Freddie Mac 2010 Annual Report Download - page 304

Determination of 2010 and 2011 Target TDC for Named Executive Officers
Role of Compensation Consultants
As part of the annual process to determine the Target TDC for each of the Named Executive Officers, the Compensation
Committee receives guidance from an independent compensation consultant that is selected by the Compensation Committee
without any recommendation by management. In addition to the annual process to determine the Target TDC, the
compensation consultant provides guidance during the course of the year on executive compensation matters and can be
engaged, as needed, by either the Compensation Committee or the full Board on special projects.
From August 2009 to May 2010, the Compensation Committee retained Steven Hall & Partners as its consultant. In
May 2010, the Compensation Committee determined it would be appropriate to end its relationship with Steven Hall &
Partners after it became aware that Steven Hall & Partners’ potential engagement with another client might give the
appearance of a conflict of interest.
In September 2010, the Compensation Committee retained Meridian Compensation Partners, LLC as its consultant.
Steven Hall & Partners and Meridian Compensation Partners, LLC have not provided the Compensation Committee with
any non-executive compensation consulting services, nor has either firm provided any services to our management.
Gathering Comparative Market Compensation Data
As part of its process to establish each Named Executive Officer’s Target TDC under the Executive Compensation
Program, the Compensation Committee reviewed the compensation of executives in comparable positions at companies that
are either in a similar line of business or are otherwise comparable for purposes of recruiting and retaining individuals with
the requisite skills and capabilities. We refer to this group of companies as the Comparator Group. In September 2009, the
Committee reviewed and discussed the composition of the Comparator Group with its compensation consultant at the time,
Steven Hall & Partners, and determined that the following companies should be included in the Comparator Group for 2010:
Allstate Hartford Financial Services Group Prudential Financial
American Express JPMorgan Chase* State Street
Bank of America* MasterCard SunTrust Banks
Bank of New York Mellon MetLife U.S. Bancorp
BlackRock Northern Trust Visa
Citigroup* PNC Financial Services Group Wells Fargo*
Fannie Mae
* Compensation data to be used from these diversified banking firms is taken only from their mortgage or real estate divisions.
In October 2010, the Committee reviewed and discussed the composition of the Comparator Group with its current
compensation consultant, Meridian Compensation Partners, LLC, and determined that the 19 companies that comprised the
2010 Comparator Group continue to reflect the relevant labor market for us and our executive talent. Accordingly, the 2011
Comparator Group is comprised of the same 19 companies as the 2010 Comparator Group.
In the event there is insufficient data from the Comparator Group for any of the Named Executive Officer positions, or
if the Committee’s compensation consultant believes that additional data sources would strengthen the analysis of
competitive market compensation levels, the Compensation Committee can use alternative survey sources to make these
assessments. For 2010, the alternative survey sources used by the Compensation Committee were compensation surveys
published by human resources consulting firms Aon Hewitt, Towers Watson, and McLagan, an Aon Hewitt consulting
company. For 2011, the alternative survey source used by the Compensation Committee was a compensation survey
published by McLagan. In order to preserve confidentiality and encourage continuing participation, these consulting firms do
not attribute the data in their surveys to the companies that participate in their surveys.
Establishing Target TDC
In establishing Target TDC levels for our Named Executive Officers, the Compensation Committee used as a guideline
the market median, or 50th percentile, of the total direct compensation, consisting of base salary, annual incentive, and long-
term incentive awards, paid to comparable positions at Comparator Group companies or in the alternative survey sources.
While the market median was used as the guideline for Target TDC, the Compensation Committee had the authority to
establish Target TDC above or below such level as it deemed appropriate, for each Named Executive Officer. Additional
factors considered by the Compensation Committee were the executive officer’s past performance and the criticality of the
officer’s role.
In establishing the Named Executive Officers’ 2010 Target TDC, the Compensation Committee reviewed 2009 data
from the Comparator Group and alternative survey sources. Specifically, for the positions of Chief Executive Officer, Chief
Financial Officer, Executive Vice President — General Counsel & Corporate Secretary, the Compensation Committee, at the
recommendation of Steven Hall & Partners, reviewed competitive market compensation data from the Comparator Group and
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