Freddie Mac 2014 Annual Report Download - page 279

274 Freddie Mac
stock does not constitute a material relationship between him and Freddie Mac that would impair his independence as
a Freddie Mac director.
Board Diversity
The Board identifies Director nominees or candidates for the Conservator to consider for election by written consent and
when there is a vacancy on the Board, at which time the Board may exercise the authority delegated to it by the Conservator to
fill such vacancies, subject to review by the Conservator.
Our charter provides that our Board must at all times have at least one person from the homebuilding, mortgage lending,
and real estate industries, and at least one person from an organization representing community or consumer interests or one
person who has demonstrated a career commitment to the provision of housing for low-income households. In addition, the
examination guidance for corporate governance issued by FHFA provides that in identifying individuals for nomination for
election to the Board, the Board should consider the knowledge of such individuals, as a group, in the areas of business,
finance, accounting, risk management, public policy, mortgage lending, real estate, low-income housing, homebuilding,
regulation of financial institutions, and any other areas that may be relevant to our safe and sound operation.
In addition, the Board has adopted a formal policy (articulated in our Guidelines) with regard to the consideration of
diversity in identifying director nominees and candidates. As articulated in the policy, the Board seeks to have a diversity of
talent, perspectives, experience and cultures among its members, including minorities, women and individuals with disabilities,
and considers such diversity in the candidate identification and nomination processes. The policy also states that the Board
seeks to have a diversity of talent on the Board and that candidates are selected, in part, for their experience and expertise. The
policy explains that when identifying director nominees, the Nominating and Governance Committee considers, among other
factors, our needs, the talents and skills then available on the Board, and, with respect to incumbent directors, their continued
involvement in business and professional activities relevant to us, the skills and experience that should be represented on the
Board, the availability of other individuals with desirable skills to join the Board, and the desire to maintain a diverse Board.
FHFA has adopted a final rule regarding minority and women inclusion. The final rule implements section 1116 of the
Reform Act and generally requires us to promote diversity and the inclusion of women, minorities, and individuals with
disabilities in all activities, including considering diversity in the process of nominating directors.
Board Leadership Structure and Role in Risk Oversight
The positions of Chief Executive Officer and Non-Executive Chairman of the Board are held by different individuals.
This leadership structure was established by the Conservator. The examination guidance for corporate governance issued by
FHFA provides that once separated, the functions of the Chief Executive Officer and the Non-Executive Chairman of the Board
should remain separated until such time as the Director of FHFA determines otherwise.
The responsibility for risk oversight is shared by two committees of the Board, the Risk Committee and the Audit
Committee, with primary risk oversight responsibility allocated to the Risk Committee. The Risk Committee is responsible for
assisting the Board in the oversight, on an enterprise-wide basis, of our risk management framework, including management of
credit risk (including counterparty risk), market risk (including interest rate and liquidity risk), model risk, operational risk,
strategic risk, and reputation risk. The risk oversight responsibilities of the Audit Committee include reviewing generally:
(a) management’s guidelines and policies governing the processes for assessing and managing our risks; and (b) our major
financial risk exposures and the steps management has taken to monitor and control such exposures.
The Enterprise Risk Management division (“ERM”) is responsible for the independent assessment and oversight of risks
across the company, including credit, market, model and operational risk. ERM’s mandate is primarily governed through a
Board - approved enterprise risk management policy that establishes the Board’s risk appetite, risk limits and Board reporting
thresholds (the “ERM Policy”). ERM has historically been led by the Executive Vice President - Chief Enterprise Risk Officer
and is currently led by our two Interim Co-Chief Enterprise Risk Officers (referred to as our "Chief Risk Officer(s)"), each of
whom in such capacity reports directly to the Chief Executive Officer. The Chief Risk Officer(s) also reports to the Risk
Committee of the Board of Directors on a quarterly basis and to the full Board of Directors, as appropriate. ERM’s Board
reports include standard quarterly risk reports and ad hoc agenda items on specific topics. The ERM Policy and the ERM
framework outlined therein apply to all areas of the company, and are complemented by underlying policies at the division and
department levels that support the management, monitoring and reporting of risk across the company. The overall ERM
framework includes a risk inventory, risk appetite, and risk limits, as well as monitoring and reporting requirements. The Chief
Executive Officer has also established a corporate enterprise risk management committee (the “ERMC”) to monitor, coordinate
and oversee the management of the company’s risks consistent with the ERM Policy. The Chief Enterprise Risk Officer(s) chair
the ERMC, which comprises most members of senior management. ERM aggregates risk exposures managed throughout the
company from the relevant risk owners for review and discussion at the ERMC. The ERMC is supported by a number of
subcommittees. Information flows from the subcommittees to the ERMC as appropriate, and information and reports to be
provided to the Board and its committees are usually reviewed and discussed in the ERMC or similar management forum prior
to the relevant Board or Board committee meeting. In addition, the Board specifically evaluates the company's performance
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