Audit Committee Report
Audit Committee Report
The Audit Committee of the
KeyCorp Board of Directors is currently composed of four independent directors and operates under a written charter adopted by the Board of Directors. The Audit Committee annually selects KeyCorp’s independent auditors, subject to shareholder
ratification.
The Audit Committee is directly responsible for the appointment, compensation, retention, and oversight of the independent external audit firm
retained to audit KeyCorp’s financial statements. The independent audit firm is responsible for performing an independent audit of KeyCorp’s consolidated financial statements in accordance with generally accepted auditing standards and to
issue a report thereon. Management is responsible for KeyCorp’s internal controls and financial reporting process.
Annually, the Audit Committee considers the
results of an evaluation of the qualifications, experience, candor, independence, objectivity, and professional skepticism of the independent external auditor in determining whether to retain the firm for the next fiscal year. As part of this
evaluation, the Audit Committee reviews and considers the results of the Public Company Accounting Oversight Board’s annual inspection of the independent external auditor. The evaluation is led by KeyCorp’s Chief Risk Review Officer, who
reports directly to the Audit Committee. The Audit Committee oversees the audit fees negotiations associated with KeyCorp’s retention of the independent auditor and has the sole authority to approve the audit fees. In accordance with rules of
the Securities and Exchange Commission, audit partners are subject to rotation requirements to limit the number of consecutive years an individual partner may provide service to KeyCorp. In conjunction with this five-year mandated rotation of the
audit firm’s lead engagement partner, the Audit Committee and its chairperson are directly involved in the selection of the independent auditor’s new lead engagement partner. Pursuant to the five-year mandated rotation, a new lead
engagement partner was designated in 2016. Ernst & Young has been retained as KeyCorp’s independent external auditor continuously since the 1994 merger of KeyCorp and Society Corporation. The members of the Audit Committee and the
Board believe that the continued retention of Ernst & Young to serve as KeyCorp’s independent external auditor is in the best interests of KeyCorp and its investors. At each regularly scheduled meeting, the Audit Committee holds
executive sessions and private meetings with individual members of management, internal audit, and the independent external auditor as the Audit Committee deems necessary.
In fulfilling its oversight responsibility, the Audit Committee relies on the accuracy of financial and other information, opinions, reports, and statements provided to
the Audit Committee. Accordingly, the Audit Committee’s oversight does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or appropriate internal controls and
procedures designed to assure compliance with accounting standards and applicable laws and regulations. Nor does the Audit Committee’s oversight assure that the audit of KeyCorp’s financial statements has been carried out in accordance
with generally accepted auditing standards or that the audited financial statements are presented in accordance with generally accepted accounting principles.
The
Audit Committee has reviewed and discussed the audited financial statements of KeyCorp for the year ended December 31, 2019 (“Audited Financial Statements”) with KeyCorp’s management and Ernst & Young. In addition, the
Audit Committee has discussed with Ernst & Young the Critical Audit Matters and the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the Commission. A portion of the Audit
Committee’s review and discussion with Ernst & Young occurred in private sessions, without KeyCorp management present. The Audit Committee has received the written disclosures and the letter from Ernst & Young required by
applicable requirements of the Public Company Accounting Oversight Board regarding Ernst & Young’s communications with the Audit Committee concerning independence, and the Audit Committee has discussed with Ernst & Young its
independence from KeyCorp.
Based on the foregoing review and discussions and relying thereon, the Audit Committee recommended to KeyCorp’s Board of Directors
the inclusion of the Audited Financial Statements in KeyCorp’s Annual Report on Form 10-K for the year ended December 31, 2019, that was filed with the Securities and Exchange Commission.
Audit Committee of the KeyCorp Board of Directors:
Charles
P. Cooley (Chair)
H. James Dallas
Richard J. Hipple
Kristen L. Manos
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PROPOSAL FOUR: Shareholder Proposal Seeking to Reduce Ownership Threshold to Call Special
Shareholder Meeting
Board of Directors Recommendation and Statement
The Board of Directors has carefully reviewed the proposal and
recommends that the shareholders vote AGAINST it.
