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KeyCorp under Investor Pressure for Independent Chairman

Ohio-based KeyCorp. KEY joined the list of some major banks, which are facing shareholders’ concern over sharing of Chief Executive Officer (“CEO”) and chairman roles. A long-term shareholder of KeyCorp proposed to have an independent chairman at the bank and recommended that the Chairman role be held by an independent board member.

The chairman title is currently held by CEO Beth Mooney, who has been carrying out the combined role since 2011.

Gerald Armstrong, who owns 20,080 shares of KeyCorp stock, filed a proposal to split both the roles. According to his proposal, “an independent board chairman has been found to improve financial performance.”

“The roles of Chairman of the Board and CEO are fundamentally different and should not be held by the same person,” Armstrong wrote in his proposal. “There should be a clear division of responsibilities between these positions to insure a balance of power and authority on the Board,” he added.

In order to emphasize on other changes he has made as a KeyCorp shareholder, Armstrong said that he caused the declassification of the company’s director terms from three years to one year and elimination of super-majority requirements.

Also, he further stated that the same proposal was presented by him to shareholders in 2012, with 54% of shares voting in its favor. However, instead of adoption, KeyCorp increased the duties of the lead director, Alexander Cutler, who also holds both the chairman and CEO positions at the company headed by him.

The current proposal will be voted on by shareholders at the KeyCorp annual meeting of shareholders to be held on May 19. However, the company recommended a vote against Armstrong’s proposal in its proxy statement.

“The Board believes that KeyCorp should maintain the flexibility to separate or combine the Chairman and Chief Executive Officer roles instead of adopting this shareholder proposal’s “one-size-fits-all” approach,” the statement read.

Also, KeyCorp sided with Mooney saying her “combined leadership role has allowed her to set the overall tone and direction for KeyCorp, maintain consistency in the internal and external communication of our strategic and business priorities, and have primary responsibility for managing KeyCorp’s operations.”

In Sep 2015, Bank of America Corporation’s BAC shareholders rejected a similar call to split the roles of chairman and CEO, currently held by Brian Moynihan.

Among the major U.S. banks like JPMorgan Chase & Co. JPM and Citigroup Inc. C, only Citigroup has a separate chairman and CEO.

Currently, KeyCorp has a Zacks Rank #4 (Sell).

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