Freddie Mac 2010 Annual Report Download - page 307

guarantee. For these performance measures, management and the Compensation Committee considered the likelihood of
achievement when recommending and approving the target or target range. Each target was set at a level determined to be
realistic and achievable, taking into account our priorities during conservatorship, including providing liquidity, stability and
affordability in a period of tremendous uncertainty in the mortgage markets, as well as the general economic outlook.
Management and the Compensation Committee considered a number of factors with respect to each of the Financial
Execution performance measures for which the target is not otherwise disclosed in Table 72. These factors included, but
were not limited to, the following:
• Segment Earnings:
– Single-Family: Historical single family segment earnings, delinquency rates, estimated default costs, loan
modifications under HAMP, and the impact of adopting accounting standards related to transfers of financial
assets and consolidation of variable interest entities.
– Multifamily: Historical multifamily segment earnings, delinquency rates, projected volume, and anticipated
LIHTC losses.
– Investment: Historical investment segment earnings, interest rate trends, the liquidity of the assets in the
investment portfolio, and the balance limit on our retained portfolio.
• Return on Assets: Historical new purchase ROA, the competitive market, estimated default costs, guarantee fees, and
security performance-related costs.
• Option-Adjusted Spread on New Investment Purchases: Historical OAS, the impacts of the Federal Reserve’s
mortgage security purchase program and the balance limit on our retained portfolio.
• Conservation of Assets:
– Senior Preferred Draws: In addition to the factors considered for Segment Earnings, we also considered the
impact of anticipated credit-related expenses, economic conditions and home prices.
– Realized Credit Losses: Anticipated charge-offs and REO operations expense.
After reviewing and discussing management’s final performance assessment against the performance measures, the
Compensation Committee concurred with management’s assessment. The Compensation Committee then identified and
discussed additional factors that it believed should be taken into consideration in determining the appropriate funding level
for the performance-based portion of Deferred Base Salary. These included:
• The continued enhancement of the Enterprise Risk Management organization, which strengthens risk-management
across the company, provides for a better framework for risk management and improves our work process;
• Management’s identification of opportunities to improve the processing of foreclosure alternative transactions,
specifically loan modifications and short sales;
• Our increased focus and accelerated progress with respect to diversity and inclusion; and
• Internal control and operational deficiencies identified by management and FHFA during 2010 related to both the
Multifamily and Information Technology divisions.
After considering our achievement against the performance objectives as well as the additional factors, which had the
overall effect of lowering the funding level, the Compensation Committee developed a preliminary recommended funding
level for the performance-based portion of Deferred Base Salary of approximately 88%. The Compensation Committee’s
preliminary recommendation was submitted to FHFA for review. Following this review, management informed the
Compensation Committee that there were no material changes to the assessment that was presented during the fourth quarter
of 2010 and this funding level was then formally approved by the Compensation Committee and FHFA.
The following chart compares the target and actual amounts of 2010 Deferred Base Salary for each Named Executive
Officer. The actual amount earned is scheduled to be paid in equal quarterly installments on the last business day of each
calendar quarter of 2011.
Table 73 — 2010 Deferred Base Salary
Named Executive Officer Fixed Portion
Performance-
Based
Portion
Total Target
Deferred Base
Salary Fixed Portion
Performance-
Based
Portion
Total Actual
Deferred Base
Salary
Target 2010 Deferred Base Salary Actual 2010 Deferred Base Salary
Mr. Haldeman . . . . . . . . . . . . . . . ............ $1,550,000 $1,550,000 3,100,000 $1,550,000 $1,362,450 $2,912,450
Mr. Kari . . . ............................ 829,167 829,166 1,658,333 829,167 728,838 1,558,005
Mr. Bostrom ............................ 680,000 680,000 1,360,000 680,000 597,720 1,277,720
Mr. Federico ............................ 670,000 670,000 1,340,000 670,000 588,930 1,258,930
Mr. Bisenius ............................ 550,000 550,000 1,100,000 550,000 483,450 1,033,450
304 Freddie Mac