KeyCorp already permits shareholders holding 25% of all shares outstanding to call special meetings of
shareholders for any purpose. The Board strongly believes that 25% is a reasonable and meaningful threshold that appropriately balances the shareholders’ ability to call a special meeting with not forcing KeyCorp to expend significant time and
money on a special meeting that only a small minority of shareholders wants. Our current threshold can be met by as few as four of our shareholders acting together. Moreover, a 25% threshold is also the same as, or lower than, the special meeting
rights at 73.3% of 468 S&P 500 companies surveyed by FactSet.org.
Holding a special meeting costs money and demands significant attention from the Board of
Directors and senior management. In addition, there is also a disruption to the Company’s normal business operations. Reducing the threshold to 10% could cause KeyCorp to spend time and resources on a special meeting even if up to 90% of
shareholders do not want such a special meeting. Special meetings should be limited to instances when there are truly important or urgent matters or concerns that need to be addressed.
In addition to the existing right of shareholders to call a special meeting, the Board has in place robust corporate governance policies that promote Board
accountability and provide shareholders with a meaningful voice to communicate their priorities to the Board and KeyCorp management. These policies include the annual election of directors using a majority vote standard, a market-standard proxy
access right for shareholders to include their director nominations in the Company’s proxy statement (subject to the requirements in KeyCorp’s Regulations), the right to submit proposals for inclusion in the Company’s proxy statement
for consideration at an annual meeting (subject to the regulations of the SEC), and the opportunity to vote annually on the advisory “say-on-pay” vote on executive compensation. In addition, the Board, our independent Lead Director, and
KeyCorp management regularly engage with shareholders to solicit and discuss their views on governance, executive compensation, and other matters. Feedback received from shareholders as part of our engagement program has in recent years informed
Board action, as described more fully in the “Shareholder Engagement” section beginning on page 16 of this proxy statement. Most recently, as a result of shareholder feedback, the Board adopted a market-standard proxy access right in May
2019.
Our strong corporate governance policies and practices, including the ability of a reasonable minority of shareholders to call special meetings, already
provide our shareholders with the ability to raise important matters with the Board and senior management. Accordingly, we believe that this shareholder proposal is not in the best interests of KeyCorp and its shareholders, and for the reasons
described above, the Board recommends that shareholders vote AGAINST this shareholder proposal.
Vote Required
Approval of this shareholder proposal will require the
affirmative vote of a majority of the KeyCorp common shares represented in person or by proxy at the Annual Meeting.
The Board of Directors
unanimously recommends that our shareholders vote “AGAINST” this proposal.
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General
Information about the Annual Meeting
General Information about the Annual Meeting
Matters to Be Presented
KeyCorp’s Board of Directors is not aware of any other matter to be presented at the Annual Meeting except those described in this proxy statement. If any other
matter is properly brought before the Annual Meeting, the individuals you have authorized to vote your shares will vote on your behalf using their best judgment.
How Votes Will Be Counted
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
KeyCorp’s outstanding common shares must be present in person or by proxy. This is known as a quorum. If you return a valid proxy, your shares will be counted for determining if a quorum is present at the Annual Meeting.
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 as a “FOR” or “AGAINST” vote. Even if you choose to “ABSTAIN” on any or every proposal, your shares will still be counted toward the quorum.
If you hold your shares through a broker, your broker’s ability to vote your shares for you is governed by the rules of the New York Stock Exchange. Without your
specific instruction, a broker or other nominee may only vote your shares on routine proposals. Your broker will submit a proxy card on your behalf but leave your shares unvoted on non-routine proposals—this is known as a “broker
non-vote.” Without your specific instruction, your broker will not vote your shares on Proposals One (Election of Directors), Three (Advisory Approval of KeyCorp’s Executive Compensation), and Four (Shareholder Proposal
Seeking to Reduce Ownership Threshold to Call Special Shareholder Meeting), which the New York Stock Exchange considers “non-routine” proposals. Non-votes will not be counted “FOR” or “AGAINST” these proposals.
