that member served during 2012. On average, the members of the Board attended 98.2% of Board and Board committee meetings during 2012. KeyCorp Board members are expected to attend KeyCorps Annual Meeting of Shareholders. All but one member of the Board attended the annual meeting held in 2012.
KeyCorps Board of Directors currently exercises certain of its powers through four standing committees: Audit, Compensation and Organization, Nominating and Corporate Governance, and Risk. The Board has also established an Executive Committee that serves the functions described on page 14 of this proxy statement.
Board and Committee Membership
The following table summarizes the current membership of the Board and its committees, and the number of times each met in 2012. Messrs. Sanford and Stevens will continue to serve on the Board and their respective committees until the Annual Meeting, when each will retire and their respective terms as a director will end.
Name | Board | Audit | Compensation and Organization |
Nominating and Corporate Governance |
Risk | Executive | ||||||
Edward P. Campbell |
Chair | Member | ||||||||||
Joseph A. Carrabba |
Member | Member | Member | |||||||||
Charles P. Cooley |
Member | Member | ||||||||||
Alexander M. Cutler |
Lead | Member | Chair | Member | ||||||||
H. James Dallas |
Member | Chair | ||||||||||
Elizabeth R. Gile |
Member | |||||||||||
Ruth Ann M. Gillis |
Chair | Member | ||||||||||
William G. Gisel, Jr. |
Member | |||||||||||
Richard J. Hipple |
Member | |||||||||||
Kristen L. Manos |
Member | Member | ||||||||||
Beth E. Mooney |
Chair | Chair | ||||||||||
Bill R. Sanford |
Member | Member | ||||||||||
Barbara R. Snyder |
Member | Member | ||||||||||
Thomas C. Stevens |
Member | |||||||||||
Total 2012 Meetings |
7 | 14 | 10 | 6 | 7 | |
The Audit Committee oversees and reviews the financial information provided to KeyCorps shareholders; appoints KeyCorps independent auditors subject to shareholder ratification; reviews the fees and services of the independent auditors; oversees any material examinations of KeyCorp and its affiliates conducted by federal and state regulatory and supervisory authorities; serves as the audit committee for KeyCorps subsidiary, KeyBank National Association; together with the Risk Committee
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oversees and reviews our allowance for loan and lease losses methodology; oversees and reviews financial reporting, compliance, legal, and information security and fraud risk matters; and supervises and directs any special projects or investigations deemed necessary. Further discussion of the Audit Committees functions can be found on page 15 of this proxy statement under the heading Board Oversight of Risk.
Compensation and Organization Committee
The Compensation Committee reviews, approves, and oversees KeyCorps corporate and executive compensation philosophy and programs, ensures the competitiveness of these programs, and advises the Board on the development and succession of key executives. The Compensation Committee approves the performance goals and objectives for the Chief Executive Officer and other members of the management committee and evaluates their performance. In approving compensation, the Committee takes into account, among other factors, the recommendation of the Chief Executive Officer and her direct reports as to the compensation of other senior executives. The Chief Executive Officer does not play any role with respect to any matter affecting her own compensation.
The Compensation Committee also oversees the development and operation of KeyCorps incentive compensation program and philosophy, related control processes and compliance with the interagency guidance on sound incentive compensation policies and is responsible for enforcing KeyCorps clawback policy. Additionally, the Compensation Committee evaluates risks related to KeyCorps compensation policies and practices in light of KeyCorps goals of maintaining safety and soundness and avoiding compensation practices that encourage excessive risk-taking.
The Compensation Committee may delegate its authority to a subcommittee of its members.
Role of Compensation Consultants
The Compensation Committee retains Compensation Advisory Partners LLC (Compensation Advisory Partners) to assist the Committee in its evaluation of KeyCorps various executive compensation programs. Compensation Advisory Partners serves as an independent consultant at the direction and for the benefit of the Compensation Committee. Annually, Compensation Advisory Partners also provides the Nominating and Corporate Governance Committee with information and analysis regarding director compensation at our compensation peer group companies. It has not performed during 2012, and will not perform, any services for any other KeyCorp entity or affiliate. A representative of Compensation Advisory Partners attends all Compensation Committee meetings and frequently meets with the Compensation Committee without the presence of KeyCorp management. From time to time, Compensation Advisory Partners meets with KeyCorp management in order to gain an understanding of KeyCorps business strategy, compensation and benefits practices, and culture, the scope of executives positions, and to obtain relevant data that is not disclosed publicly. For additional discussion of the role of Compensation Advisory Partners, please see the discussion beginning on page 39 of this proxy statement.
The Compensation Committee has discussed and evaluated the work of Compensation Advisory Partners in light of six factors identified by the rules of the Securities and Exchange Commission for determining potential conflicts of interest. After review, the Compensation Committee has concluded that no conflicts of interest are raised by the work of Compensation Advisory Partners.
A more detailed explanation of the Compensation Committees process and procedures regarding executive compensation is presented in the Compensation Discussion and Analysis beginning on page 27 of this proxy statement. Detailed information regarding the Compensation Committees role in overseeing and evaluating compensation-related risks begins on page 16 of this proxy statement.
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Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee serves as the nominating committee for KeyCorp and, as such, recommends to the Board nominees or candidates to stand for election as directors. The Nominating and Corporate Governance Committee oversees the annual board self-assessment process, including the individual director self-assessments, and KeyCorps policies and practices on significant issues of corporate social responsibility. In addition, the functions of the Nominating and Corporate Governance Committee include oversight of Board corporate governance matters generally, the annual review and recommendation to the Board of a director compensation program that may include equity-based incentive compensation plans, oversight and review of KeyCorps directors and officers liability insurance program, and the facilitation of a meeting of all the independent Board Committee Chairs to discuss the linkage between risk and compensation at KeyCorp.
The Nominating and Corporate Governance Committee uses market data to aid it in its annual review of KeyCorps director compensation program. No executive officer of KeyCorp has any role in determining the amount of director compensation although the Nominating and Corporate Governance Committee may seek assistance from our management committee in designing equity compensation plans for directors. The Nominating and Corporate Governance Committee may delegate its authority to a subcommittee of its members.
Director Recruitment
The Nominating and Corporate Governance Committee uses the following criteria in director recruitment:
| the candidate must have a record of high integrity and other requisite personal characteristics and must be willing to make the required time commitment; |
| the candidate should have a demonstrated breadth and depth of management and/or leadership experience, preferably in a senior leadership role, in a large or recognized organization (profit or nonprofit, private sector or governmental (including educational), civilian or military); |
| the candidate should have a high level of professional or business expertise in areas of relevance to KeyCorp (such as information technology, global commerce, marketing, finance, banking or financial industry, risk management, etc.); |
| in the case of non-employee directors, the candidate should meet the independence criteria set forth in KeyCorps Standards for Determining Independence of Directors; |
| the candidate should not be serving as a director of 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 candidate must demonstrate the ability to think and act independently as well as the ability to work constructively in the overall Board process. |
Additionally, the Board considers whether the candidate would improve the diversity of the Board in terms of gender, race, religion, experience, and/or geography. The current composition of the Board reflects the Nominating and Corporate Governance Committees efforts in this area and the importance of diversity to the Board as a whole:
| five director nominees, including the Chair of the Board, are women; |
| three of the six directors who have joined the Board since 2010 are women; and |
| one director nominee is a minority. |
The criteria used in director recruitment, other than the first, are not rigid rules that must be satisfied in each case, but are flexible guidelines to assist in evaluating and focusing the search for director candidates.
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In evaluating potential first-time Board nominees, the Committee will consider:
| the skills and business experience needed for the Board; |
| the current and anticipated composition of the Board in light of the business activities and needs of KeyCorp and the diverse communities and geographies served by KeyCorp; and |
| the interplay of the candidates 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. |
The Nominating and Corporate Governance Committee considers its search for a candidate successful if a candidate matching the needs of KeyCorp and the Board is found based on these considerations.
The invitation to join the Board as a first-time director or to stand for election as a first-time nominee for director is extended by the Chair of the Nominating and Corporate Governance Committee after discussion with and approval by the committee as a whole. Upon acceptance of the invitation by the candidate, the recommendation of the candidate by the Nominating and Corporate Governance Committee will be made to the Board for final approval.
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 the search firm fees and other retention terms. When identifying director candidates, the Nominating and Corporate Governance Committee has generally retained an independent search firm. The Nominating and Corporate Governance Committee is continually in the process of identifying potential director candidates and Board members are encouraged to submit any potential nominee that any individual director would like to suggest to the Chair of the Nominating and Corporate Governance Committee.
Shareholder Recommendations
A shareholder may also submit any potential nominee that the shareholder would like to suggest to the Chair of the Nominating and Corporate Governance Committee. Any shareholder recommendation for a director nominee should contain the recommended nominees background information, including:
| the name, age, business, and residence address of such person; |
| the principal occupation or employment of such person for the last five years; |
| the class and number of shares of capital stock of KeyCorp that are beneficially owned by such person; |
| all positions of such person as a director, officer, partner, employee, or controlling shareholder of any corporation or other business entity; |
| any prior position as a director, officer, or employee of a depository institution or any company controlling a depository institution; and |
| a statement that the individual would be willing to serve if nominated or elected. |
Any shareholder recommendation should also include, as to the shareholder giving the written notice:
| a representation that the shareholder is a holder of record of shares of KeyCorp entitled to vote at the meeting at which directors are to be elected; and |
| a description of all arrangements or understandings between the shareholder and such recommended person and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder. |
Shareholder recommendations should be provided to the Secretary of KeyCorp at KeyCorps corporate headquarters at 127 Public Square, Cleveland, Ohio 44114. The Secretary will direct the materials to the Chair of the Nominating and Corporate Governance Committee.
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Page 73 of this proxy statement includes additional instructions for shareholders who would like to submit a director nominee for consideration for the 2014 annual meeting of shareholders.
The Risk Committee oversees and reviews risk management matters relating to: credit risk, market risk, and liquidity risk; asset/liability management policies and strategies; compliance with regulatory capital requirements; KeyCorps capital structure and capital management strategies, including compliance with regulatory capital requirements; KeyCorps portfolio of Corporate-Owned Life Insurance; technology-related plans, policies, and major capital expenditures; and our capital expenditure process. Together with the Audit Committee, the Risk Committee also oversees and reviews the allowance for loan and lease losses methodology. In addition, the Risk Committee exercises the authority of the Board of Directors in connection with the authorization, sale, and issuance by KeyCorp of debt and certain equity securities. The Risk Committee is also charged with making recommendations to the Board regarding KeyCorps dividend and share repurchase authorizations. A further discussion of the Committees functions is set forth on page 15 of this proxy statement under the heading Board Oversight of Risk.
The Executive Committee exercises the authority of the Board, to the extent permitted by law, on any matter requiring Board or Board committee action between scheduled Board or Board committee meetings.
The Board believes that KeyCorp should maintain the flexibility to separate or combine the Chairman and Chief Executive Officer roles from time to time and on a case-by-case basis. Annually, the Board evaluates its leadership structure and it will continue to do so as circumstances change, including when a new Chief Executive Officer is elected. Currently, KeyCorp employs a successful leadership model under which its Chief Executive Officer also serves as Chairman of the Board. The Board has also established a position of Lead Director, and Alexander M. Cutler, who has served on the Board since 2000, is our Lead Director pursuant to the vote of the independent directors. In 2012, KeyCorps Board was comprised of 12 independent directors and two members of management. Five of our independent directors are currently serving or have served as the chief executive officer of a publicly traded company. Each standing committee of the Board is chaired by an independent director and is composed entirely of independent directors. The Chairman and Chief Executive Officer has benefited from the extensive leadership experience of the Board.
In our 2012 proxy statement, we included a shareholder proposal that called for the Board to separate the roles of Chairman and Chief Executive Officer. Approximately 54% of shares represented at the meeting voted in favor of the proposal. In response, the Board carefully considered the shareholders vote, consulted with a number of KeyCorps large institutional shareholders and outside advisors, and enhanced the role of the Lead Director. Among his specific responsibilities, the Lead Director now:
| chairs executive sessions of the Board and any meetings at which the Chairman is not present; |
| serves as the liaison between the Chairman and the independent directors; |
| approves all information sent to the Board; |
| approves meeting agendas for the Board; |
| approves meeting schedules to assure there is sufficient time for discussion of all agenda items; |
| has the authority to call meetings of the independent directors; |
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| if requested by major shareholders, ensures that he is available for consultation and direct communication; |
| is in frequent contact with the Chairman with respect to major issues before KeyCorp and any significant actions contemplated by KeyCorp, which are discussed with the Lead Director at an early stage; |
| advises on the retention of independent consultants to the Board; |
| assists the Board and management in assuring compliance with applicable securities laws and fiduciary duties to shareholders; |
| oversees initiatives to implement improvements to KeyCorps governance policies; |
| serves as a focal point for independent Committee Chairs, providing guidance and coordination; and |
| together with the Chair of the Compensation Committee, facilitates the evaluation of the performance of KeyCorps Chief Executive Officer. |
The Board recognizes that different leadership models may work for other companies depending upon their circumstances, and may become appropriate for KeyCorp under different circumstances. The Board believes that KeyCorp has greatly benefited from having a single person setting the overall tone and direction for KeyCorp and having primary responsibility for managing its operations, while allowing the Board to carry out its oversight responsibilities with the full involvement of each independent director.
In the past several years, we have developed an active shareholder engagement program that facilitates communication and transparency with our shareholders. The 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, provides the necessary independent leadership to compliment the combined Chairman and Chief Executive Officer role and, with formal and informal mechanisms we have in place to facilitate the work of the Board and its Committees, results in the Board effectiveness and Board efficiency that our shareholders expect.
We believe that our leadership structure supports the Boards risk oversight function. At each Board meeting, the Chair of each Board committee reports to the full Board on risk oversight issues. The Board of Directors has delegated primary oversight responsibility for risk, generally, to the Audit Committee and the Risk Committee, and primary oversight responsibility for compensation-related risks to the Compensation Committee. These committees receive, review, and evaluate management reports on risk. Generally, each Board committee oversees the following risks:
| The Audit Committee oversees internal audit, financial reporting, compliance and legal matters; the implementation, management, and evaluation of operational and compliance risk and controls; and information security and fraud risk. |
| The Risk Committee oversees KeyCorps enterprise-wide risks, including credit risk, market risk, interest rate risk, and liquidity risk, including the actions taken to mitigate these risks, as well as reputational and strategic risks. |
| The Compensation Committee oversees risk as it relates to KeyCorps compensation policies and practices. |
The Audit and Risk Committees jointly oversee and review the allowance for loan and lease losses methodology.
