KeyCorp (KEY) Earnings Call Transcript & Summary

Hello, and welcome to the Annual Meeting of Shareholders of KeyCorp. Please note that today's meeting is being recorded. During the meeting, we will have a question-and-answer session. You can submit questions or comments at any time by clicking on the Q&A icon. It is now my pleasure to turn today's meeting over to Chris Gorman, Chairman and CEO of Key. Mr. Gorman, the floor is yours.

Good morning, ladies and gentlemen. The meeting is now in session. Welcome to the 2023 Annual Meeting of Shareholders. I am Chris Gorman, Chairman and CEO of KeyCorp. We thank everyone for being with us today through our virtual meeting platform. With me today is James Waters, the Secretary of KeyCorp. James will first explain the meeting formalities. After the meeting, we will hold a shareholder convocation. During the convocation, I will comment on the state and direction of your company. Shareholders may submit questions at any time during the meeting by clicking the Q&A icon in the virtual meeting platform. When submitting questions, shareholders should follow the guidelines set forth in the rules of conduct available within the virtual meeting platform. James, I turn the meeting over to you.

Thank you, Chris. The list of the corporation shareholders as of the close of business on Friday, March 17, 2023, the record date set for today's meeting is available for inspection during this meeting by clicking the document icon in the virtual meeting platform. I noticed this meeting was duly and properly mailed to shareholders, and a certificate to that effect will be filed with the meeting records. Your Board of Directors has authorized a representative of Computershare Investor Services, our transfer agent, to act as the inspector for the meeting. Computershare is responsible for the following: determining the number of shares represented at the meeting, confirming that we have a quorum, confirming the validity of all proxies, receiving and tabulating all votes cast and reporting the voting results. The inspector's oath will be filed with the meeting records. The inspector has reported that we have a quorum. Accordingly, this meeting has been duly convened to transact any business properly brought before it. The voting at this meeting will be done on the virtual meeting platform. Although voting is done primarily by proxy, if you wish to vote or change your vote during this meeting, you may do so in the virtual meeting platform. Any shareholder who has already voted and does not want to change their vote, need not take any further action. The order of business for today's meeting will be as follows: First, Chris will introduce the nominees for election as Director, followed by 4 other proposals presented for vote by management; second, Chris will introduce a shareholder proposal and give the shareholders representative the opportunity to address the meeting. Third, we will address questions that have been submitted by shareholders related to the proposals. Fourth, we will vote on the proposals. And fifth and finally, we will announce the preliminary voting results. After the formal meeting has concluded, Chris will host our shareholder convocation and will present his views on KeyCorp and its business and will answer general questions that have been submitted by shareholders concerning our strategy, our performance and the financial services industry in general. At any time during the meeting or convocation, Chris or any person addressing the shareholders on behalf of Key may make forward-looking statements about Key's future performance. A notice regarding forward-looking statements appears within the Document section of the virtual meeting platform. Please review and take note of that notice. I call your attention to the rules of conduct set forth for this meeting. These are available to each shareholder within the Document section of the virtual meeting platform. We ask that you please review and abide by those rules. There will be a question-and-answer period during the meeting limited to the proposals being voted on today and another question-and-answer period during the convocation for general questions regarding Key's strategy and performance. A representative from Key is reviewing questions that have been submitted and will read your questions aloud at the appropriate time. To facilitate full and fair shareholder participation, we ask that you limit yourself to one question on the proposals being voted on today and one question during the convocation. You may submit questions within the virtual meeting platform by clicking on the Q&A icon. We ask that questions be brief. That concludes our meeting formalities.

