KeyCorp to Resume Linking Pay More Closely to Job Performance

KeyCorp (KEY), Ohio’s second-biggest bank, will resume linking executive pay more closely to performance after it repays a $2.5 billion taxpayer bailout.

The compensation adjustment was among recommendations suggested by the lender’s board in December, Cleveland-based KeyCorp said today in a statement. Implementation of the guidelines also would settle a shareholder suit filed against the bank last year over 2009 executive pay, the bank said. KeyCorp was accused of violating fiduciary duties and committing corporate waste, according to a regulatory filing.

“While not admitting the validity of any allegations,” KeyCorp said it and the plaintiffs had reached a settlement that awaits court approval, according to the statement. Chairman and Chief Executive Officer Henry L. Meyer III, incoming CEO Beth Mooney and Tom Stevens, vice chairman, were among those named in the suit.

Meyer was asked by Mooney to remain with the bank as a non- executive employee for up to another year, according to the statement. His stock and compensation until Mooney takes over on May 1 will be an annualized $3 million, the same as last year, the bank said. Then he will be paid $240,000.

The bank sold $1 billion in bonds March 21 to help repay borrowings under the U.S. Treasury Department’s Troubled Asset Relief Program.

To contact the reporter for this story: Justin Doom in New York at jdoom1@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net