As part of the risk oversight process, KeyCorp has formed a senior level management committee called the Enterprise Risk Management Committee (the ERM Committee). The ERM Committee consists of Ms. Mooney and other senior officers at KeyCorp, including Mr. Hartmann, KeyCorps Chief Risk Officer. The ERM Committee meets weekly and is the central management committee ensuring
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that the corporate risk profile is managed in a manner consistent with KeyCorps risk appetite. The ERM Committee also is responsible for implementation of KeyCorps Enterprise Risk Management Program which encompasses KeyCorps risk philosophy, policy framework, and governance structure for the management of risks across the entire company. The ERM Committee reports to the Risk Committee. The Board of Directors approves the Enterprise Risk Management Program and determines KeyCorps risk appetite.
Oversight of Compensation-Related Risks
KeyCorps compensation program is designed to offer competitive pay for performance, aligned with KeyCorps short- and long-term business strategies, approved risk appetite and defined risk tolerances, and shareholders interests. Reviews of KeyCorps 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 KeyCorps compensation plans to monitor compliance with KeyCorps risk management tolerances and safety and soundness requirements.
KeyCorp has a well-developed governance structure for its incentive compensation programs, including roles for its Board of Directors, senior management, businesses and control functions. The KeyCorp Board of Directors oversees KeyCorps incentive compensation programs, primarily through its 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 KeyCorps overall Incentive Compensation Program and Policy so that KeyCorps incentive compensation practices remain in alignment with KeyCorps risk management practices. KeyCorps Incentive Compensation Program and Policy are intended to enhance KeyCorps 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. KeyCorps 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 ensuring 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, KeyCorps 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 utilization 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 risk balance and align an employees individual interests with KeyCorps future success and safety and soundness; |
| the development of clawback procedures to recoup certain incentive compensation paid to employees based on 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 plan. |
The Board has adopted categorical standards to assist it in assessing the independence of each of our directors. These standards conform to (and in some cases are stricter than) the independence standards set by the New York Stock Exchange. Our Standards for Determining Independence of Directors are available on our website: www.key.com/ir.
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Ms. Mooney and Mr. Stevens are not independent because they are employees of KeyCorp. As employees of KeyCorp, Ms. Mooney and Mr. Stevens (and members of his immediate family) received in 2012 a standard discount on trust services provided by KeyCorp affiliates totaling approximately $2,709 and $2,727, respectively. The Board of Directors has determined that all other members of the Board of Directors (i.e., Mss. Gile, Gillis, Manos, and Snyder, and Messrs. Campbell, Carrabba, Cooley, Cutler, Dallas, Gisel, Hipple, and Sanford) are independent. This determination was made after reviewing the relationship of each of these individuals to KeyCorp in light of KeyCorps categorical standards of independence and such other factors, if any, as the Board deemed relevant.
In determining the independence of the members of the Board, the Board considered certain transactions, relationships, or arrangements described below between those directors and KeyCorp. The Board determined that none of these transactions, relationships, or arrangements is in conflict with KeyCorps categorical standards of independence and that no such transaction, relationship, or arrangement is material or impairs any directors independence for any other reason. The transactions, relationships, and arrangements considered by the Board and determined to be immaterial were:
| Messrs. Campbell, Carrabba, Cooley, Cutler, Gisel, and Hipple were customers of one or more of KeyCorps subsidiaries during 2012 and had transactions with such banks or other subsidiaries in the ordinary course of business. |
| In addition, during 2012, Messrs. Carrabba, Cutler, Hipple, and Sanford, and Mss. Gillis and Snyder were officers of, or had a relationship with, corporations or were members of partnerships that were customers of one or more of KeyCorps subsidiaries and had transactions with such subsidiaries in the ordinary course of business. Similar transactions continue to be effected during 2013. |
| All loans included in the foregoing transactions were made on substantially the same terms, including rate and collateral terms, as those prevailing at the time for comparable transactions between KeyCorp and unrelated third-parties, and did not present heightened risks of collectability or other unfavorable features. |
KeyCorp has adopted a Policy for Review of Transactions between KeyCorp and its Directors, Executive Officers, and Other Related Persons. A copy of the Policy can be found at www.key.com/ir. The transactions subject to the Policy include any transaction, relationship, or arrangement with KeyCorp in which any director, executive officer, or other related person has a direct or indirect material interest other than transactions, relationships, or arrangements excepted by the Policy. These exceptions include transactions available to all KeyCorp employees generally, transactions involving compensation or indemnification of executive officers or directors authorized by the Board of Directors or one of its committees, transactions involving reimbursement for routine expenses, and transactions occurring in the ordinary course of business. The Nominating and Corporate Governance Committee is responsible for applying the Policy and uses the following factors in making its determinations:
| whether the transaction is in conformity with KeyCorps Code of Ethics and Corporate Governance Guidelines and is in KeyCorps best interests; |
| whether the transaction is on terms comparable to those that could be obtained in arms length dealings with an unrelated third party; |
| whether the transaction is required to 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 KeyCorps non-employee directors. |
The Vanguard Group, Inc., State Street Corporation, and BlackRock, Inc. have reported that each of them, together with their respective affiliates, is a beneficial owner more than 5% of KeyCorps
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Common Shares, as indicated under the heading Ownership of KeyCorp Common Shares beginning on page 22 of this proxy statement. During 2012, KeyCorps broker-dealer subsidiaries engaged in the purchase and sale of fixed income and equity securities and mutual funds with The Vanguard Group, Inc., State Street Corporation, and BlackRock, Inc. and their respective affiliates. The commissions earned by KeyCorps affiliates on these transactions were: from The Vanguard Group, Inc. and its affiliates, approximately $1.5 million; from State Street Corporation and its affiliates, approximately $300,000; and from BlackRock, Inc., approximately $1.9 million. All of these transactions were conducted at arms length and in the ordinary course of business.
Interested parties may submit comments and views about KeyCorp to the directors in writing to KeyCorp at its corporate headquarters at 127 Public Square, Cleveland, Ohio 44114. The correspondence should be addressed to Lead Director, KeyCorp Board of Directors, care of the Secretary of KeyCorp and marked Confidential.
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Corporate Governance Documents
The KeyCorp Board of Directors Committee Charters, KeyCorps Corporate Governance Guidelines, KeyCorps Code of Ethics, KeyCorps Standards for Determining Independence of Directors, KeyCorps Policy for Review of Transactions between KeyCorp and its Directors, Executive Officers, and Other Related Persons, KeyCorps Limitation on Luxury Expenditures Policy and KeyCorps Statement of Political Activity are all posted on KeyCorps website: www.key.com/ir. Copies of these documents will be delivered, free of charge, to any shareholder who contacts KeyCorps Investor Relations Department at (216) 689-4221.
Corporate Governance Guidelines
The Board of Directors has adopted written Corporate Governance Guidelines that detail the Boards corporate governance duties and responsibilities. The Corporate Governance Guidelines take into consideration, and are updated from time to time to reflect, corporate governance best practices 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, succession planning and management) and management (such as stock ownership guidelines for management, certain limits on executive compensation, Keys compensation philosophy, and procedures for annual evaluation of our Chief Executive Officer).
We are committed to the highest standards of ethical integrity. Accordingly, the Board of Directors has adopted a Code of Ethics for all of Keys employees, officers, and directors which was last amended on July 13, 2012. We will disclose any waiver or amendment to our Code of Ethics by posting such information on our website. Our Code of 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 its 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 KeyCorps Board of Directors meets annually with a member of KeyCorps Government Relations team to review KeyCorps policies and practices regarding political contributions. Policies and practices reviewed by the Nominating and Corporate Governance Committee include Keys 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.
A statement of our political activities, including our annual U.S. political contributions, is made available to our shareholders on our website: www.key.com/ir.
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Our management committee is principally responsible for making policy for KeyCorp, subject to the supervision and direction of the Board of Directors. All members of the management committee are executive officers of KeyCorp and are subject to annual election at the annual organizational meeting of the directors in May.
There are no family relationships among the directors or the members of the management committee. Other than Mr. Hartmann and Ms. Brady, all members of the management committee have been executive officers of KeyCorp or one of its subsidiaries for the past five years or more.
Set forth below are the names and ages of the members of the management committee of KeyCorp as of January 1, 2013, the positions held by them at KeyCorp during the past five years, and the year they first became executive officers of KeyCorp. Because Mr. Hartmann and Ms. Brady have been employed at KeyCorp for less than five years, information is being provided concerning their previous business experiences.
AMY G. BRADY (46)
Ms. Brady has been Chief Information Officer since May 16, 2012. Prior to joining KeyCorp, Ms. Brady spent 25 years at Bank of America, where she most recently served as Chief Information Officer, Enterprise Technology and Operations at Bank of America, supporting technology and operations delivery for key enterprise functions. Ms. Brady has been an executive officer of KeyCorp since 2012.
CHRISTOPHER M. GORMAN (52)
Mr. Gorman has been the President of Key Corporate Bank since 2010. He previously served as a KeyCorp Senior Executive Vice President and head of Key National Banking during 2010. Mr. Gorman was an Executive Vice President of KeyCorp (2002 to 2010) and served as President of KeyBanc Capital Markets (2003 to 2010). He became an executive officer of KeyCorp in 2010.
PAUL N. HARRIS (54)
Mr. Harris has been the General Counsel and Secretary of KeyCorp since 2003 and an executive officer of KeyCorp since 2004.
|
WILLIAM R. KOEHLER (48)
Mr. Koehler has been the President of Key Community Bank since 2010. Mr. Koehler previously served as Great Lakes Regional President (during 2010); as leader of KeyCorps Keyvolution initiative (2008 to 2010); as Michigan District President (2007 to 2008); and prior to, as Managing Director and Segment Leader of the Financial Sponsors Group and Regional Banking within KeyBanc Capital Markets. Mr. Koehler became an executive officer of KeyCorp in 2010.
BETH E. MOONEY (57)
Ms. Mooney has been the Chairman and Chief Executive Officer of KeyCorp since 2011 and the President of KeyCorp since 2010. She served as Chief Operating Officer during 2010. Ms. Mooney joined KeyCorp in 2006 as a Vice Chair and head of Key Community Banking and served in those positions until 2010. She has been an executive officer since joining KeyCorp.
ROBERT L. MORRIS (60)
Mr. Morris has been the Chief Accounting Officer of KeyCorp since 2006 and an executive officer of KeyCorp since 2006. | |
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WILLIAM L. HARTMANN (59)
Mr. Hartmann has been the Chief Risk Officer of KeyCorp since July 12, 2012. Mr. Hartmann joined KeyCorp in 2010 as its Chief Credit Officer. Prior to joining KeyCorp, Mr. Hartmann spent 29 years at Citigroup (a multinational financial services institution) where his most recent position was global head of Large Corporate Risk Management. While at Citigroup, he held numerous roles with increasing responsibility, including chief risk officer, Asia Pacific, head of Global Portfolio Management, co-head of Leveraged Finance Capital Markets and global head of Loan Sales & Trading. Mr. Hartmann has been an executive officer of KeyCorp since 2012. |
THOMAS C. STEVENS (63)
Mr. Stevens has been the Vice Chair and Chief Administrative Officer of KeyCorp since 2003 and an executive officer of KeyCorp since 1996. Mr. Stevens will continue to serve as Vice Chair until our Annual Meeting, and will retire as Chief Administrative Officer effective June 30, 2013.
JEFFREY B. WEEDEN (56)
Mr. Weeden has been the Chief Financial Officer of KeyCorp since 2002 and an executive officer of KeyCorp since 2002. |
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Ownership of KeyCorp Common Shares
The following table sets forth the number of KeyCorp Common Shares that were beneficially owned by the directors of KeyCorp, the Named Executive Officers, and all directors and members of the management committee of KeyCorp as a group. Additionally, the table sets forth certain information with respect to the number of other phantom shares, if any, owned and the combined beneficial ownership of KeyCorp Common Shares and other phantom shares. The table also sets forth each person known to us to be the beneficial owner of more than 5% of our Common Shares.
Unless otherwise noted, this information is provided as of December 31, 2012.
