Proxy Blog

Keycorp 

May 9, 2019

The annual proxy for this financial services company had the following proposals: 

  1. Proforma proposals on directors, appointment of auditors, and “say-on-pay” advisory vote 
  2. Board proposals on equity plan, authorized shares, and board authority to amend 

Magni voted as follows: 

  1. For and against proforma proposals.
    -For and against directors  The board has a majority of independent directors and some have CEO/CFO experience with other companies. The compensation of directors is disclosed with a meaningful portion in equity where the equity has restrictions to align director incentives with long-term value creation. As with last year, two of the candidate(Crosby and Highsmith) are on the board as a result of prior acquisitions. These two positions should have independent board members, hence Magni voted against the two directors.
    -For auditors – There appear to be no controversies with the financial statements of the company.
    -For say-on-pay”  The proxy materials documented shareholder engagement activities. During those activities, compensation was part of the discussion. The peer group was listed along with the criteria for the group. Though the criteria were high level, ishowed the position of the company within the middle of the peer group across the primary financial metrics. Such information provides reassurance that the compensation comparisons are relevant and more likely to be objective. 
  2. For and against board proposals.
    -For equity plan – Equity incentive plans are a good tool for aligning management of a company with shareholder interests. The amendments to the existing plan are relatively minor and the changes are consistent with good governance.
    -Against increasing authorized shares – The company is close to needing more shares. That said, the proposal was a 50% increase in authorized shares. The risk of shareholder dilution is significant. The board should introduce another proposal with a much smaller increase.
    -Against authority to amend – Recent Ohio legislation allows companies to amend bylaws that enable company boards to make “minor” amendments without shareholder approval. The board wants this authority. The proposal does not provide examples of amendments that would be enacted without shareholder approval. Approving such a proposal is risky as it is unclear what limits exist on board authority. It is safer to vote against this proposal in order to prevent adverse unintended consequences.