Fannie Mae 2008 Annual Report Download - page 239

executives or based on the business needs of the named executives in the performance of their job
responsibilities. In 2008, we agreed to provide Mr. Johnson relocation benefits, including moving, temporary
living, and home selling and buying assistance.
Severance Benefits. None of our named executives who currently serves as an executive officer has entered
into an agreement with us entitling him to severance benefits. Information on benefits an executive might
receive under our compensation programs in the event the executive’s employment is terminated is provided
below in “Compensation Tables—Potential Payments upon Termination or Change-in-Control.” Compensation
arrangements for Mr. Mudd are discussed in more detail below in “What compensation arrangements do we
have with Mr. Mudd, our Former Chief Executive Officer?” and information on severance benefits for our
other named executives who no longer serve as executive officers is provided below in “How did FHFA or
Fannie Mae determine the amount of each element of 2008 direct compensation?—Separation Benefit
Determinations.”
How did FHFA or Fannie Mae determine the amount of each element of 2008 direct compensation?
We describe below how each element of our named executives’ 2008 direct compensation was determined.
Salary Determinations.
Mr. Allison did not receive a salary in 2008. As discussed above, 2009 compensation arrangements for
Mr. Allison have not been determined.
FHFA approved the salary for Mr. Johnson, who became our Chief Financial Officer in November 2008, in
connection with his hire, along with potential amounts for the size of his 2009 cash bonus target and his 2009
long-term incentive award grant. Mr. Johnson’s annual salary is $625,000. In establishing his compensation,
FHFA considered the recommendations of management, the substantial reduction Mr. Johnson’s target
compensation represented in comparison to compensation for Mr. Swad, our former Chief Financial Officer,
and pay by comparable institutions for executives in comparable positions, as reported earlier in 2008 to
FHFA by FHFA’s compensation consultant, HayGroup. In recommending compensation for Mr. Johnson,
management relied on guidance and data from its outside executive compensation consultant, Johnson
Associates, Inc. (which is not related to Mr. Johnson), regarding changing trends in chief financial officer
compensation. The recommended compensation level was intended to target the market median of total direct
compensation paid at companies in a comparator group of diversified financial services companies that we
compete with for executive talent. For this purpose, we looked to the same comparator group that we used for
2007 compensation decisions. The members of this group are listed in the proxy statement on Schedule 14A
we filed with the SEC on April 4, 2008. The compensation recommendation was also designed to balance our
goal of seeking to recruit Mr. Johnson with the need to limit compensation to an appropriate level given our
current circumstances.
In accordance with our compensation philosophy, which considered, as a guideline, the market median of total
direct compensation paid at companies in our comparator group, in early 2008 our Board increased
Mr. Bacon’s salary to $530,400 and Mr. Lund’s salary to $543,920. For similar reasons, and taking into
account individual performance and role criticality, in early 2008 our Board increased Mr. Hisey’s salary to
$385,017. No other named executive received a salary increase for 2008.
No decisions have been made yet regarding 2009 salaries for our continuing named executives, and they are
currently being paid at a rate equal to their 2008 salary levels.
Retention Award Determinations.
Retention awards were granted to each of our named executives who served as an officer through the entire
year of 2008, in the amounts indicated in the Direct Compensation Paid or Granted to our Continuing Named
Executives in 2008 table below and in footnote 4 to that table.
When it established the 2008 Retention Program, FHFA directed that the pool from which retention awards
could be paid to our employees would be funded at an amount no greater than 75% of the aggregate 2008
annual bonus target amounts that previously had been established for employees. FHFA established this
amount based on advice from its compensation consultant, HayGroup, regarding the appropriate structure and
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