Name(1)(2) | Common Shares Beneficially Owned(4) (5) |
Percent
of Common Shares Outstanding(6) |
Other Phantom Shares(5) |
Total Beneficial Ownership of Common Shares and Other Phantom Shares |
||||||||||||
Edward P. Campbell |
19,732 | | 89,725 | 109,457 | ||||||||||||
Joseph A. Carrabba |
15,666 | | | 15,666 | ||||||||||||
Charles P. Cooley |
5,557 | | | 5,557 | ||||||||||||
Alexander M. Cutler |
23,166 | | 69,396 | 92,562 | ||||||||||||
H. James Dallas |
36,227 | | 26,859 | 63,086 | ||||||||||||
Elizabeth R. Gile |
14,466 | | | 14,466 | ||||||||||||
Ruth Ann M. Gillis |
15,666 | | 5,520 | 21,186 | ||||||||||||
William G. Gisel, Jr. |
7,157 | | | 7,157 | ||||||||||||
Christopher M. Gorman(3) |
630,602 | | 79,428 | 710,030 | ||||||||||||
Richard J. Hipple |
4,557 | | | 4,557 | ||||||||||||
William R. Koehler |
190,578 | | 32,797 | 223,375 | ||||||||||||
Kristen L. Manos |
34,442 | | 44,393 | 78,835 | ||||||||||||
Beth E. Mooney(3) |
1,242,393 | | 83,840 | 1,326,233 | ||||||||||||
Bill R. Sanford |
44,369 | | | 44,369 | ||||||||||||
Barbara R. Snyder |
15,166 | | 6,985 | 22,151 | ||||||||||||
Thomas C. Stevens(3) |
1,469,156 | | 85,029 | 1,554,185 | ||||||||||||
Jeffrey B. Weeden(3) |
1,418,494 | | 38,580 | 1,457,074 | ||||||||||||
All directors and members of the management committee as a group (21 persons) | 5,840,611 | | 767,536 | 6,608,147 | ||||||||||||
The Vanguard Group, Inc. (7) |
57,814,875 | 6.19% | | 57,814,875 | ||||||||||||
State Street Corporation (8) |
50,522,993 | 5.4% | | 50,522,993 | ||||||||||||
BlackRock, Inc. (9) |
46,231,758 | 4.95% | | 46,231,758 |
(1) | KeyCorps Corporate Governance Guidelines state that, by the fifth anniversary of his or her election to the Board or an office of KeyCorp: (i) each non-employee director should own KeyCorp Common Shares with a value at least equal to five times KeyCorps non-employee director annual retainer, of which 1,000 shares should be directly owned in the form of Common Shares; (ii) the Chief Executive Officer should own KeyCorp Common Shares with a value at least equal to six times her base salary, of which at least 10,000 shares should be directly owned in the form of Common Shares; and, (iii) the members of the management committee should own KeyCorp Common Shares with a value at least equal to three times his or her base salary, of which at least 5,000 shares should be directly owned in the form of Common Shares. |
(2) | Pursuant to Keys Insider Trading Policy, no director or member of the management committee is permitted to pledge, and in 2012 no director or member of the management committee has pledged, KeyCorp Common Shares. |
(3) | The number of KeyCorp Common Shares beneficially owned by each of these persons through the KeyCorp 401(k) Savings Plan is included as of December 31, 2012. |
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(4) | Beneficially owned shares include options exercisable as of March 1, 2012. No directors held vested options as of March 1, 2013. The members of the management committee identified above hold vested options as follows: |
Name | Vested Options (#) |
|||
Christopher M. Gorman |
313,392 | |||
William R. Koehler |
122,603 | |||
Beth E. Mooney |
829,111 | |||
Thomas C. Stevens |
1,120,649 | |||
Jeffrey B. Weeden |
1,025,633 | |||
All directors and members of the management committee as a group (21 persons) | 3,913,534 |
(5) | The beneficially owned shares of our non-employee directors include some phantom shares issued under the KeyCorp Directors Deferred Share Plan that, under certain circumstances described below, may be distributed to a director as Common Shares within 60 days of December 31, 2012. The amounts of such phantom shares are as follows: |
Name | Phantom Shares (#) |
|||
Edward P. Campbell |
13,166 | |||
Joseph A. Carrabba |
13,166 | |||
Charles P. Cooley |
4,557 | |||
Alexander M. Cutler |
13,166 | |||
H. James Dallas |
13,166 | |||
Elizabeth R. Gile |
13,166 | |||
Ruth Ann M. Gillis |
13,166 | |||
William G. Gisel, Jr. |
4,557 | |||
Richard J. Hipple |
4,557 | |||
Kristen L. Manos |
13,166 | |||
Bill R. Sanford |
13,166 | |||
Barbara R. Snyder |
13,166 | |||
All non-employee directors as a group (12 persons) |
132,165 |
Investments in phantom shares by non-employee directors are made pursuant to the KeyCorp Second Director Deferred Compensation Plan and the Directors Deferred Share Plan (collectively, the Deferred Share Plans). Phantom shares are granted to non-employee directors each year under the Directors Deferred Share Plan and are payable in three years, one-half in cash and one-half in Common Shares. Phantom shares payable in cash are not included in this table. If a directors directorship ends, the phantom shares become immediately payable even if the three-year period has not ended. |
Investments in phantom shares made by members of the management committee pursuant to the KeyCorp Deferred Savings Plan, or granted as Restricted Stock Unit or phantom share awards under the KeyCorp 2010 Equity Compensation Plan, and phantom shares held in the Second Directors Deferred Compensation Plan, or issued to directors under the Directors Deferred Share Plan but contributed into the Second Directors Deferred Compensation Plan are included in the column Other Phantom Shares because the members of the management committee and directors holding them do not receive beneficial ownership of KeyCorp Common Shares and did not have the right to acquire beneficial ownership of KeyCorp Common Shares on or before March 1, 2013. |
For each phantom share issued under the foregoing plans, one Common Share is deducted from the aggregate number of Common Shares available for issuance under that respective plan However, an actual Common Share is only issued to the holder of phantom shares upon a distribution to be paid in Common Shares from the phantom share account. Distributions to be paid in Common Shares from the phantom share account occur on a share-for-share basis. Directors and members of the management committee participating in these plans and holding phantom shares do not have any Common Share voting rights or investment power with respect to or on account of the phantom shares until a distribution in Common Shares is made from the phantom share account. |
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(6) | No director or member of the management committee beneficially owns more than 1% of the total of outstanding KeyCorp Common Shares plus options vested as of March 1, 2013. |
(7) | Based solely upon information contained in the Schedule 13G filed by The Vanguard Group, Inc. (Vanguard) with the Securities and Exchange Commission on February 11, 2013. Vanguard reported that it owned beneficially 57,814,875 Common Shares, held sole voting power over 1,625,899 Common Shares, held sole power to dispose or to direct the disposition of 56,252,273 Common Shares, and held shared power to dispose or to direct the disposition of 1,562,602 Common Shares. Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of Vanguard, is the beneficial owner of 1,303,607 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 581,287 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 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 12, 2013. State Street reported that it owned beneficially, and had shared voting power and shared power to dispose or to direct the disposition of 50,522,993 Common Shares. Each of the following entities has been identified by State Street as a subsidiary that beneficially owns KeyCorp Common Shares: State Street Global Advisors France S.A., State Street Bank and Trust Company, SSGA Funds Management, Inc., State Street Global Advisors Limited, State Street Global Advisors Ltd., State Street Global Advisors, Australia Limited, State Street Global Advisors Japan Co., Ltd., State Street Global Advisors, Asia Limited, and SSARIS Advisors LLC. The reported address of State Street is State Street Financial Center, One Lincoln Street, Boston, MA 02111. |
(9) | Based solely upon information contained in the Schedule 13G filed by BlackRock, Inc. (BlackRock) with the Securities and Exchange Commission on January 10, 2013. BlackRock reported that it owned beneficially, held sole power to dispose or to direct the disposition of, and held sole power to vote or direct the voting power over, all of the 46,231,758 Common Shares reported in the table above. The reported address of BlackRock is 40 East 52nd Street, New York, NY 10022. |
Section 16(A) Beneficial Ownership Reporting Compliance
KeyCorps directors and members of the management committee are required to report their ownership and changes in ownership of KeyCorp Common Shares to the Securities and Exchange Commission. The Securities and Exchange Commission has established certain due dates for these reports. KeyCorp knows of no person who failed to timely file any required report during 2012.
Equity Compensation Plan Information
KeyCorp currently maintains and is authorized to issue Common Shares under the (i) KeyCorp 2010 Equity Compensation Plan (the 2010 Plan), (ii) the KeyCorp Deferred Equity Allocation Plan (the Deferred Equity Plan), providing a pool of Common Shares for existing and future KeyCorp deferred compensation arrangements with employees and directors, (iii) the KeyCorp Directors Deferred Share Plan, and (iv) the KeyCorp Amended and Restated Discounted Stock Purchase Plan. KeyCorp is no longer authorized to issue Common Shares under, but still has awards outstanding under, the KeyCorp 2004 Equity Compensation Plan (the 2004 Plan) and the KeyCorp Amended and Restated 1991 Equity Compensation Plan (amended as of March 13, 2003) (the 1991 Plan).
Shareholders approved the 2010 Plan at the 2010 annual shareholders meeting. At December 31, 2012, 12,444,457 Common Shares remained available for future issuance under the 2010 Plan.
Shareholders approved the Deferred Equity Plan and the Directors Deferred Share Plan at the 2003 annual shareholders meeting. Under the Deferred Equity Plan and the Directors Deferred Share Plan, all or a portion of the deferrals and deferred payments may be deemed invested in accounts based on KeyCorp Common Shares, which are distributed in the form of KeyCorp Common Shares. Some of the arrangements with respect to the Deferred Equity Plan include funding an employer-matching feature that rewards employees with additional Common Shares at no additional cost. The table does not include information about the Deferred Equity Plan or Directors Deferred Share Plan because options, warrants and rights awards are not available under these plans. As of December 31, 2012, 4,679,047 and 132,161 Common Shares, respectively, have been allocated to accounts of participants under the Deferred Equity
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Plan and the Directors Deferred Share Plan (including vested awards that have not yet been distributed to participants), and 5,717,784 and 153,901 Common Shares, respectively, remained available for future issuance.
The following table provides information about KeyCorps equity compensation plans as of December 31, 2012:
(a) | (b) | (c) | ||||||||||
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, and Rights |
Weighted- Exercise Price of Outstanding |
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (a)) |
|||||||||
Equity compensation plans approved by security holders(1) |
32,607,384 | $ | 19.36 | 15,587,901 | (2) | |||||||
Equity compensation plans not approved by security holders(3) |
| | | |||||||||
Total |
32,607,384 | $ | 19.36 | 15,587,901 |
(1) | The table does not include 10,941,328 unvested shares of time-lapsed and performance-based restricted stock awarded under the 2010 Plan, 2004 Plan and 1991 Plan. These unvested restricted shares were issued when awarded and consequently are included in KeyCorps Common Shares outstanding. |
(2) | The Compensation Committee of the Board of Directors of KeyCorp 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 KeyCorps outstanding Common Shares in any rolling three-year period. |
(3) | The table does not include outstanding options to purchase 12,435 Common Shares assumed in connection with an acquisition from a prior year. At December 31, 2012, these assumed options had a weighted average exercise price of $25.29 per share. No additional options may be granted under the plan that governs these options. |
If our shareholders approve KeyCorps 2013 Equity Compensation Plan, as described more fully beginning on page 60 of this proxy statement, we will no longer have authorization to issue Common Shares under the 2010 Equity Plan, the Deferred Equity Plan, or the KeyCorp Directors Deferred Share Plan (collectively, the Prior Plans). Outstanding awards granted under the Prior Plans, as well as the 1991 Plan and 2004 Plan, will remain outstanding, subject to the terms and conditions of the respective plan each award was granted under. Upon approval of KeyCorps 2013 Equity Compensation Plan by our shareholders, we will deregister with the Securities and Exchange Commission the Common Shares that would otherwise remain reserved for issuance and available for grants under the Prior Plans.
The following equity awards were outstanding under all KeyCorp equity compensation plans as of December 31, 2012:
Unexercised Stock Options | ||||
Number Outstanding |
Weighted-Average Exercise Price |
Weighted-Average Remaining Life | ||
32,619,819 |
$19.36 | 4.7 years | ||
Unvested Full-Value Awards(1) | ||||
Number | Vesting | Type | ||
5,145,713 |
Service condition | Long-term incentive | ||
4,092,563(2) |
Performance/Service condition | Long-term incentive | ||
2,716,654 |
Service | Other | ||
1,195,849 |
Service | Deferred compensation programs |
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(1) | This table presents the aggregate number of unvested restricted stock, restricted stock unit and phantom share awards (including cash-settled awards). No Common Shares have yet been issued with respect to unvested restricted stock units or phantom shares, and no Common Shares will ever be issued with respect to unvested cash-settled awards. As a result, the number of unvested full-value awards reflected in this table differs from the number of restricted stock awards set forth in footnote 1 to the table above, which excludes unvested restricted stock units, phantom shares and cash-settled awards. This table also excludes awards that have vested and been allocated to the accounts of participants (such as under our Deferred Equity Allocation Plan, Directors Deferred Share Plan or other deferred compensation plans) but which have not yet been distributed to participants. Awards that are vested and allocated, but not yet distributed, are nonetheless treated as shares outstanding for purposes of the discussion before the tables on the preceding page. |
(2) | Consists of performance-based restricted stock units that may only be settled in cash and, consequently, are not considered shares outstanding. |
More information about these awards can be found in Footnote 18 to the Consolidated Financial Statements beginning on page 191 of our 2012 Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on February 26, 2013.
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Compensation Discussion and Analysis
This Compensation Discussion and Analysis describes our executive compensation philosophy and provides a review of the compensation decisions and awards that the Compensation Committee has made with regard to the following members of our management committee:
| Beth E. Mooney, Chairman and Chief Executive Officer; |
| Jeffrey B. Weeden, Chief Financial Officer; |
| Christopher M. Gorman, President, Key Corporate Bank; |
| Thomas C. Stevens, Vice Chair and Chief Administrative Officer; and |
| William R. Koehler, President, Key Community Bank. |
As used throughout this discussion, the term Named Executive Officers refers to the five members of our management committee listed above.
Highlights of 2012 Performance
During 2012, the economy continued to be sluggish with overall GDP and payroll growth remaining modest and in-line with 2010 and 2011 levels. A continued low-interest-rate environment, global financial instability, U.S. federal government gridlock, and regulatory changes directly impacted the way we ran and grew our business. Despite this challenging business climate, we generated growth, acquired and developed new businesses, and continued to deliver positive shareholder returns. We demonstrated disciplined capital management by investing in our franchise, increasing our quarterly cash dividend, implementing a share repurchase program and executing on growth opportunities. Our 2012 results showed continued improvement in asset quality, an improving deposit mix and overall loan growth.
With respect to the financial metrics that were used as targets for our 2012 short-term incentive plan, we achieved a return on average assets from continuing operations in 2012 of 1.05%, completing our second consecutive year of return on average assets above 1% and within our strategic target range. We increased 2012 pre-provision net revenue (PPNR) by $38 million or 2.9% over 2011, demonstrating improved noninterest income resulting from the early termination of leveraged leases, net gains from loan sales driven by an increase in our commercial mortgage banking business and the redemption of trust preferred securities. In addition, PPNR to risk-weighted assets was 1.83% for 2012, just slightly below the target for this measure. For 2012, Key had earnings per share of $0.88, well within the upper end of the target range set for this metric by the Compensation Committee in early 2012.
We made significant progress in the pursuit of our strategic objectives which served as an additional basis upon which we compensated our Named Executive Officers.
| We completed the acquisition of 37 retail-banking branches in Western New York, which added approximately $2 billion in assets and deposits to our balance sheet. |
| We acquired $718 million in Key-branded credit card assets to further diversify our revenue streams and allow for future growth opportunities. |
| We continued our work toward our goal of achieving an expense run-rate reduction of $150 to $200 million by the end of 2013. We achieved $60 million in annualized expense savings in 2012, exceeding the original goal set for the year. |
During 2012, our profitability and strong revenue growth demonstrated our Named Executive Officers commitment to enhancing long-term shareholder value by executing our distinctive relationship business model and completing strategic actions that position us well for the future.
