Fannie Mae 2008 Annual Report Download - page 236

Executives who ceased serving as executive officers in 2008:
• Daniel H. Mudd, former President and Chief Executive Officer
• Stephen M. Swad, former Executive Vice President and Chief Financial Officer
• Enrico Dallavecchia, former Executive Vice President and Chief Risk Officer
• Robert J. Levin, former Executive Vice President and Chief Business Officer
Impact of the Conservatorship on Executive Compensation
As discussed above under “Part I—Item 1—Business—Conservatorship, Treasury Agreements, Our Charter
and Regulation of Our Activities,” the Director of FHFA appointed FHFA as conservator of Fannie Mae on
September 6, 2008. This event and the conditions that led to it had a significant impact on our executives,
their compensation and the process by which executive compensation for 2008 was determined.
2008 Executive Compensation Decisions Have Been Made or Approved by Our Conservator
Upon its appointment as our conservator in September 2008, FHFA immediately succeeded to all rights, titles,
powers and privileges of Fannie Mae, and of any shareholder, officer or director of Fannie Mae with respect to
Fannie Mae and its assets. As a result, our then-existing Board of Directors no longer had the power or duty
to manage, direct or oversee the business and affairs of Fannie Mae, and the Board and its committees,
including the Compensation Committee, ceased functioning from the date of conservatorship until late
December 2008. Of the compensation determinations for 2008 discussed below, only the salary levels for our
executive officers who served prior to conservatorship were determined by the Compensation Committee of
the prior Board. The rest of the executive compensation decisions discussed below were determined by or
approved by FHFA, in consultation with the Secretary of the Treasury. In particular, the determinations that
incentive compensation would not be paid for 2008 and decisions regarding the structure of the 2008
Retention Program were made by FHFA. The amount of the retention awards and the amount of Mr. Johnson’s
salary were approved by FHFA after considering management’s recommendations. Mr. Allison, our Chief
Executive Officer, reviewed management’s recommendations before they were provided to FHFA. FHFA has
provided the information below regarding the factors it considered in reaching these executive compensation
determinations.
After September 2008, FHFA reconstituted our Board of Directors, directed us regarding the function and
authorities of the Board, and appointed six new and three returning directors to our Board to serve in addition
to our Board Chairman, who was appointed by FHFA in September 2008. The reconstituted Compensation
Committee first met in late January 2009.
Conservator’s determination relating to 2008 Incentive Compensation and Establishment of 2008 Retention
Program
Conservator’s determination relating to 2008 Annual Incentive Plan Bonus Payments and Stock-Based Long-
Term Incentive Awards. Our compensation of executive officers for 2008 was originally structured to include
three principal cash and stock components: (1) salary, (2) the opportunity to receive cash bonuses under our
Annual Incentive Plan, which measured both corporate and individual performance during the year against
goals established by the Board of Directors at the beginning of the year and (3) the opportunity to receive
long-term incentive awards, generally in the form of restricted stock, which were to be awarded based on the
achievement of corporate goals.
On September 15, 2008, given our overall performance relative to the goals established by the Board in early
2008, the conservator determined that no executive officer would be entitled to receive a cash bonus under our
Annual Incentive Plan. In addition, the conservator determined that long-term incentive awards would not be
made to any executive officer for 2008 performance.
Conservator’s Establishment of 2008 Retention Program. On September 15, 2008, the conservator
established a broad-based employee retention program, which we refer to as the 2008 Retention Program,
under which some of our named executives received cash retention awards. Thirty-three percent of each of
these awards is “performance-based” and may become payable, in whole or in part, in February 2010 if the
named executive continues to be employed by us at that time or is involuntarily terminated for reasons other
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