KeyCorp Receives Majority Opposition on Pay

By Ted Allen on May 25, 2010 10:32 AM

KeyCorp, an Ohio-based banking firm, received 55 percent investor opposition during an advisory vote on executive compensation at its May 21 annual meeting.

The company is the first participant in the U.S. government's Troubled Asset Relief Program to get majority dissent over its pay practices. KeyCorp also is the third U.S. issuer (after Motorola and Occidental Petroleum) that has failed to earn majority support during a management-sponsored "say on pay" vote. KeyCorp received 87.2 percent approval during its 2009 advisory vote.

This year's dissent appears to reflect the disconnect between growing CEO pay and KeyCorp's lagging financial performance. The firm posted a negative 34 percent one-year shareholder return and a negative 45.3 percent return over three years, which both trail the performance of the company's industry peers and the S&P 500.

During the past fiscal year, the CEO's total compensation increased by 40.8 percent to $8.7 million, primarily because of an increase in the value of stock option grants and a large salary stock increase. Like other TARP firms, KeyCorp has shifted to salary stock to get around restrictions on incentive pay. The company has taken some efforts to address shareholder concerns about pay, such as eliminating tax reimbursements on perks and change-in-control payments, and freezing its qualified and non-qualified pension plans.