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Compensation of Our Chief Executive Officer in 2012
Based on the strong financial performance of Key in 2012 and the significant progress we made in executing our strategy, the Compensation Committee took the following actions with respect to the total direct compensation of Ms. Mooney, our Chief Executive Officer:
| Established her 2012 base salary at $950,000, reflecting her performance to date as she entered her first full year as Chief Executive Officer. |
| Paid her a short-term incentive based on 2012 performance of $2,035,000. This represents a payout of 110% of her short-term incentive target and was directly tied to the level of achievement against the performance metrics set forth in the 2012 Annual Incentive Plan. This performance, which is summarized on the preceding page and described in more detail under the Short-Term Incentive section of this discussion, resulted in funding of our PPNR goal at 107%, our PPNR to risk-weighted assets goal at 98%, our return on average assets goal at 128% and our earnings per share goal at 135%. Additionally, achievement of our strategic goals resulted in an additional funding opportunity of 10%. |
| Awarded her long-term incentives in 2012 with a target value of $3,350,000. This award was based on her performance during her first year as Chief Executive Officer, the level of achievement of our financial and strategic goals, her assembly of a strong management team, as well as the Committees recognition of her leadership. In addition, the Committee established compensation levels to provide Ms. Mooney with compensation more reflective of the market. |
The amount of compensation actually realized by Ms. Mooney in 2012 differs significantly from the Securities and Exchange Commissions calculation of total compensation, as set forth in the Summary Compensation Table. The Summary Compensation Table includes amounts, such as the estimated future value of equity awards, deferred compensation, changes in pension value and other amounts that Ms. Mooney may not receive until some future date, if at all. As a result, it is useful to report the amount of compensation actually realized by Ms. Mooney in 2012, which was $3,559,865.
For this purpose, we define realized compensation to include the following:
| gross base salary received in 2012 of $923,077; |
| gross annual incentive earned in 2012 of $2,035,000; and |
| fair market value of restricted stock awards that vested in 2012, irrespective of when granted, of $601,788. |
Please see the Compensation Realized by Our Chief Executive Officer in 2012 table on page 44 of this proxy statement for more information about how we calculated Ms. Mooneys realized compensation.
Our Pay-for-Performance Compensation Philosophy
We have adopted a pay-for-performance compensation philosophy which recognizes that our success is dependent upon attracting, retaining and motivating a talented workforce. To support this objective:
| We provide for a competitive compensation program that is aligned with long-term shareholder value and conforms to regulatory requirements. |
| Our compensation policies and practices focus on the link between pay and sustainable performance, both at the company and individual levels and reinforce both short- and long-term financial performance objectives. |
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| Because our businesses are based on risk-taking within our approved risk tolerances, our compensation policies are developed with a focus on prudent risk-taking and the balance between risk and reward. |
The Compensation Committee is responsible for developing, reviewing and approving our compensation philosophy and compensation programs for our Named Executive Officers, and we discuss our compensation philosophy and our compensation programs at least annually with the full Board.
We execute our Pay-for-Performance philosophy by: |
| Emphasizing Performance-Based Compensation: A significant portion of each Named Executive Officers compensation opportunity is dependent upon achieving a balanced mix of financial and strategic goals that are directly aligned with our approved risk tolerances. In 2012, approximately 85% of the target total direct compensation of our Chairman and Chief Executive Officer, and approximately 77% of the target total direct compensation of our other Named Executive Officers, was performance-based and not guaranteed, as illustrated in the charts below. |
Chief Executive Officers Pay Mix | Other Named Executive Officers Pay Mix | |
| Requiring Deferral of Incentive Awards: For 2012, we revised our compensation program to require the deferral of a fixed percentage of our Named Executive Officers total incentive award consisting of: (i) the short-term incentive earned by the Named Executive Officer during 2012, and (ii) the long-term incentive opportunity granted to the executive in early 2013 based on a combination of 2012 performance and expected future contributions (the 2013 LTI Award). This change was intended to require that a significant percentage of our Named Executive Officers total incentive award (at least 60% for our Chief Executive Officer and at least 50% for our other Named Executive Officers) be deferred over a multi-year period and remain subject to annual risk balancing. |
| Setting Competitive Compensation Levels: We strive to maintain a competitive pay mix of both variable and fixed compensation that is reflective of our compensation peer group in which we compete for talent. |
| Balancing Compensation Risk and Reward: We design our compensation programs to appropriately balance risk and reward. We regularly monitor these programs to ensure that we do not create incentives that encourage imprudent risk-taking. The Compensation Committee retains the right to modify incentive plan payout formulas and awards to provide for forfeiture, reduction, offset, or clawback, to the extent it determines it necessary |
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or desirable in order to comply with the intent of the plan, our risk requirements, the participants risk requirements, and/or applicable regulations and guidance. Our clawback policy also allows us to recover incentive compensation if it was based on financial results that are subsequently restated and cancel outstanding equity awards, and recover realized gains, if an executive engages in certain harmful activity. |
What we do: |
We support our Pay-for-Performance philosophy through a number of other sound governance practices:
| Impose Robust Stock Ownership Guidelines: Our stock ownership guidelines contain robust stock ownership requirements, ranging from six times base salary for our Chief Executive Officer, with a minimum of 10,000 shares being directly owned, to three times base salary for our other Named Executive Officers, with a minimum of 5,000 shares being directly owned. Also, each Named Executive Officer must hold the net shares purchased under a stock option and any shares delivered upon vesting of other equity awards until the executive officer satisfies our stock ownership guidelines and, in the case of shares acquired upon the exercise of stock options, for not less than one year. These stock ownership guidelines closely align the interests of our Named Executive Officers with those of our shareholders. |
| Require Double Trigger: Our change of control arrangements are subject to double trigger requirements, meaning that severance benefits are due, and equity awards vest, only if a Named Executive Officer experiences a qualifying termination of employment in connection with a change of control. These requirements are intended to prevent our Named Executive Officers from receiving windfall benefits in the event of a change of control. |
| Review Tally Sheets: The Compensation Committee annually reviews a tally sheet for each Named Executive Officer, which includes potential severance payments, the accumulated value of vested and unvested equity awards, and the retirement benefits of each Named Executive Officer, along with comparisons against the levels and types of compensation provided to executive officers maintaining similar positions in our compensation peer group. This practice enables the Compensation Committee to evaluate the total compensation package for each Named Executive Officer, as well as isolated adjustments or incremental changes to specific elements of the package. |
| Review Share Utilization: We regularly review share overhang levels and run-rates and maintain share utilization levels well within industry norms. |
| Retain an Independent Consultant: The Compensation Committee retains an independent consultant to assist in developing and reviewing our executive compensation strategy and program. The Compensation Committee, with the assistance of the independent consultant, regularly evaluates the compensation practices of our peer companies to confirm that our compensation programs are consistent with market practice. |
What we dont do: |
Our executive compensation philosophy provides for:
| No Employment Agreements: We do not maintain employment agreements with any of our employees, including our Named Executive Officers. |
| No Tax Gross-Ups: We have eliminated all tax gross-ups in the event of a change of control and all tax gross-ups for perquisites (other than on relocation). |
| No SERPs: We froze all of our executive pension plans in 2009. None of our Named Executive Officers actively participate in a supplemental defined benefit plan. |
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| No Hedging or Pledging of Company Stock: Our Insider Trading Policy restricts our employees, officers and directors from engaging in hedging transactions involving our Common Shares and it restricts our officers and directors who are subject to reporting requirements under Section 16 of the Securities Exchange Act of 1934 from pledging our Common Shares. |
| No Timing of Equity Grants: We maintain a disciplined 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: We do not reprice or back-date stock options. |
Important 2012 Compensation Design Changes
During 2012, we participated in a review and assessment of our incentive compensation programs and procedures in connection with the adoption by our regulators, including the Federal Reserve, of the interagency guidance on sound incentive compensation policies. This guidance emphasizes, among other things, increased deferral of compensation and reduced use of stock options. As part of this process, we made the following modifications to the incentive compensation of our Named Executive Officers:
Mandatory Deferral. We revised our compensation program to provide a total incentive award for each Named Executive Officer consisting of: (i) the short-term incentive earned by the Named Executive Officer during 2012 and awarded in 2013, plus (ii) the 2013 LTI Award. At least 60% of the total incentive award of our Chief Executive Officer, and at least 50% of the total incentive award of our other Named Executive Officers, is required to be deferred. We determine whether our Named Executive Officers satisfy this requirement by first considering whether their long-term incentive (100% of which is delivered in the form of equity-based compensation subject to a multi-year, risk-adjusted vesting schedule) satisfies the required deferral percentage. If not, a portion of the Named Executive Officers short-term incentive is converted into and delivered as equity-based compensation subject to a multi-year, risk-adjusted vesting schedule.
Reduced Use of Stock Options. We are reducing our use of stock options. Beginning with our Named Executive Officers 2013 LTI Award, we have allocated 50% of the long-term incentive opportunity to cash performance shares, 40% to restricted stock units and 10% to stock options. In 2012, our Named Executive Officers long-term incentive opportunity was split equally between cash performance shares and stock options. |
Enhanced Risk Balancing. All incentive awards, both short- and long-term, are required to be risk balanced throughout the incentive process. The Compensation Committee participates in a review of the deferred incentive awards relative to the actual risk-related outcomes of each Named Executive Officers performance on which the award is based. Based on individual risk performance, business performance that includes significant credit, market or operational losses or negative pre-provision net revenue, we will undertake a root cause analysis to determine how much, if any, of the executives deferred incentive should be forfeited.
Reduced Maximum Funding Cap. We reduced the maximum funding opportunity of our short-term incentive plan from a maximum of 200% of target to a maximum of 150% of target. We also made corresponding adjustments to the payout curve of this plan, such that achievement of 75% of target performance results in a 50% payout, and achievement of 125% of target performance results in a 150% payout. No short-term incentive payouts will be made to our Named Executive Officers for performance below 75% of target performance. | |
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Consideration of Our Say-on-Pay Shareholder Vote
At our 2012 Annual Meeting, our shareholders supported our executive compensation program by approving the compensation of our Named Executive Officers by a vote of approximately 96% of the KeyCorp Common Shares represented at the meeting. Since this vote, we have continued to review our executive compensation program in light of our business performance and market demands. We regularly solicit feedback from institutional investors about the structure of our compensation program. These continuing conversations with institutional investors help us better understand matters of importance to investors with regard to our Named Executive Officers compensation programs, and help us to shape our pay-for-performance strategy.
Our 2012 Executive Compensation Program
Core Direct Compensation
The principal components of our core direct compensation program, consisting of base salary, short-term incentive compensation and long-term incentive compensation, are described in the table below.
Component | Characteristic | Purpose | Summary of 2012 Actions | |||
Base Salary |
Fixed compensation subject to annual adjustment and review if appropriate. | Attract, retain and motivate executives and to align with market practices. | Base salary increases in 2012 between $0 and $100,000 to reflect recent promotions and expanded roles. | |||
Short-Term Incentive |
Variable compensation based on achievement of corporate and/or business unit performance goals and other strategic objectives. | Motivate and reward Named Executive Officers for achieving our annual financial and strategic goals and for effectively managing risks within our approved risk tolerances. | Short-term incentive awards ranged from $594,000 to $2,035,000, based on our performance against the financial and strategic goals in our Annual Incentive Plan. | |||
Long-Term Incentives |
Variable compensation based on share price growth and achievement of performance relative to that of our peers and other corporate performance goals. | Motivate and reward Named Executive Officers for achieving our long-term financial and strategic goals and for continued management of our risk profile, while aligning their interests with those of our shareholders. | Long-term incentive awards granted in 2012 ranged from $1,000,000 to $3,350,000, which were split equally between cash performance shares, subject to 3-year performance vesting, and stock options.
Long-term incentive awards granted in 2013 ranged from $1,300,000 to $4,000,000 which were allocated 50% to cash performance shares, 40% to restricted stock units and 10% to stock options. |
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Base Salary
The Compensation Committee reviews and establishes base salaries on a competitive basis each year following a market assessment of the base compensation paid to comparable executives at peer companies, to the extent that a comparable position can be identified.
For 2012, the Compensation Committee made the following adjustments to our Named Executive Officers base salaries (which were effective with the pay period including April 1, 2012):
Name | 2012 | 2011 | Increase | |||||||
Beth E. Mooney |
$ | 950,000 | $ | 850,000 | 12% | |||||
Jeffrey B. Weeden |
$ | 650,000 | $ | 630,000 | 3% | |||||
Thomas C. Stevens |
$ | 720,000 | $ | 720,000 | 0% | |||||
Christopher M. Gorman |
$ | 600,000 | $ | 600,000 | 0% | |||||
William R. Koehler |
$ | 550,000 | $ | 450,000 | 22% |
The adjustments for Ms. Mooney and Mr. Koehler reflect their recent promotions and expanded roles in our company. As Ms. Mooney and Mr. Koehler continue to gain experience and drive performance in their new roles, the Compensation Committee may further adjust their base salary levels to better align them with competitive market levels, as the Compensation Committee deems appropriate.
Short-Term Incentive
The Compensation Committee regards our short-term incentive program as an important component of our Named Executive Officers total cash compensation package.
Institutional investors with whom we have had discussions express a preference that we employ a formulaic approach to determine the amount of short-term incentive compensation payable to our Named Executive Officers. The performance scorecard for 2012 consisted of a mix of financial and strategic goals and an objective payout formula, with specific targets and weightings, as described below. The Compensation Committee also established a fixed funding percentage for each financial goal ranging from 0% to 150% of the target opportunity apportioned to each measure, with no payout for the goal if the threshold level of performance (75%) was not achieved. The Compensation Committee reviewed performance against the financial and strategic goals throughout the year and at each regularly scheduled meeting reported to the full Board the performance relative to pre-established targets.
Performance goals for Ms. Mooney, Mr. Weeden, and Mr. Stevens: Ms. Mooney, Mr. Weeden, and Mr. Stevens participated in the KeyCorp Annual Incentive Plan. Under the Annual Incentive Plans funding scorecard, 90% of the 2012 short-term incentive funding opportunity was based on the extent to which we achieved four equally-weighted financial goals, with the remaining 10% of the 2012 short-term incentive funding opportunity based on the extent to which we achieved certain strategic goals, all of which are described below.