Thank you James. The next order of business is to describe the proposals to be voted on at today's meeting. The first proposal concerns the election of directors to serve a 1-year term expiring at the 2024 Annual Meeting of Shareholders. The size of KeyCorp's Board of Directors is currently set at 13 members. The nominees for election are: Sandy Cutler, retired Chairman and Chief Executive Officer, Eaton Corporation plc. Sandy is our Lead Director; James Dallas, retired Senior Vice President of Quality and Operations, Medtronic Inc.; Betsy Gile, retired Managing Director, Deutsche Bank AG; Ruth Ann Gillis, retired Executive Vice President and Chief Administrative Officer, Exelon Corporation; Robin Hayes, Chief Executive Officer, JetBlue Airways Corporation; Carlton Highsmith, former President and Chief Executive Officer, The Specialized Packaging Group; Richard Hipple, former Executive Chairman, Materion Corporation; Devina Rankin, Executive Vice President and Chief Financial Officer, Waste Management, Inc.; Barbara Snyder, President, the Association of American Universities; Richard Tobin, President and Chief Executive Officer, Dover Corporation; Todd Vasos, retired Chief Executive Officer, Dollar General Corporation; David Wilson, retired Examiner in Charge, the Office of the Comptroller of the Currency. Additionally, I am honored to stand for election as your Board Chairman. The Board of Directors recommends a vote for each of the nominees. One of the long-standing strengths of Key has been the quality and dedication of the members of our Board of Directors. I would like to extend my appreciation for the valuable service that our directors provide to Key and to you, our shareholders. The next proposal to be voted on is the ratification of the Audit Committee's appointment of Ernst & Young as Key's independent auditor for 2023. Alex Schmitt, a representative of Ernst & Young, is present today and will be available to answer questions submitted through the virtual meeting platform. The Board of Directors recommends that the shareholders vote for this proposal. The next proposal is an advisory vote on KeyCorp's executive compensation program. The Board of Directors has placed this proposal before the shareholders as required by the Dodd-Frank Act and applicable securities laws. The Board is of the opinion that KeyCorp's executive compensation program provides appropriate incentives to its executive officers and at the same time, does not encourage its executive officers to take unnecessary risks. For those reasons, the Board recommends that the shareholders vote for the proposal. The next proposal is an advisory vote on the frequency of the shareholder vote on KeyCorp's executive compensation program. The Dodd-Frank Act and applicable securities laws require the shareholders to vote at least once every 6 years regarding how frequently KeyCorp should seek an advisory vote on our executive compensation program. The Board recommends that the shareholders vote in favor of an annual advisory vote or for 1 year. The next proposal before the shareholders is a vote to approve KeyCorp's amended and restated 2019 equity compensation program. A copy of the amended and restated plan was included in the Appendix A to the proxy. The Board believes that the plan as amended and restated is necessary to properly incentivize these employees and to maintain the alignment of both the interest of management and key shareholders. For that reason, the Board recommends that the shareholders vote for the proposal. The final matter to be voted on is a shareholder proposal submitted by John Chevedden on behalf of Kenneth Steiner, a shareholder of Key, seeking to separate the roles of Chairman and Chief Executive Officer. Mr. Chevedden's representative, Ms. Cam Franklin will now have the opportunity to present a statement to the shareholders in accordance with the rules of conduct for the meeting. Ms. Franklin, you will have 3 minutes to present your statement. Operator, please open Ms. Franklin's line.

One moment, please. Ms. Franklin's line is now open.

Good morning. Do you hear me okay?

Good morning. We can.

Okay. Here we go. Proposal 6, independent Board Chairman, sponsored by Kenneth Steiner. Shareholders request that the Board of Directors adopt an enduring policy and the amend the governing documents as necessary in order that 2 separate people hold the office of the Chairman and the Office of the CEO. Whenever possible, the Chairman of the Board shall be an independent director. This proposal topic won 52% support at Boeing and 54% support at Baxter International. Boeing then adopted this proposal topic. KeyCorp is exhibit A in why the Lead Director role is a poor alternative to an independent Board Chairman. KeyCorp Lead Director, Mr. Alexander Cutler, violates the most important attribute of a Lead Director independence. As director tenure goes up, director independence goes down. Mr. Cutler has 23 years director tenure. Mr. Cutler's long tenure makes him a prime candidate to retire. It is time for a change given that our stock was at $37 in 2007, relatively early in Mr. Cutler's tenure as the KeyCorp Director. Mr. Cutler and Mr. Christopher Gorman, KeyCorp's Chair and CEO, were the 2 directors who received the most against votes at the 2021 Annual Meeting. Mr. Cutler received up to 40x the against votes of other KeyCorp directors. And Mr. Cutler also chairs the KeyCorp Nomination Committee. With the current CEO serving as Chair, this means giving up a substantial check and balance safeguard that can only occur with an independent Board Chairman. A Lead Director is no substitute for an independent Board Chairman. A Lead Director cannot call a special Shareholder Meeting and cannot even call a special Meeting of the Board. A Lead Director can delegate most of the Lead Director duties to others and then simply rubber stamp it. There is no way shareholders can be sure of what goes on. Please vote yes, independent Board Chairman, Proposal #6.

Well, thank you. The Board of Directors sets high standards for Key's corporate governance and is committed to diverse and independent board leadership. The Board has a well-defined Lead Director role that is elected and evaluated on an annual basis by the independent directors. 12 of our 13 director nominees are independent, and all director nominees have significant executive-level experience. The Board regularly reviews our leadership structure and with consideration of feedback from shareholders, has determined that the current structure is appropriate for Key, and that the company has benefited from having a single person setting the tone and direction, coupled with a strong independent Board and a well-defined Lead Director role. For these reasons, the Board believes that a vote against this proposal is in the best interest of KeyCorp and all of its shareholders. We will now address any questions that have been submitted on the proposals presented today.

We have no questions on the proposal.

If you are voting during the meeting through the virtual meeting platform, please make sure you have completed your voting at this time. [Voting]