Proposal Two is a routine matter on which your broker will vote without your instruction. Therefore, broker non-votes are not expected to occur with respect to Proposal Two. Broker non-votes will still be counted toward the quorum.
To ensure your shares are voted at the meeting, you are urged to provide your proxy instructions promptly by telephone, online, or by mailing your signed proxy card in
the enclosed envelope. KeyCorp common shares represented by properly executed proxy cards, online instructions, or telephone instructions will be voted as you direct. If you do not vote at all on an otherwise properly-executed proxy card or your
properly submitted online instruction gives no voting direction whatsoever, the proxies will vote your shares “FOR” the election of the nominees named herein as directors (Proposal One), “FOR” the ratification of the appointment
of Ernst & Young as our independent auditors for the fiscal year ending December 31, 2020 (Proposal Two), “FOR” advisory approval of KeyCorp’s executive compensation (Proposal Three), and “AGAINST” the
shareholder’s proposal seeking to reduce the ownership threshold to call a special shareholder meeting (Proposal Four).
Revoking a Proxy
If you have submitted your
proxy and would like to revoke it, you may do so any time before your shares are voted at the Annual Meeting by: (i) filing a notice with the Secretary of KeyCorp revoking your proxy, (ii) submitting a new, subsequently dated proxy
(whether by proxy card, online, or telephone), or (iii) attending the Annual Meeting and electing to vote your shares in person. Your presence at the Annual Meeting alone will not revoke your proxy.
Cost of Proxy Solicitation
KeyCorp will pay for preparing, printing, and mailing these proxy
materials. Officers and employees of KeyCorp and its subsidiaries may solicit the return of proxies, but will not receive additional compensation for those efforts. KeyCorp has engaged D.F. King to assist in the solicitation of proxies at an
anticipated cost of $15,500 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.
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Proxy Solicited on Behalf of the Board of Directors of KeyCorp for the Annual Meeting on May 21, 2020
The undersigned hereby constitutes and appoints Christopher M. Gorman, Craig T. Beazer, and Carrie A. Benedict, and each of them, his/her true and
lawful agents and proxies with full power of substitution in each to represent the undersigned at the Annual Meeting of Shareholders of KeyCorp to be held on May 21, 2020, and at any adjournments or postponements thereof, on all matters
properly coming before said meeting.
This proxy when properly executed will be voted in the manner directed herein by the undersigned shareholder.
If no direction is made, this proxy will be voted FOR the election of the listed nominees and FOR Proposals 2 and 3, and AGAINST Proposal 4. In accordance with their judgment, the proxies are authorized to vote upon any other matters that may
properly come before the meeting. The signer hereby transfers all power given by the signer to vote at the said meeting or any adjournment thereof.
To: The Bank of New York Mellon, Trustee (the “Trustee”) under the KeyCorp 401(k) Savings Plan (the “Plan”).
I, as a participant in the Plan, hereby instruct the Trustee to vote (in person or by proxy), in accordance with my instructions on this card and the
provisions of the Plan, all Common Shares of KeyCorp attributable to my KeyCorp Stock Fund account under the Plan (the “Allocated Shares”), as of the record date for the Annual Meeting of Shareholders of KeyCorp. For each proposal listed
on the voting instruction card mark only one box. The Trustee will vote your Allocated Shares in accordance with your instructions provided, however, that Computershare Investor Services, LLC receives your voting instructions by 1:00 AM, Eastern
Time, on May 19, 2020.
This voting instruction card when properly executed will be voted as directed by you. If no voting instructions are
given or if your voting instructions are not properly executed, the Trustee will vote those shares in the same proportion as those Allocated Shares that are actively voted by Plan participants.
I hereby revoke any and all voting instructions previously given to vote at this meeting or any adjournments thereof. Please sign exactly as your
name appears on the books of KeyCorp, date, and promptly return this voting instruction card in the enclosed envelope.
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Authorized Signatures — This section must be completed for your vote to count. Please date and sign below.