Unlike the financial goals, the Compensation Committee did not use pre-established weightings for the strategic goals; rather, funding levels for the strategic goals were based on the Compensation Committees assessment of overall performance relative to the mix of strategic measures. The strategic goals included:
| our achieving an identified $30 to $50 million in cost savings run-rate by December 31, 2012; |
| the successful integration of the Western New York branch acquisition; and |
| the achievement of specified revenue growth priorities, such as the Enterprise Commercial Payment initiative. |
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When evaluating our achievement of these goals, the Compensation Committee considered the quality of earnings in light of one-time items of expense or revenue that were not contemplated at the time targets were set for 2012 and the impact these items had on our actual results.
KeyCorp 2012 Annual Incentive Plan
Performance Metrics | Actual Result |
Performance Required for Target Payout |
Funding Rate |
Weight | Final Funding |
|||||||||||||||
PPNR ($ in millions) |
$1,348 | $1,301 | 107 | % | 22.5 | % | 24 | % | ||||||||||||
PPNR/RWA |
1.83% | 1.85% | 98 | % | 22.5 | % | 22 | % | ||||||||||||
ROA |
1.05% | 0.92% | 128 | % | 22.5 | % | 29 | % | ||||||||||||
EPS |
$0.88 | $0.75 | 135 | % | 22.5 | % | 30 | % | ||||||||||||
Additional Performance Metrics |
||||||||||||||||||||
Execution of Cost Savings/Efficiency Priorities Roadmap Successful Integration of HSBC Branches Revenue Growth |
Met Expectations | 10 | % | 10 | % | |||||||||||||||
Calculated Funding Compensation Committee Approved Funding |
|
115 110 |
% % |
Mr. Gorman and Mr. Koehler, due to their respective roles as the President of the Corporate Bank and the President of the Community Bank, maintained a modified short-term incentive structure that reflected KeyCorps strategic and financial performance, as well as each executives individual line of business performance criteria.
Performance goals for Mr. Gorman: As the President of the Corporate Bank, Mr. Gormans performance goals were weighted (i) 75% based on the achievement of the 2012 financial and strategic goals as set forth under the KeyCorp Annual Incentive Plan as described above, and (ii) 25% based on the achievement of the following core Corporate Bank Annual Incentive Plan financial goal, subject to reduction based on our overall performance and corporate bank risk performance:
Corporate Bank 2012 Annual Incentive Plan Performance Metrics
Performance Metric | Result | Funding | ||
Plan Pre-Incentive Compensation PPNR (Pre-IC PPNR) |
$856 million | |||
Actual Pre-IC PPNR |
$890 million | 104% | ||
Potential Negative Adjustment |
||||
Corporate Bank Risk Performance |
No adjustment | | ||
Overall KeyCorp Annual Incentive Plan Performance at 90% or less |
No adjustment | | ||
Calculated Funding Compensation Committee Approved Funding |
108% 108% |
Actual Pre-IC PPNR compared to the planned level of Pre-IC PPNR was 104% and resulted in 108% funding for Mr. Gorman under the Corporate Bank Annual Incentive Plan. Based on the continued strong financial performance of the Corporate Bank, in which investment banking income and debt placement fees under his leadership have increased ten-fold, as well as Mr. Gormans leadership in driving strategic change within the Corporate Bank, the Committee approved an increase to Mr. Gormans short-term incentive award, raising his total short-term incentive award to 130% of target. Mr. Gormans total incentive award did not exceed his applicable cap under Section 162(m), as described below.
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Performance goals for Mr. Koehler: Similarly, as the President of the Community Bank, Mr. Koehlers performance goals were weighted (i) 75% based on the achievement of the 2012 financial and strategic goals as set forth under the KeyCorp Annual Incentive Plan as described above, and (ii) 25% based on the achievement of the following Community Bank Annual Incentive Plan financial and strategic goals:
Community Bank 2012 Annual Incentive Performance Metrics
Performance Metrics | Result | Performance Required for Target Payout |
Funding Rate |
Weight | Final Funding |
|||||||||||||||
Total Pre-IC PPNR |
$ | 262 million | $ | 332 million | 58 | % | 44 | % | 25 | % | ||||||||||
Pre Tax and IC Net Income |
$ | 106 million | $ | 115 million | 84 | % | 15 | % | 13 | % | ||||||||||
Additional Performance Metrics |
||||||||||||||||||||
Overall KeyCorp Performance |
26 | % | 29 | % | ||||||||||||||||
Other Factors |
||||||||||||||||||||
Community Bank Strategic Initiatives |
15 | % | 15 | % | ||||||||||||||||
Calculated Funding |
82 | % | ||||||||||||||||||
Compensation Committee Approved Funding |
|
82 | % |
Please see page 41 of this proxy statement for the definitions of certain of the financial and strategic goals described above.
2012 Short-term incentive payouts: Based on the foregoing financial and strategic metrics, our Named Executive Officers 2012 short-term incentive payouts were calculated as follows:
Name | 2012 Target STI Opportunity |
Actual Payout (as % of Target) |
Actual Payout ($)(1) |
|||||||||
Beth E. Mooney |
1,850,000 | 110 | % | 2,035,000 | ||||||||
Jeffrey B. Weeden |
590,000 | 110 | % | 650,000 | ||||||||
Thomas C. Stevens |
540,000 | 110 | % | 594,000 | ||||||||
Christopher M. Gorman(2) |
1,150,000 | 130 | % | 1,500,000 | ||||||||
William R. Koehler(2) |
750,000 | 103 | % | 775,000 |
(1) | 100% of the short-term incentive was paid in cash as each Named Executive Officers 2013 LTI Award satisfied the minimum required deferral percentage of our mandatory deferral. |
(2) | Reflects both KeyCorps and the respective line of business (Corporate Bank and Community Bank) achievement levels. |
When determining the short-term incentive funding and payout levels for 2012, the Compensation Committee retained the authority to adjust all incentive funding downward or to not provide an incentive opportunity if our Enterprise Risk Management dashboard performance fell outside of permissible risk tolerance levels. Qualitative performance feedback was provided to the Compensation Committee from the Risk and Audit Committees regarding our risk profile and current and emerging risk issues prior to determining the amount of short-term incentive funding. In addition, before determining the actual payouts, the Compensation Committee also considered the quality of our Named Executive Officers demonstrated scorecard performance, including their individual risk performance.
In order to comply with the requirements of Section 162(m) of the Internal Revenue Code, we capped the maximum short-term incentive actually payable to any Named Executive Officer. This cap was determined by multiplying a participation percentage assigned by the Compensation Committee to each Named Executive Officer by a bonus pool equal to 1% of our 2012 PPNR. The amount of short-term incentive compensation actually paid to each Named Executive Officer did not exceed the cap applicable to the Named Executive Officer.
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Long-Term Incentives
The Compensation Committee establishes long-term incentive grant levels by reviewing our companys historic grant levels, the dilutive impact and financial accounting cost of the long-term incentive program, and the long-term incentive practices of companies in our compensation peer group. The Compensation Committee also considered the balance between long-term and short-term incentive compensation.
Long-term incentive grants: The following table reflects: (i) the forward-looking long-term incentives granted to Named Executive Officers in February 2012 based on their expected future contributions, and (ii) the 2013 LTI Award granted in early 2013 based on an assessment of our combined performance and the individual performance of each Named Executive Officer during 2012 together with the expected ability of the Named Executive Officer to influence our future growth.
Value of Long-Term Incentive Grant(1) | ||||||||||
Name | Granted in 2012 ($)(2) |
2013 LTI Award ($)(3) |
||||||||
Beth E. Mooney |
3,350,000 | 4,000,000 | ||||||||
Jeffrey B. Weeden |
1,380,000 | 1,400,000 | ||||||||
Thomas C. Stevens |
1,340,000 | | (4) | |||||||
Christopher M. Gorman |
1,750,000 | 1,900,000 | ||||||||
William R. Koehler |
1,000,000 | 1,300,000 |
(1) | Value of award on date of grant as determined by Black-Scholes value for stock options, and grant date share price for restricted stock units (2013 LTI Award only) and cash performance shares (assuming payout at target). |
(2) | Reflects long-term incentives granted in 2012 based on expected future contributions. |
(3) | Reflects long-term incentives granted in 2013 based on a combination of 2012 performance and expected future contributions. |
(4) | Due to Mr. Stevens previously announced retirement, effective June 30, 2013, he did not receive a 2013 LTI Award. |
Equity vehicles: The long-term incentives granted to our Named Executive Officers in 2012 and the 2013 LTI Award were allocated as follows:
LTI Granted in 2012 | 2013 LTI Award | |
Cash Performance Shares (50%) Stock Options (50%) |
Cash Performance Shares (50%) Restricted Stock Units (40%) Stock Options (10%) |
Cash performance shares: Cash performance shares provide our Named Executive Officers with the opportunity to receive a cash payout based on the extent to which we achieve a balanced mix of financial and strategic goals during a three-year performance period together with the continued management of our risk profile. Cash performance shares encourage our Named Executive Officers to continue to make decisions and to deliver results over a multi-year time period, thereby keeping a focus on our companys long-term performance horizons. In addition, cash performance shares allow us to retain our executive talent because executives generally must remain employed through the end of the performance period to receive a payout. Although the dollar value of a cash performance share at distribution is equal to our Common Share price on that date, any payout would be in the form of cash.
The number of cash performance shares granted to each Named Executive Officer was determined by converting the portion of each Named Executive Officers long-term incentive opportunity allocable to cash performance shares into a target number of phantom shares based on the closing price of our Common Shares as of the cash performance share grant date.
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The Compensation Committee determines the actual payouts with respect to the cash performance shares, depending on the extent to which we achieve the following balanced mix of financial and strategic goals together with the management of our risk profile:
Financial/Quality of Earnings | Other Factors (Payout Reduction Only) | |
Total Shareholder Return vs. Peers ROA vs. Peers Cumulative Earnings Per Share |
Enterprise Risk Management Dashboard Execution of Strategic Priorities Other Factors |
Each of the Financial/Quality of Earnings metrics are equally weighted at 33.3% of the total, while the Other Factors, related to our strategic business plan covering the performance period, may reduce funding levels in the Compensation Committees judgment. Generally, performance at the 25th percentile of our peers results in 50% funding and performance at the 75th percentile of our peers results in 150% funding with respect to the Total Shareholder Return vs. Peers and ROA vs. Peers.
Please see page 41 of this proxy statement for the definitions of certain of the financial goals used above.
In order to comply with the requirements of Section 162(m) of the Internal Revenue Code, cash performance shares are subject to a funding hurdle. The hurdle is satisfied if our pre-provision net revenue/average assets (from continuing operations) during the three-year performance period is at least 75% of our pre-provision net revenue/average assets (from continuing operations) during the preceding three years. If the hurdle is satisfied, the cash performance shares fund at the maximum level of performance (200% of target for the cash performance shares granted in 2012 and 150% of target for the cash performance shares granted as part of the 2013 LTI Award). If the hurdle is not satisfied, the cash performance shares do not fund.
Restricted stock units: Restricted stock units allow our Named Executive Officers to receive Common Shares. Restricted stock units vest ratably over a four-year period. Restricted stock units align the interests of our executives with those of our shareholders by providing a direct link to share price, ensuring that our executives maintain robust levels of share ownership, and providing strong incentives for retention of key executives.
Stock options: Stock options allow our Named Executive Officers to purchase shares at a price equal to the grant date closing price of our Common Shares. Our stock options are granted subject to four-year ratable vesting and have a ten-year term.
We believe that stock options are an effective tool to align the interests of our shareholders with those of our executives as long as they are appropriately risk-balanced and granted in measured amounts. Our regulators, however, have expressed concerns about the leverage associated with stock options and the possibility of executives realizing a disproportionate award; accordingly, we have decreased our usage of stock options for long-term incentive awards granted after 2012. Instead, we increased the number of restricted stock units granted so that our executives are subject to the same leverage to changes in share price as are our shareholders.
By decreasing the use of stock options and increasing our reliance on restricted stock units we are able to reduce shareholder dilution while maintaining a strong link to shareholder interests and a direct tie to our companys future performance.
All Incentives Subject to Risk-Based Vesting
All incentive awards granted in 2013, including both the 2013 LTI and any short-term incentive subject to mandatory deferral, are subject to annual risk-adjusted vesting and to offset, forfeiture and clawback in accordance with our clawback policy, company risk policies and harmful activity requirements, and applicable plan provisions, all as described earlier in this discussion.
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Application of Mandatory Deferral
The following table illustrates how the new mandatory deferral requirements apply to our total incentive award and the percentage of each Named Executive Officers total incentive award subject to multi-year deferral and risk-adjusted vesting.
Name | 2012
Short- Term Incentive ($)(1) |
2013 LTI Award ($)(2) |
Total Incentive Award ($) |
% of Total Incentive Award Deferred |
||||||||||||
Beth E. Mooney |
2,035,000 | 4,000,000 | 6,035,000 | 66 | % | |||||||||||
Jeffrey B. Weeden |
650,000 | 1,400,000 | 2,050,000 | 68 | % | |||||||||||
Thomas C. Stevens |
594,000 | | (3 ) | 594,000 | | % | ||||||||||
Christopher M. Gorman |
1,500,000 | 1,900,000 | 3,400,000 | 56 | % | |||||||||||
William R. Koehler |
775,000 | 1,300,000 | 2,075,000 | 63 | % |
(1) | Represents short-term incentive earned in 2012 and awarded in early 2013. |
(2) | Reflects 2013 LTI Award consisting of long-term incentives granted in early 2013 based on a combination of 2012 performance and expected future contributions. |
(3) | Due to Mr. Stevens previously announced retirement, effective June 30, 2013, he did not receive a 2013 LTI Award. Accordingly, no deferral percentage is reported for him. |
The table above contains information not included in the Summary Compensation Table and should not be viewed as a substitute for any information contained in that table.
