Fannie Mae 2005 Annual Report Download - page 215

during 2007. The amount Mr. Swad will receive for his bonus may be less than or greater than his target
amount, depending on both corporate and individual performance. Mr. Swad’s 2007 variable long-term
incentive award for 2007 is targeted at approximately $3.2 million. The size of Mr. Swad’s actual award may
be greater than or less than this amount, depending on a number of factors, including individual performance.
Mr. Swad’s pension goal under Fannie Mae’s Executive Pension Plan is 40% of average total compensation
for the three consecutive years of his last ten years of employment when total compensation is the highest. In
accordance with Fannie Mae’s capital restoration plan, payment of Mr. Swad’s bonus and non-salary
compensation awards will be subject to prior approval from OFHEO.
Mr. Swad will also receive severance benefits if we terminate his employment prior to the end of 2008 for
reasons other than cause. In that event, he would receive severance benefits that would include one year of
salary, accelerated vesting of one cycle of any restricted stock or other stock-based award, and one year of
subsidized medical and dental coverage. If we terminated his employment for a reason other than for cause
before we pay him his 2007 annual incentive plan bonus award, he would receive 100% of his 2007 target
award amount. If we terminated his employment during 2008 other than for cause, he would receive a 2008
annual incentive award, prorated based on the number of months he was employed during 2008.
Director Compensation Information
Below we describe our compensation arrangements with our directors. Mr. Mudd, who is our only director
who is an employee of Fannie Mae, does not receive benefits under any of these arrangements except for the
Matching Gifts Program, which is available to every Fannie Mae employee, and the Director’s Charitable
Award Program.
Cash Compensation
Our non-management directors, with the exception of the non-executive Chairman of our Board, are paid a
retainer at an annual rate of $35,000, plus $1,500 for attending each Board or Board committee meeting in
person or by telephone. Committee chairpersons received an additional retainer at an annual rate of $10,000,
plus an additional $500 for each committee meeting chaired and $300 for each telephone committee meeting
chaired. As we described in a Form 8-K filed on January 21, 2005, in January 2005, our Board approved a
compensation arrangement for the non-executive Chairman of the Board, Mr. Ashley, in recognition of the
substantial amount of time and effort necessary to fulfill the duties of the position. Under this arrangement,
Mr. Ashley receives an annual fee of $500,000.
Restricted Stock Awards
We have a restricted stock award program for non-management directors established under the Fannie Mae
Stock Compensation Plan of 2003 and the Fannie Mae Stock Compensation Plan of 1993. The award program
provides for consecutive multi-year cycles of awards of restricted common stock. Under the 2003 plan, these
award cycles are four years, and the first award was scheduled to be made at the time of the 2006 annual
meeting. Under the 1993 plan, the cycles are five years and the most recent award was made at the time of the
2001 annual meeting. Awards vest in equal annual installments after each annual meeting during the cycle,
provided the participant continues to serve on the Board of Directors. If a director joins the Board of Directors
during a cycle, he or she receives a pro rata grant for the cycle, based on the time remaining in the cycle.
Vesting generally accelerates upon departure from the Board due to death, disability, or for elected directors,
not being renominated after reaching age 70. Under this program, in May 2001, we granted 871 shares of
restricted common stock to each non-management director who was a member of the Board at that time.
These shares vest over a five-year period at the rate of 20% per year. Each director who joined the Board prior
to June 2006 received a pro rata grant for the cycle, based on the time remaining in the cycle.
In addition, in October 2003 we granted 2,600 shares of restricted common stock to each non-management
director who was a member of the Board at that time, scheduled to vest in four equal annual installments
beginning with the May 2004 annual meeting. We subsequently made pro rata grants to non-management
directors who joined the Board after October 2003.
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