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Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator,
corporate officer, trustee, guardian, or custodian, please give full title.
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Date (mm/dd/yyyy) — Please print date below.
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Signature 1 — Please keep signature within the box.
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Signature 2 — Please keep signature within the box.
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/ /
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Change of Address — Please print new address below.
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Comments — Please print your comments below.
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Online
Go to www.envisionreports.com/KEY or scan the QR code — login details are located in the shaded bar below.
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Votes submitted electronically must be received by May 21, 2020 at 1:00 a.m., local time. Votes submitted by participants in KeyCorp 401(k) Savings Plan must be received by May 19, 2020 at 1:00 a.m., local
time.
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Important Notice Regarding the Availability of Proxy Materials for the KeyCorp Shareholder Meeting to be held on
May 21, 2020.
Under Securities and Exchange Commission rules, you are receiving this notice that the proxy materials for the annual shareholders’
meeting are available on the Internet. Follow the instructions below to view the materials and vote online or request a copy. The items to be voted on and location of the annual meeting are on the reverse side. Your vote is important!
This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. We encourage you to access and review
all of the important information contained in the proxy materials before voting. The 2020 Proxy Statement and the 2019 Annual Report on Form 10-K are available at:
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Easy Online Access — View your proxy materials and vote.
Step 1: Go to www.envisionreports.com/KEY.
Step 2: Click on Cast Your Vote or Request Materials.
Step 3: Follow the instructions on the screen to log in.
Step 4: Make your selections as instructed on each screen for your delivery preferences.
Step 5: Vote your shares.
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When you go online, you can also help the environment by consenting to receive electronic delivery of future
materials.
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Obtaining a Copy of the Proxy Materials - If you want to receive a copy of the proxy materials, you must request one. There is no
charge to you for requesting a copy. Please make your request as instructed on the reverse side on or before May 11, 2020 to facilitate timely delivery.
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The KeyCorp Annual Meeting of Shareholders will be held on May 21, 2020 at One Cleveland Center, 1375 East Ninth Street,
Cleveland, Ohio 44114, at 8:30 a.m., local time. For directions, please call (216) 689-4221.
Proposals to be voted
on at the meeting are listed below along with the Board of Directors’ recommendations.
The Board of Directors recommends a vote FOR all nominees
and FOR Proposals 2 and 3, and AGAINST Proposal 4:
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1.
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Election of Directors: the nominees of the Board of Directors whose term of office will expire in 2021 are:
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Bruce D. Broussard, Gary M. Crosby, Alexander M. Cutler, H. James Dallas, Elizabeth R. Gile, Ruth Ann M. Gillis, Christopher M.
Gorman, Carlton L. Highsmith, Richard J. Hipple, Kristen L. Manos, Barbara R. Snyder, and David K. Wilson.
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2.
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Ratification of the appointment of independent auditor.
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Advisory approval of executive compensation.
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4.
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Shareholder proposal seeking to reduce ownership threshold to call special shareholder meeting.
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PLEASE NOTE - YOU CANNOT VOTE BY RETURNING THIS NOTICE. To vote your shares you must go online or request a paper copy of the proxy materials to receive a proxy
card. If you wish to attend and vote at the meeting, please bring this notice with you.
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Here’s how to order a copy of the proxy materials and select delivery preferences:
Current and future delivery requests can be submitted using the options below.
If you request an email copy, you will receive an email with a link to the current meeting
materials.
PLEASE NOTE: You must use the number in the shaded bar on the reverse side
when requesting a copy of the proxy materials.
— Internet - Go to www.envisionreports.com/KEY. Click Cast Your Vote or Request
Materials.
— Phone -
Call us free of charge at 1-866-641-4276.
— Email - Send an email to investorvote@computershare.com with “Proxy Materials
KeyCorp” in the subject line. Include your full name and address, plus the number located in the shaded bar on the reverse side, and state that you want a paper copy of the meeting materials.
To facilitate timely delivery, all requests for a paper copy of proxy
materials must be received by May 11, 2020.
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