Perquisites and Retirement Benefits
We require all of our Named Executive Officers to obtain an annual executive physical. In addition, we provide Ms. Mooney with residential security services and in some instances require her to use a secure automobile and professionally trained driver for certain business and travel. We require such use as a matter of security for Ms. Mooney. Ms. Mooney reimburses the company for the cost of the automobile and driver when the use is solely for personal purposes. Except as described above, we do not provide our Named Executive Officers with other perquisites.
Our retirement plans now consist of two defined contribution plans: the voluntary 401(k) Savings Plan for all employees and the non-qualified Deferred Savings Plan that provides senior managers with similar levels of benefits on plan-eligible compensation over the Internal Revenue Service compensation limits. The plans include a profit sharing contribution, which is determined annually on a discretionary basis and can range from 0% to 6% of plan-eligible compensation. The contribution rate will depend on the Compensation Committees assessment of our overall performance relative to goals that are aligned with our short-term incentive plan. Based on the level of our achievement of the financial and strategic objectives applicable to the Annual Incentive Plan, the Compensation Committee established the profit sharing contribution for 2012 at 2.4%.
We froze our Cash Balance Pension Plan and Second Excess Cash Balance Pension Plan effective December 31, 2009.
Change of Control Agreements
All Named Executive Officers are covered under a change of control agreement. We use change of control agreements to help attract and retain executive talent. The Compensation Committee and the Board of Directors continue to believe that it is in the best interests of shareholders to ensure that our Named Executive Officers are able to objectively evaluate the merits of a potential transaction without being distracted by its potential impact on their personal employment situations. Based on information provided by Compensation Advisory Partners, the Compensation Committees independent compensation consultant, most companies in our compensation peer group maintain similar change of control arrangements for their executive officers.
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To receive a change of control benefit, there must be (i) a change of control and (ii) the executive must be terminated within two years following the change of control (or terminate for good reason). Change of control benefits include a lump sum payment representing three years of (i) the executives base salary, (ii) target bonus, (iii) the benefits that the executive would have received under the KeyCorp 401(k) Savings Plan and Deferred Savings Plan, and (iv) a lump sum payment of the executives COBRA costs for continued medical coverage. Following the executives termination, unvested equity awards will fully vest as outlined under the applicable equity award agreement(s). To be eligible for a change of control benefit, our executives must enter into a waiver and release agreement with our company.
Separation Pay
To assist our employees at the time of a job loss due to a termination as a result of a reduction in staff, we maintain the KeyCorp Separation Pay Plan, which generally covers all of our employees, including our Named Executive Officers. The Separation Pay Plan provides an employee with a separation pay benefit if the employees position is eliminated (or modified) and there is no other comparable position available to the employee. Separation pay benefits are capped at a maximum benefit amount of two-times the IRS Section 401(a)(17) compensation limit (in 2012 this cap was $500,000). To be eligible for a separation pay benefit, our executives must enter into a waiver and release agreement with our company.
The terms of our change of control agreements and the separation benefit provided under the Separation Pay Plan are described in detail in the narrative to the Potential Payments Upon Termination or Change of Control section on page 50 of this proxy statement.
Compensation Consultant and Compensation Peer Group
The Compensation Committee has retained the services of Compensation Advisory Partners, an independent executive compensation advisory firm. At the Compensation Committees request, Compensation Advisory Partners provides the Compensation Committee with information on current trends in compensation design and emerging compensation practices. It also provides the Compensation Committee with an annual review and analysis of the compensation programs of our compensation peer group, which it updates during the latter half of the year to determine whether the compensation targets of the Named Executive Officers continue to remain competitive. Compensation Advisory Partners reports directly to, and serves at the sole pleasure of, the Compensation Committee. Compensation Advisory Partners provided no other services to us other than the executive compensation consulting services that were requested by the Compensation Committee. Compensation Advisory Partners services to the Compensation Committee include:
| recommending targeted pay position for total compensation and the desired mix between the primary components such as base salary, short-term and long-term incentive compensation for senior executives; |
| assisting in determining an appropriate peer group for executive compensation and performance comparisons; |
| advising on competitive compensation ranges; |
| advising on annual and long-term incentive design and implementation, including plan structure, performance metrics, award opportunities and vesting conditions; |
| assisting in determining progress against incentive compensation performance goals for senior executives; and |
| reporting on trends in executive compensation, as well as any other ad hoc services relating to executive compensation requested by the Compensation Committee. |
In setting compensation for our Named Executive Officers, the Compensation Committee examines the compensation data of our peer companies to better understand whether our pay
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practices continue to 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, and other relevant circumstances as it determines our Named Executive Officers compensation levels.
For 2012, the Compensation Committee continued to use the Standard and Poors Banks Index (without Wells Fargo, due to its size) for our compensation peer group. This index includes companies of similar size (based on assets) and diversified business models. The companies in the index maintain a strong brand and reputation and actively compete with us for executive talent. As of December 2012, the median market capitalization of the compensation peer group was $10 billion and the median asset size was $83 billion. In comparison, our market capitalization and asset size at December 31, 2012 were $7.8 billion and $89.2 billion, respectively. For 2012, the companies in the compensation peer group were (listed in alphabetical order):
BB&T Corp |
Huntington Bancshares Inc. | Regions Financial Group | ||
Comerica |
M&T Bank Corp.* | SunTrust Banks Inc. | ||
Fifth Third Bancorp |
Peoples United Financial Inc. | US Bancorp | ||
First Horizon National Corp. |
PNC Financial Services Group | Zions Bancorporation |
* | Acquired Hudson City Bancorp during 2012. Hudson City Bancorp was part of the Standard and Poors Banks Index during 2011. |
Tax Deductibility Considerations
Section 162(m) of the Internal Revenue Code allows a federal tax deduction for compensation that is paid to our Named Executive Officers if the amount of compensation is $1 million or less. For amounts in excess of $1 million, a deduction is allowed only if the compensation paid meets the definition of performance-based compensation.
Our short-term incentive opportunity, stock options and cash performance shares granted in 2012 were intended to qualify as performance-based compensation for purposes of Section 162(m) and to be fully deductible for federal income tax purposes. However, the Compensation Committee has not adopted a policy that requires all compensation to be deductible because we want to preserve the ability to award compensation that is not deductible if we believe that it is in our shareholders best interests.
On October 23, 2012, Mr. Stevens, our Vice Chair and Chief Administrative Officer, announced that he will retire as a member of KeyCorps Board of Directors effective as of the Annual Meeting and as Chief Administrative Officer on June 30, 2013.
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Definitions of Certain Financial Goals
As described previously in this Compensation Discussion and Analysis, we use a balanced mix of performance goals under our short-term incentive program and the cash performance shares. The performance goals are defined as follows:
| Earnings per Share (EPS): Net income from continuing operations attributable to KeyCorp Common Shares divided by weighted-average Common Shares and potential Common Shares outstanding. |
| Pre-Provision Net Revenue (PPNR) (non-GAAP measure): Net interest income (GAAP) plus taxable-equivalent adjustment plus noninterest income less noninterest expense, all from continuing operations. |
| Pre-Provision Net Revenue/Risk-Weighted Assets (RWA) (non-GAAP measure): Annualized pre-provision net revenue divided by average risk-weighted assets (RWA), both from continuing operations. RWA are computed by assigning specific risk weightings (as defined by the Federal Reserve) to assets and off-balance sheet instruments. |
| Return on Assets (ROA): Annualized net income from continuing operations attributable to KeyCorp divided by average assets of continuing operations. |
| Risk-Weighted Assets (RWA) (non-GAAP measure): RWA equal the total assets on-balance sheet plus off-balance sheet exposures, risk weighted as defined by the Federal Reserve. |
| Total Shareholder Return (TSR): For use with the Long-Term Incentive Plan. Based on average closing share price over the last 20 trading days in the base year versus average closing share price in the last 20 days in year three, plus investment of dividends paid during the three-year measurement period. |
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. For 2012, no adjustments were made to the goals under the short-term incentive program.
A reconciliation of certain non-GAAP financial measures to GAAP financial measures and our reasons for using non-GAAP financial measures can be found beginning on page 45 of our 2012 Annual Report on Form 10-K.
41
Compensation of Executive Officers and Directors
2012 Summary Compensation Table
The following table sets forth the compensation paid by KeyCorp to the Named Executive Officers for the years ended December 31, 2012, 2011, and 2010 to the extent applicable.
Name and Principal Position |
Year | Salary ($)(2) |
Bonus ($)(3) |
Stock Awards ($)(4) |
Option Awards ($)(5) |
Non Equity Incentive Plan Compensation ($)(6) |
Change in Value and |
All Other Compensation ($)(8) |
Total ($) |
|||||||||||||||||||||||||||
Beth E. Mooney |
2012 | 923,077 | | 1,674,994 | 1,454,366 | 2,035,000 | 5,335 | 179,654 | 6,272,426 | |||||||||||||||||||||||||||
2011 | 1,265,339 | | 1,428,828 | 1,179,843 | 958,800 | 5,290 | 117,564 | 4,955.665 | ||||||||||||||||||||||||||||
2010 | 1,610,656 | | 769,998 | | | 4,653 | 63,969 | 2,449,276 | ||||||||||||||||||||||||||||
Jeffrey B. Weeden |
2012 | 644,615 | | 689,999 | 599,110 | 650,000 | 18,885 | 93,404 | 2,696,014 | |||||||||||||||||||||||||||
2011 | 899,932 | | 1,977,497 | 646,873 | 420,000 | 18,723 | 58,888 | 4,021,914 | ||||||||||||||||||||||||||||
2010 | 1,214,882 | | 584,998 | | | 16,469 | 58,882 | 1,875,231 | ||||||||||||||||||||||||||||
Christopher M. Gorman |
2012 | 600,000 | | 874,999 | 759,744 | 1,500,000 | 29,957 | 51,160 | 3,815,860 | |||||||||||||||||||||||||||
2011 | 1,116,391 | | 942,837 | 749,999 | 805,500 | 29,700 | 37,697 | 3,682,124 | ||||||||||||||||||||||||||||
2010 | 1,409,910 | | 704,997 | | | 26,124 | 51,205 | 2,192,236 | ||||||||||||||||||||||||||||
Thomas C. Stevens |
2012 | 720,000 | | 669,993 | 581,746 | 594,000 | 45,717 | 98,121 | 2,709,577 | |||||||||||||||||||||||||||
2011 | 948,403 | | 657,850 | 586,250 | 386,400 | 45,325 | 72,897 | 2,697,124 | ||||||||||||||||||||||||||||
2010 | 1,214,868 | | 584,998 | | | 39,867 | 69,868 | 1,909,601 | ||||||||||||||||||||||||||||
William R. Koehler |
2012 | 523,077 | 93,500 | 499,995 | 434,138 | 775,000 | 17,186 | 87,048 | 2,429,944 |
(1) | Ms. Mooney has been Chief Executive Officer since May 2011, making 2012 the first full year she served in that position. |
(2) | During all of 2010 and through June 5, 2011, a significant portion of each Named Executive Officers salary was paid in the form of salary stock due to the limitations imposed on us as a result of our participation in the Troubled Assets Relief Program (TARP). We repaid our TARP obligations in full on March 30, 2011 and the Compensation Committee discontinued the use of salary stock effective June 5, 2011, which had the effect of reducing the base salary levels of the Named Executive Officers. |
(3) | Reflects the vesting of awards of deferred cash granted to Mr. Koehler in 2009 and 2010, which vested on February 18, 2012 and February 19, 2012. |
(4) | In 2012, the Named Executive Officers long-term incentive opportunity was delivered 50% in the form of cash performance shares and 50% in the form of stock options. The amounts reported in this column reflect the aggregate grant date fair value of the cash performance shares granted to the Named Executive Officers determined by dividing the target amount of the long-term incentive opportunity by the grant date closing price of $7.98. Please see page 36 of this proxy statement for a description of the cash performance shares. The grant date fair value of the cash performance shares granted in 2012 to each Named Executive Officer, assuming that the highest level of performance would be achieved, is as follows: Ms. Mooney: $3,534,700; Mr. Weeden: $1,456,088; Mr. Gorman: $1,846,490; Mr. Stevens: $1,413,870; and Mr. Koehler: $1,055,128. For 2010, the column reflects grants of long-term restricted stock awarded to Named Executive Officers as permitted under TARP. For 2011, the column reflects the portion of each Named Executive Officers short-term incentive award that was required to be deferred and delivered in the form of restricted stock. All awards are recorded at their aggregate grant date fair value, which was determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, CompensationStock Compensation (FASB ASC Topic 718). See Note 18 of the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended December 31, 2012 (Annual Report) for an explanation of the assumptions made in valuing these awards. |
(5) | Reflects the aggregate grant date fair value of stock options granted to the Named Executive Officers. No stock options were granted to our Named Executive Officers in 2010 as a result of our participation in TARP. See Note 18 of the Consolidated Financial Statements contained in our 2012 Annual Report on Form 10-K for an explanation of the assumptions made in valuing these awards. |
42
(6) | Reflects the cash portion of the short-term incentive earned by each Named Executive Officer for the applicable year. For 2011, a portion of each Named Executive Officers short-term incentive award was paid in the form of restricted shares, which vest in equal installments over a four-year period and are included in the Stock Awards column for 2011. For 2012, 100% of each Named Executive Officers short-term incentive award was paid in cash. |
(7) | Reflects the interest credits allocated to the Named Executive Officers under the frozen Cash Balance Pension Plan and Excess Cash Balance Pension Plans. We froze our pension benefits for all employees, including the Named Executive Officers, effective December 31, 2009, as more fully described in the narrative to the 2012 Pension Benefits Table below. No above-market or preferential earnings were accrued by Named Executive Officers on deferred compensation. |
(8) | Reflects the benefits and payments described in the following section, Components of All Other Compensation. |
Components of All Other Compensation
The following table sets forth detail about the amounts reported in the All Other Compensation column of the 2012 Summary Compensation Table above.
