Fannie Mae 2009 Annual Report Download - page 211

2010, base salary will be capped at $500,000 for all of our executive officers, including the named
executives, other than our Chief Executive Officer and Chief Financial Officer.
•Deferred Pay. Deferred pay is paid to the named executives in cash in quarterly installments in the year
following the performance year. Generally, 2009 deferred pay will be paid in four equal quarterly
installments in March, June, September and December of 2010. Deferred pay is designed to replicate the
“stock salary” element of the compensation program applicable to financial institutions that received
TARP assistance and is also intended to serve as a retention incentive for the named executives; however,
deferred pay will be paid in cash, not stock. Given the low market value of our common stock since our
entry into conservatorship, we and FHFA believe that stock-based compensation would not provide
appropriate retention incentives for our named executives. Further, large grants of low-priced stock could
provide substantial incentives for the named executives to seek and take large risks. In addition, we are
prohibited from paying new stock-based compensation under the senior preferred stock purchase
agreement without Treasury’s consent.
The amount of deferred pay is the remaining portion of a named executive’s total direct compensation
that is not base salary or a long-term incentive award at the target level. Deferred pay for 2009 contains
no performance-based component; however, as described below under “Components of 2010
Compensation and Changes from 2009 Compensation Arrangements,” 50% of deferred pay for 2010 will
be based on the company’s performance against corporate goals established for 2010 and 50% of deferred
pay for 2010 will be service-based. Except in the limited circumstances described under “Compensation
Tables—Potential Payments Upon Termination or Change-in-Control” below, we will pay installments of
deferred pay only if the named executive is employed by Fannie Mae on the scheduled payment dates.
•Long-term Incentive Award. A long-term incentive award is a performance-based cash award that is paid
in the two calendar years following the performance year. Half of the 2009 long-term incentive award was
paid in February 2010 and the remaining half of the award will be paid in the first quarter of 2011. Long-
term incentive awards are designed to provide incentives to the named executives to achieve corporate and
individual performance goals. In addition, because the final half of the award is not payable until the first
quarter of the second year following the performance year, it also serves as a retention incentive for the
named executives. Except in the limited circumstances described under “Compensation Tables—Potential
Payments Upon Termination or Change-in-Control” below, we will pay installments of a long-term
incentive award only if the named executive is employed by Fannie Mae on the scheduled payment dates.
We target long-term incentive awards at one-third of total compensation. The actual amount paid to a
named executive is based on the company’s and the named executive’s performance against corporate and
individual performance goals. For a description of our 2009 corporate performance goals, see “2009
Compensation Process and Decisions—What elements of corporate performance and other factors did the
Compensation Committee and the Board consider in making compensation decisions relating to the 2009
long-term incentive awards and 2008 Retention Program awards?” below. Our Board of Directors retains
the discretion to pay individual long-term incentive awards that are lower or higher than the target
amounts and this discretion is not restricted to a specific range above or below these targets; however, the
sum of the individual long-term incentive awards to all executive officers cannot exceed the overall size
of the long-term incentive pool for our executive officers, and FHFA has directed that this pool cannot
exceed 120% of target. In addition, each long-term incentive award paid to an executive officer must be
approved by FHFA.
Employee Benefits
Our employee benefits are a fundamental part of our executive compensation program, and serve as an
important tool in attracting and retaining senior executives. We describe these employee benefits below.
•Retirement Plans. We redesigned our retirement benefits program in late 2007 and further limited
certain retirement benefits in 2009. As a result of these changes, the retirement plans in which each of our
named executives was eligible to participate in 2009 depended on their date of hire or promotion, as
applicable.
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