Fannie Mae 2006 Annual Report Download - page 195

What are our practices for determining when we grant equity awards?
All restricted stock or restricted stock unit grants to senior executives, including the named executives, are
granted on the date of approval by the Board or Compensation Committee or, if later, on the date the
executive commences employment with us, with one exception. In February 2006, the Board granted senior
executives restricted stock and restricted stock unit awards in dollar-denominated amounts, with the number of
shares to be determined by dividing the dollar amounts by the trading price of Fannie Mae’s common stock.
The Board deferred the determination of how many shares of restricted stock each executive would receive
until after the filing of our next Form 12b-25. That ensured that the results of the review of Fannie Mae by
Paul, Weiss, Rifkind, Wharton & Garrison LLP would be publicly available prior to the determination date.
The deferral of the grant date was structured to result in executives’ receiving whichever number of shares was
lower—the number determined using the trading price at the time of the grant approval or the number
determined using the trading price after the results of the Paul, Weiss report were made public. Stock awards
to employees below the level of senior vice president are allocated by the chief executive officer pursuant to a
delegation from the Compensation Committee. We are not currently granting stock options to employees and
do not expect to grant options before we become a current filer.
What are our stock ownership requirements?
We encourage our directors, officers and employees to own our stock in order to align their interests with the
interests of shareholders. Our chief executive officer is required to hold shares of Fannie Mae common stock
with a value equal to five times his base salary. In addition, our chief executive officer’s long-term incentive
award for 2006 included a separate stock ownership requirement described above in footnote 2 to the
“Compensation Paid or Granted for 2006” table. Our other named executives are required to hold Fannie Mae
common stock with a value equal to two times base salary. Senior executives have three years from the time
of appointment to reach the expected ownership level. In addition to our stock ownership requirements, our
officers are prohibited from purchasing and selling derivative securities related to Fannie Mae equity
securities, including warrants, puts and calls, or from dealing in any derivative securities other than pursuant to
our stock-based benefit plans.
How and why have we changed our policy on perquisites?
Perquisites represent a very small portion of the overall compensation package for our named executives.
During 2006, Fannie Mae provided the named executives with perquisites that included a financial counseling
benefit, personal use of certain of Fannie Mae’s cars and drivers, excess personal liability insurance, annual
physical exams, executive life insurance, airline club memberships, and dining services, as well as tax
gross-ups related to the excess personal liability and life insurance benefit. In addition, all members of our
Board of Directors, including Mr. Mudd, participated in the Director’s Charitable Award program.
Our policy provides that perquisites should be based on business needs, and that existing perquisites should be
evaluated from time to time and eliminated if no longer appropriate. Consistent with this policy, in February
2007 the following perquisites were eliminated:
• reimbursement for financial counseling—effective July 1, 2007;
• use of company transportation for any non-business purpose without reimbursement—effective January 1,
2007;
• personal use of company-owned memberships at country clubs—effective January 1, 2008;
• excess liability insurance—effective January 1, 2008 for all officers and March 1, 2007 for any person
who became an officer on or after that date; and
• the tax “gross-up” to cover taxes due on any excess liability insurance or life insurance provided by
Fannie Mae to officers—effective January 1, 2008.
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