Name | Executive ($)(1) |
Executive ($)(2) |
Disability ($) |
Matching ($)(3) |
Profit ($)(4) |
Total ($) |
||||||||||||||||||
Beth E. Mooney |
2,223 | 19,353 | | 112,913 | 45,165 | 179,654 | ||||||||||||||||||
Jeffrey B. Weeden |
2,223 | | 2,182 | 63,448 | 25,551 | 93,404 | ||||||||||||||||||
Christopher M. Gorman |
2,223 | | 205 | 15,000 | 33,732 | 51,160 | ||||||||||||||||||
Thomas C. Stevens |
2,223 | | 2,961 | 66,384 | 26,554 | 98,121 | ||||||||||||||||||
William R. Koehler |
2,223 | | | 60,590 | 24,236 | 87,048 |
(1) | The maximum benefit utilized by any Named Executive Officer was $2,222.90. For privacy reasons, this amount is shown for all Named Executive Officers, regardless of actual usage. |
(2) | Based on the recommendations of an independent security study, the Compensation Committee approved a comprehensive security program for Ms. Mooney. Under this program, we are paying for certain security upgrades and have authorized, and in some instances required, her to use a secure automobile and professionally-trained driver for business and personal travel. Ms. Mooney reimburses us for the cost of the automobile and driver when used solely for personal purposes. |
(3) | The amounts in this column consist of KeyCorp contributions to the qualified 401(k) Savings Plan and the nonqualified Deferred Savings Plan. For more information about these plans, see pages 38 and 49 of this proxy statement. |
(4) | We provide employees who participate in our 401(k) Savings Plan and Deferred Savings Plan with a discretionary profit sharing contribution equal to a percentage of their plan-eligible compensation. The percentage of this profit sharing contribution is determined annually by the Compensation Committee based on its assessment of overall performance relative to goals that are aligned with our short-term incentive plan. For 2012, the profit sharing contribution to these plans was 2.4%. |
43
Compensation Realized by Our Chief Executive Officer in 2012
Realized Compensation
Compensation Component | Period Earned |
Target | Amount Realized | Performance Result | ||||||||
Base Salary |
2012 | $950,000 | $923,077 | The Compensation Committee reviews and establishes base salaries on a competitive basis each year following a market assessment of the base compensation paid to comparable executives at peer companies. Ms. Mooneys base salary was increased from $850,000 to $950,000 effective for the pay period including April 1, 2012. | ||||||||
Annual Incentive |
2012 | $1,850,000 | $2,035,000 | The amount of Ms. Mooneys short-term incentive was determined under our Annual Incentive Plan, which achieved 110% of target performance. | ||||||||
Long-Term Incentive |
n/a | n/a | | |||||||||
Restricted Stock |
2012 | n/a | $601,788 | Reflects the vesting of an award of restricted stock granted on March 12, 2009, 100% of which vested on March 12, 2012. | ||||||||
Stock Option Exercises |
n/a | n/a | | Ms. Mooney currently has 829,111 exercisable options, of which 350,000 are in the money. Ms. Mooney did not exercise any stock options in 2012. | ||||||||
Total Realized Compensation |
$3,559,865 |
Amounts Realizable Upon Vesting of Other Equity Awards; Exercises of Stock Options
Compensation Component | Period Earned |
Target | Amount Realized | Performance Result | ||||||||
Cash Performance Shares |
2011-2013 | $ | 1,428,828 | To be realized in 2014, subject to performance. |
In 2011, 50% of Ms. Mooneys long-term incentive opportunity was granted in the form of cash performance shares. The cash performance shares were converted into a number of phantom shares (based on a $8.59 grant date closing price). The cash performance shares cliff vest over 3 years and the number of shares vesting is dependent upon our achievement of a balanced mix of financial and strategic goals. | |||||||
Cash Performance Shares |
2012-2014 | $ | 1,674,994 | To be realized in 2015, subject to performance. |
In 2012, 50% of Ms. Mooneys long-term incentive opportunity was granted in the form of cash performance shares. The cash performance shares were converted into a number of phantom shares (based on a $7.98 grant date closing price). The cash performance shares cliff vest at the end of 3 years and the number of shares vesting is dependent upon our achievement of a balanced mix of financial and strategic goals. | |||||||
Stock Options |
| $ | 2,634,309 | | In both 2011 and 2012, 50% of Ms. Mooneys long-term incentive opportunity ($1,454,366 in 2012 and $1,179,943 in 2011) was granted in the form of stock options with an exercise price equal to the grant date closing price of a share ($7.98 in 2012 and $8.59 in 2011). The stock options vest ratably over 4 years. |
44
2012 Grants of Plan-Based Awards Table
Name | Grant Date |
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards ($)(1) |
Estimated Future Payouts Under Equity Incentive Plan Awards (#)(2) |
All Other Option Awards: Number of Securities Underlying Options (#)(3) |
Exercise or Base Price of Option Awards ($/Sh)(4) |
Grant ($)(5) |
||||||||||||||||||||||||||||||||||
Threshold | Target | Maximum | Threshold | Target | Maximum | |||||||||||||||||||||||||||||||||||
Beth E. Mooney |
925,000 | 1,850,000 | 3,700,000 | | | | | | | |||||||||||||||||||||||||||||||
3/2/12 | | | | 104,950 | 209,899 | 419,798 | | | 1,674,994 | |||||||||||||||||||||||||||||||
3/2/12 | | | | | | | 450,268 | $ | 7.98 | 1,454,366 | ||||||||||||||||||||||||||||||
Jeffrey B. Weeden |
295,000 | 590,000 | 1,180,000 | | | | | | | |||||||||||||||||||||||||||||||
3/2/12 | | | | 43,233 | 86,466 | 172,932 | | | 689,999 | |||||||||||||||||||||||||||||||
3/2/12 | | | | | | | 185,483 | $ | 7.98 | 599,110 | ||||||||||||||||||||||||||||||
Christopher M. Gorman |
575,000 | 1,150,000 | 2,300,000 | | | | | | | |||||||||||||||||||||||||||||||
3/2/12 | | | | 54,825 | 109,649 | 219,298 | | | 874,999 | |||||||||||||||||||||||||||||||
3/2/12 | | | | | | | 235,215 | $ | 7.98 | 759,744 | ||||||||||||||||||||||||||||||
Thomas C. Stevens |
270,000 | 540,000 | 1,080,000 | | | | ||||||||||||||||||||||||||||||||||
3/2/12 | | | | 41,980 | 83,959 | 167,918 | | | 669,993 | |||||||||||||||||||||||||||||||
3/2/12 | | | | | | | 180,107 | $ | 7.98 | 581,746 | ||||||||||||||||||||||||||||||
William R. Koehler |
375,000 | 750,000 | 1,500,000 | | | | | | | |||||||||||||||||||||||||||||||
3/2/12 | | | | 31,328 | 62,656 | 125,312 | | | 499,995 | |||||||||||||||||||||||||||||||
3/2/12 | | | | | | | 134,408 | $ | 7.98 | 434,138 |
(1) | Detailed in the column titled Estimated Possible Payouts Under Non-Equity Incentive Plan Awards ($) are short-term incentive awards, which reflect the threshold (50% of target), target and maximum (200% of target) short-term incentive awards that each Named Executive Officer could receive for the one-year performance period ending December 31, 2012. The actual payouts are reflected in the Summary Compensation Table. |
(2) | Detailed in the column titled Estimated Future Payouts Under Equity Incentive Plan Awards (#) are the threshold (50% of target), target and maximum (200% 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 of January 1, 2012 through December 31, 2014. The cash performance shares are discussed in the Compensation Discussion and Analysis section beginning on page 27 of this proxy statement. The dollar value awarded to each Named Executive Officer as cash performance shares was converted into a book entry target number of phantom shares based on the closing price on the date of grant (or $7.98 on March 2, 2012) that track the stock price, but pay out in the form of cash. Dividend equivalents on the target number of shares are reinvested and subject to the same terms and restrictions otherwise applicable to the underlying cash performance shares. |
(3) | Detailed in the column titled All Other Option Awards is the number of Common Shares underlying the stock options granted to each of the Named Executive Officers on March 2, 2012. Stock options granted in 2012 vest ratable over the four-year period following the grant date. |
(4) | We set the exercise price of all stock options using the closing price of our Common Shares on the date of grant which, on March 2, 2012, was $7.98. The Compensation Committee does not reprice options. We have not and will not back-date options, nor do we provide loans to employees in order to exercise options. If an equity-based award is granted in a month in which our earnings are publicly disclosed, the grant date will be the date of the Compensation Committee meeting or three days following the earnings release, whichever is later. |
(5) | Amounts reported in the Grant Date Fair Value of Stock Options and Awards column represent the aggregate grant date fair value of equity awards granted during the respective year. See Note 18 of the Consolidated Financial Statements contained in our Annual Report for an explanation of the assumptions made in valuing these awards. |
Impact of Termination and Change of Control: The impact of terminations and a change of control on the Grants of Plan-Based Awards to the Named Executive Officers is discussed and shown in more detail in the table on page 50 of this proxy statement.
45
2012 Outstanding Equity Awards At Fiscal Year-End Table
The following table sets forth information for each Named Executive Officer with respect to (i) each stock option that had not been exercised and remained outstanding as of December 31, 2012, (ii) each award of unvested restricted stock and restricted stock units that had not vested and remained outstanding as of December 31, 2012, and (iii) each award of cash performance shares that had not vested and remained outstanding as of December 31, 2012.
Name | Grant Date | Stock Awards | ||||||||||||||||||||||||||||||||||
Option Awards | Number of Shares or Units of Stock That Have Not Vested (#)(4) |
Market Value of Shares or Units of Stock That Have Not Vested ($) |
Equity Plan That Have (#)(5) |
Equity Rights ($) |
||||||||||||||||||||||||||||||||
Number of Securities Underlying Unexercised Options (#) Exercisable (1) |
Number of Securities Underlying Unexercised Options (#) Unexercisable (2) |
Option ($)(3) |
Option Expiration Date |
|||||||||||||||||||||||||||||||||
Beth E. Mooney |
5/1/2006 | 125,000 | | 37.59 | 5/1/2016 | | | | | |||||||||||||||||||||||||||
7/20/2007 | 105,000 | | 36.20 | 7/20/2017 | | | | | ||||||||||||||||||||||||||||
7/25/2008 | 175,000 | | 11.16 | 7/25/2018 | | | | | ||||||||||||||||||||||||||||
6/12/2009 | 350,000 | | 6.12 | 6/12/2019 | | | | | ||||||||||||||||||||||||||||
5/19/2011 | 74,111 | 222,332 | 8.59 | 5/19/2021 | | | | | ||||||||||||||||||||||||||||
3/2/2012 | | 450,268 | 7.98 | 3/2/2022 | | | | | ||||||||||||||||||||||||||||
|
Aggregate non- option awards |
|
| | | | 149,368 | 1,257,675 | 352,778 | 2,970,394 | ||||||||||||||||||||||||||
Jeffrey B. Weeden |
7/17/2003 | 100,000 | | 25.64 | 7/17/2013 | | | | | |||||||||||||||||||||||||||
7/23/2004 | 85,000 | | 29.27 | 7/23/2014 | | | | | ||||||||||||||||||||||||||||
7/22/2005 | 85,000 | | 34.40 | 7/22/2015 | | | | | ||||||||||||||||||||||||||||
7/21/2006 | 90,000 | | 36.37 | 7/21/2016 | | | | | ||||||||||||||||||||||||||||
7/20/2007 | 100,000 | | 36.20 | 7/20/2017 | | | | | ||||||||||||||||||||||||||||
7/25/2008 | 175,000 | | 11.16 | 7/25/2018 | | | | | ||||||||||||||||||||||||||||
6/12/2009 | 350,000 | | 6.12 | 6/12/2019 | | | | | ||||||||||||||||||||||||||||
5/19/2011 | 40,633 | 121,898 | 8.59 | 5/19/2021 | | | | | ||||||||||||||||||||||||||||
3/2/2012 | | 185,483 | 7.98 | 3/2/2022 | | | | | ||||||||||||||||||||||||||||
|
Aggregate non- option awards |
|
| | | | 97,006 | 816,787 | 316,684 | 2,666,475 | ||||||||||||||||||||||||||
Christopher M. Gorman |
7/17/2003 | 35,000 | | 25.64 | 7/17/2013 | | | | | |||||||||||||||||||||||||||
7/23/2004 | 45,500 | | 29.27 | 7/23/2014 | | | | | ||||||||||||||||||||||||||||
7/22/2005 | 42,210 | | 34.40 | 7/22/2015 | | | | | ||||||||||||||||||||||||||||
7/21/2006 | 35,714 | | 36.37 | 7/21/2016 | | | | | ||||||||||||||||||||||||||||
7/20/2007 | 42,857 | | 36.20 | 7/20/2017 | | | | | ||||||||||||||||||||||||||||
7/25/2008 | 65,000 | | 11.16 | 7/25/2018 | | | | | ||||||||||||||||||||||||||||
5/19/2011 | 47,111 | 141,331 | 8.59 | 5/19/2021 | | | | | ||||||||||||||||||||||||||||
3/2/2012 | | 235,215 | 7.98 | 3/2/2022 | | | | | ||||||||||||||||||||||||||||
|
Aggregate non- option awards |
|
| | | | 131,338 | 1,105,867 | 200,034 | 1,684,286 | ||||||||||||||||||||||||||
Thomas C. Stevens |
7/17/2003 | 125,000 | | 25.64 | 7/17/2013 | | | | | |||||||||||||||||||||||||||
7/23/2004 | 97,000 | | 29.27 | 7/23/2014 | | | | | ||||||||||||||||||||||||||||
7/22/2005 | 100,000 | | 34.40 | 7/22/2015 | | | | | ||||||||||||||||||||||||||||
7/21/2006 | 100,000 | | 36.37 | 7/21/2016 | | | | | ||||||||||||||||||||||||||||
7/20/2007 | 100,000 | | 36.20 | 7/20/2017 | | | | | ||||||||||||||||||||||||||||
7/25/2008 | 175,000 | | 11.16 | 7/25/2018 | | | | | ||||||||||||||||||||||||||||
6/12/2009 | 350,000 | | 6.12 | 6/12/2019 | | | | | ||||||||||||||||||||||||||||
5/19/2011 | 73,649 | 73,650 | 8.59 | 5/19/2021 | | | | | ||||||||||||||||||||||||||||
3/2/2012 | | 180,107 | 7.98 | 3/2/2022 | | | | | ||||||||||||||||||||||||||||
|
Aggregate non- option awards |
|
| | | | 95,933 | 807,757 | 156,147 | 1,314,757 |
46
Name | Grant Date | Stock Awards | ||||||||||||||||||||||||||||||||||
Option Awards | Number of Shares or Units of Stock That Have Not Vested (#)(4) |
Market Value of Shares or Units of Stock That Have Not Vested ($) |
Equity Plan That Have (#)(5) |
Equity Rights ($) |
||||||||||||||||||||||||||||||||
Number of Securities Underlying Unexercised Options (#) Exercisable (1) |
Number of Securities Underlying Unexercised Options (#) Unexercisable (2) |
Option ($)(3) |
