Ally Bank 2011 Annual Report Download - page 243

Table of Contents
Ally Financial Inc. • Form 10−K
Based on the risk assessments conducted during 2011, the Committee concluded that (1) the SEO compensation programs do not encourage excessive
and unnecessary risk taking that could threaten the value of Ally; (2) other employee compensation plans do not encourage unnecessary or excessive risk
taking that could threaten the value of the Company, or reward shortterm results to the detriment of longterm value creation; and (3) Ally's compensation
programs do not encourage the manipulation of reported earnings.
The Committee, with the assistance of the Company's senior risk officers, will continue to assess the risks associated with Ally's compensation plans
every six months and take necessary steps to identify and eliminate any features that may unnecessarily expose Ally to risks or encourage manipulation of
reported earnings.
The Compensation, Nominating and Governance Committee certifies that:
• It has reviewed with senior risk officers the SEO compensation plans and has identified and limited features to ensure that these plans do
not encourage SEOs to take unnecessary and excessive risks that threaten the value of Ally.
• It has reviewed with senior risk officers the employee compensation plans and has identified and limited features as it deemed necessary to
ensure that Ally is not exposed to unnecessary risks.
• It has reviewed the employee compensation plans to eliminate any features in these plans that would encourage the manipulation of
reported earnings of Ally to enhance the compensation of any employee.
THE COMPENSATION, NOMINATING AND GOVERNANCE COMMITTEE
Kim S. Fennebresque (Committee Chairman)
Robert T. Blakely
Franklin W. Hobbs
Executive Compensation Discussion and Analysis
Introduction
In 2011, Ally successfully maintained its position as the industry's leading auto finance company, and was ranked as the No. 1 overall auto lender in
the U.S. (Source: AutoCount data from Experian Automotive − Full Year 2011). Ally showed significant growth in auto loan originations, with its U.S.
consumer financing originations increasing 27 percent year−over−year to $40.2 billion in 2011, and continued to diversify its base of manufacturers served.
Further, Ally maintained a strong capital and liquidity profile, and continued to build the deposit base at Ally Bank with a strong consumer value
proposition and expanded product offerings. Since 2008, GMAC Mortgage has completed more than 765,000 default workouts for borrowers, which
comprised approximately 28 percent of the loans serviced during that period. Notwithstanding these accomplishments, Ally reported a full−year net loss of
$157 million, which included a $230 million charge for penalties which were imposed by certain regulators and other governmental agencies in connection
with foreclosure−related matters. Our mortgage operations also experienced a decrease in the fair value of its mortgage servicing rights of $1.6 billion in
2011.
TARP Executive Compensation Limitations
In connection with our participation in TARP and certain determinations of the Special Master, Ally is subject to certain limitations on executive
compensation, the most significant of which are:
• Cash salaries are limited based on the determination of the Special Master;
• The majority of an SEO's compensation paid in equity that must be held long−term;
• Incentive compensation granted in the form of long−term restricted equity that is contingent on performance and paid out after incremental
TARP repayments;
• Perquisites and “other” compensation capped at $25,000, with limited exceptions;
• Suspension of the accrual of benefits to supplemental executive retirement plans;
• Prohibition on incentives for SEOs that could cause them to take unnecessary or excessive risks;
• Clawback of any bonus or incentive compensation paid to an SEO based on statements of earnings, revenues, gains, or other performance criteria
that are later found to be materially inaccurate, is based on erroneous data that resulted in an accounting restatement due to material
noncompliance with any financial reporting requirement under the securities laws within the three years prior to payment, or is found to require
repayment under the provisions of any other Federal law or regulation that may govern the Company's executive compensation; and
• Prohibition on any severance payable to the SEOs and the next five most highly compensated employees.
These limitations apply until Ally is no longer subject to TARP.
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