Option Expiration Date |
|||||||||||||||||||||||||||||||||
William R. Koehler |
7/17/2003 | 6,500 | | 25.64 | 7/17/2013 | | | | | |||||||||||||||||||||||||||
7/23/2004 | 4,000 | | 29.27 | 7/23/2014 | | | | | ||||||||||||||||||||||||||||
7/22/2005 | 4,550 | | 34.40 | 7/22/2015 | | | | | ||||||||||||||||||||||||||||
7/21/2006 | 4,870 | | 36.37 | 7/21/2016 | | | | | ||||||||||||||||||||||||||||
7/20/2007 | 14,286 | | 36.20 | 7/20/2017 | | | | | ||||||||||||||||||||||||||||
7/25/2008 | 20,000 | | 11.16 | 7/25/2018 | | | | | ||||||||||||||||||||||||||||
7/27/2009 | 22,000 | | 5.55 | 7/27/2019 | | | | | ||||||||||||||||||||||||||||
7/27/2010 | 21,271 | 10,635 | 8.42 | 7/27/2020 | | | | | ||||||||||||||||||||||||||||
5/19/2011 | 25,126 | 75,377 | 8.59 | 5/19/2021 | | | | | ||||||||||||||||||||||||||||
3/2/2012 | | 134,408 | 7.98 | 3/2/2022 | | | | | ||||||||||||||||||||||||||||
|
Aggregate non- option awards |
|
| | | | 39,496 | 332,560 | 112,010 | 943,121 |
(1) | This column shows the number of Common Shares underlying outstanding stock options that have vested as of December 31, 2012. |
(2) | This column shows the number of Common Shares underlying outstanding stock options that have not vested as of December 31, 2012. The remaining vesting dates for each award are as follows: |
Grant Date | Remaining Vesting Dates | Vesting Schedules | ||
5/19/2011 |
5/19/2013, 5/19/2014, 5/19/2015 | 25% vests each year for four years after the grant date | ||
3/2/2012 |
3/2/2013, 3/2/2014, 3/2/2015, 3/2/2016 | 25% vests each year for four years after the grant date |
Stock options granted to Mr. Stevens on May 19, 2011 vested 50% on May 19, 2012, and the remaining 50% will vest on May 19, 2013. |
(3) | This column shows the exercise price for each stock option reported in the table, which equaled the fair market value per share on the date of grant. |
(4) | This column shows the aggregate number of restricted shares and restricted stock units outstanding as of December 31, 2012. The remaining vesting dates for each award are as follows: |
Grant Date | Remaining Vesting Dates | Vesting Schedules | ||
2/18/2010 |
2/18/2013 | 100% vests three years from date of grant | ||
3/5/2010 |
3/5/2013 | 33.3% vests each year for three years after the grant date | ||
3/4/2011 |
3/4/2013, 3/4/2014 | 33.3% vests each year for three years after the grant date | ||
3/2/2012 |
3/2/2013, 3/2/2014, 3/2/2015, 3/2/2016 | 25% vests each year for four years after the grant date |
(5) | This column shows the aggregate number of cash performance shares outstanding as of December 31, 2012. The vesting dates for each award of performance shares (including reinvested dividends) are as follows: |
Grant Date | Vesting Dates | Vesting Schedules | ||
5/19/2011 |
5/19/2014 | 100% vests three years from date of grant | ||
3/2/2012 |
3/2/2015 | 100% vests three years from date of grant |
152,411 cash performance shares (including reinvested dividends through December 31, 2012) granted to Mr. Weeden on May 19, 2011 will vest 50% on May 19, 2013 and the remaining 50% will vest on May 19, 2014, although both tranches are payable on May 19, 2014 subject to attainment of performance conditions. |
70,633 cash performance shares (including reinvested dividends through December 31, 2012) granted to Mr. Stevens on May 19, 2011 will vest on May 19, 2013 and be paid on May 19, 2014 subject to attainment of performance conditions. |
47
2012 Option Exercises and Stock Vested Table
The following table provides information regarding the vesting of restricted stock or units during the year ended December 31, 2012 for the Named Executive Officers. The Named Executive Officers did not exercise any stock options in 2012.
Stock Award Vesting Date |
Stock Awards Number of Shares Acquired on Vesting (#) |
Value Realized on Vesting ($) |
||||||||||
Beth E. Mooney |
3/12/2012 | (1) | 76,369 | 601,788 | ||||||||
Jeffrey B. Weeden |
3/12/2012 | (1) | 88,928 | 700,753 | ||||||||
Christopher M. Gorman |
3/12/2012 | (1) | 89,824 | 707,813 | ||||||||
Thomas C. Stevens |
3/12/2012 | (1) | 83,441 | 657,515 | ||||||||
William R. Koehler |
3/6/2012 | (2) | 4,383 | 33,396 | ||||||||
3/15/2012 | (3) | 15 | 131 | |||||||||
3/5/2012 | (4) | 3,220 | 25,145 | |||||||||
3/4/2012 | (5) | 2,934 | 23,417 |
(1) | Ms. Mooney and Messrs. Weeden, Gorman and Stevens each received a grant of restricted stock or restricted stock units on March 12, 2009, 100% of which vested on March 12, 2012. |
(2) | Mr. Koehler received a grant of restricted stock or restricted stock units on March 6, 2009, the remaining third of which vested on March 6, 2012. |
(3) | Mr. Koehler received a grant of restricted stock or restricted stock units on March 6, 2009. The dividends of the remaining third tranche were paid on March 15, 2012. |
(4) | Mr. Koehler received a grant of restricted stock or restricted stock units on March 5, 2010, one-third of which vested on March 5, 2012. |
(5) | Mr. Koehler received a grant of restricted stock or restricted stock units on March 4, 2011, one-third of which vested on March 4, 2012. |
The following table presents information about the Named Executive Officers participation in KeyCorps defined benefit pension plans as of December 31, 2012.
Name | Plan Name | Number of Years of Credited Service (#) |
Present Value of Accumulated Benefits ($) |
|||||
Beth E. Mooney |
Cash Balance Pension Plan | 3 | 45,381 | |||||
Second Excess Cash Balance Pension Plan | 3 | 87,160 | ||||||
Jeffrey B. Weeden |
Cash Balance Pension Plan | 7 | 110,041 | |||||
Second Excess Cash Balance Pension Plan | 7 | 359,100 | ||||||
Christopher M. Gorman |
Cash Balance Pension Plan | 18 | 173,898 | |||||
Second Excess Cash Balance Pension Plan | 18 | 570,284 | ||||||
Thomas C. Stevens |
Cash Balance Pension Plan | 13 | 242,784 | |||||
Excess Cash Balance Pension Plan | 13 | 471,756 | ||||||
Second Excess Cash Balance Pension Plan | 13 | 421,133 | ||||||
William R. Koehler |
Cash Balance Pension Plan | 13 | 173,901 | |||||
Second Excess Cash Balance Pension Plan | 13 | 253,022 |
KeyCorp Cash Balance Pension Plan: Effective December 31, 2009, KeyCorp froze the Cash Balance Pension Plan (the Pension Plan). Participants benefits accrued through December 31, 2009 will continue to be credited with interest credits until the participants commence distribution of their benefits from the Plan. The Pension Plans interest crediting rate is established annually and is based on the rate for 30-year U.S. Treasury securities. For 2012, the Pension Plans interest crediting
48
rate was 4.13%. For 2013, the Pension Plans interest crediting rate is 2.95%. Participants Pension Plan distributions may be made upon the participants retirement, termination of employment, or death. Distributions may be made in the form of a single lump sum payment, in the form of an annuity, or in a series of actuarially equivalent installments.
KeyCorp Excess Cash Balance and Second Excess Cash Balance Pension Plans: The KeyCorp Excess Cash Balance Pension Plan was frozen as of December 31, 2004 in conjunction with the grandfathering provisions of Section 409A of the Internal Revenue Code. A Section 409A compliant KeyCorp Second Excess Cash Balance Pension Plan was established January 1, 2005 (collectively, the Excess Cash Balance Pension Plan and the Second Excess Cash Balance Pension Plan are referred to as the Excess Plans). On December 31, 2009, the KeyCorp Second Excess Cash Balance Pension Plan was also frozen. Participants benefits accrued up through December 31, 2009 continue to be credited with interest credits until the participants distribution date. Each Excess Plans interest crediting rate is established annually and is based on the rate for 30-year U.S. Treasury securities. For 2012, the Excess Plans interest crediting rate was 4.13%. For 2013, the Excess Plans interest crediting rate is 2.95%.
To be eligible to receive a distribution from an Excess Plan, a participant must be age 55 or older with a minimum of five years of vesting service with KeyCorp. Participants who are involuntarily terminated for reasons other than for cause may receive a distribution of their Excess Plan or Cash Balance Plan benefits provided the participant at the time of termination (i) has a minimum of 25 years of vesting service with KeyCorp, and (ii) enters into an employment separation agreement (containing a full release with non-compete and non-solicitation requirements) with KeyCorp. Distributions of vested Excess Plan benefits are made upon the employees separation from service, subject to the specified employee six-month hold back requirements of Section 409A of the Internal Revenue Code. Distributions are in the form of an annuity or actuarially equivalent installments (unless the participants benefit is under $50,000, in which case it is distributed as a single lump sum payment).
Ms. Mooney and Messrs. Weeden, Gorman, Stevens, and Koehler participate in the Pension Plan and Excess Plans, as detailed in the table above. Credited service for the purposes of the Pension Plan and Excess Plans was frozen as of December 31, 2009.
2012 Nonqualified Deferred Compensation Table
The following table shows the nonqualified deferred compensation activity for the Named Executive Officers for 2012. All nonqualified executive contributions and KeyCorp contributions to each plan are also included in current-year compensation presented in the 2012 Summary Compensation Table above.
Name | Plan Name | Executive Contributions |
KeyCorp Contributions in Last FY ($)(1) |
Aggregate Earnings in Last FY ($)(2) |
Aggregate Withdrawals/ Distributions ($) |
Aggregate Balance at Last FYE ($)(3) |
||||||||||||||||||
Beth E. Mooney |
Deferred Savings Plan | 97,913 | 137,078 | 111,517 | | 1,249,600 | ||||||||||||||||||
Jeffrey B. Weeden |
Deferred Savings Plan | 69,815 | 68,428 | 62,962 | | 729,662 | ||||||||||||||||||
Christopher M. Gorman |
Deferred Savings Plan | | 27,732 | 121,244 | | 2,977,727 | ||||||||||||||||||
Thomas C. Stevens |
Deferred Savings Plan | 77,076 | 71,938 | 184,243 | | 2,841,287 | ||||||||||||||||||
William R. Koehler |
Deferred Savings Plan | 123,179 | 63,825 | 111,962 | | 1,073,155 |
(1) | KeyCorp contributions in the last fiscal year are reflected in the 2012 Summary Compensation Table above, in the All Other Compensation column. |
(2) | Aggregate earnings in the last fiscal year are not reflected in the 2012 Summary Compensation Table above because the earnings were neither preferential nor above-market. Each of the Named Executive Officers had positive earnings results in 2012 and benefited from the gain in the price of KeyCorps Common Shares as well as KeyCorp Common Share dividends since the prior year end. |
(3) | The aggregate balances at the last fiscal year-end represent the total ending account balance (employee and company balances) at December 31, 2012 for each Named Executive Officer. |
49
Previously reported Summary Compensation Table values for executive contributions and KeyCorp contributions under rules adopted in 2006 include: Ms. Mooney executive contributions of $1,729,432, and KeyCorp contributions of $264,219; Mr. Weeden executive contributions of $478,692, and KeyCorp contributions of $293,062; Mr. Gorman executive contributions of $1,324,424, and KeyCorp contributions of $325,450; and Mr. Stevens executive contributions of $888,804, and KeyCorp contributions of $327,246. Mr. Koehler was not a Named Executive Officer for the proxy statements filed from 2007 through 2012.
Deferred Savings Plan. The Deferred Savings Plan allows employees in salary grade of 86 and above to defer up to 50% of their base salary and up to 100% of their annual incentive awards (collectively referred to as participant deferrals) to the Plan once the employees compensation for the applicable plan year reaches the IRS compensation limits for the year. KeyCorp provides participants with an employer match on the first 6% of participant deferrals deferred under the Deferred Savings Plan. The employer match is subject to a three-year vesting requirement. Effective January 1, 2010, the Deferred Savings Plan was amended to provide for a discretionary profit sharing contribution in an amount, if any, determined annually by KeyCorps Board of Directors or its authorized Committee. The discretionary profit sharing contribution for 2012 was 2.4% of a participants eligible compensation. Like the employer match, the discretionary profit sharing contribution is also subject to a three-year vesting requirement.
Participant deferrals are invested on a bookkeeping basis in investment funds that mirror the funds offered under the 401(k) Savings Plan as well as in an interest-bearing fund. The interest-bearing fund is credited with a monthly interest rate equal to 120% of the applicable long-term federal rate as published by the Internal Revenue Service. Distributions of vested Deferred Savings Plan benefits are made upon the employees separation from service, subject to the specified employee six-month hold back requirements of Section 409A of the Internal Revenue Code.
Potential Payments Upon Termination or Change of Control
The following table sets forth the compensation that would be paid by KeyCorp to the Named Executive Officers assuming a termination of employment and/or change of control on December 31, 2012 in the various scenarios outlined below.
Separation Date: 12/31/12 (1) | Mooney ($) |
Weeden ($) |
Gorman ($) |
Stevens ($) |
Koehler ($) |
|||||||||||||||
Voluntary Resignation |
||||||||||||||||||||
Acceleration of unvested equity (2) Pension Benefit / Retirement Enhancements (3) Other Benefits and Perquisites (4) |
|
2,281,208 |
|
|
1,304,042 |
|
|
|
|
|
1,264,764 |
|
|
|
| |||||
Total |
2,281,208 | 1,304,042 | | 1,264,764 | | |||||||||||||||