Fannie Mae 2009 Annual Report Download - page 213

Committee and the Board consider in making compensation decisions relating to the 2009 long-term incentive
awards and 2008 Retention Program awards?” below for a discussion of the corporate goals against which
performance was measured and the Compensation Committee’s and Board’s assessment of performance
against these goals.
Although we consider all payments under the 2008 Retention Program to be part of our 2008 compensation
program, we have incorporated the amount of this final retention payment into the applicable named
executives’ 2009 compensation set forth below in the “Summary Compensation Table for 2009, 2008 and
2007” because this final payment under the 2008 Retention Program was based on 2009 corporate
performance. For a description of the 2008 Retention Program, please refer to “Executive Compensation—
Compensation Discussion and Analysis” in our 2008 Form 10-K.
Why was this mix of base salary, deferred pay and long-term incentive awards selected?
FHFA worked with our management and Board of Directors, and sought the guidance of Treasury’s Special
Master for TARP Executive Compensation, to develop an executive compensation program that benefits from
the structural standards created for TARP-assisted firms. As a result of these efforts, we adopted a
compensation program based on FHFA’s guidance consisting of base salary, deferred pay and a long-term
incentive award. With regard to the relative distribution of total compensation among these elements, based on
guidance from FHFA, we targeted the long-term incentive award component at one-third of total compensation
and limited annual base salary rates to no more than $500,000 beginning in 2010, except in the case of our
Chief Executive Officer and Chief Financial Officer, which is similar to the pay structure created for TARP-
assisted firms. FHFA provided guidance that the remaining portion of total compensation be paid over time in
cash in the form of deferred pay.
2009 Compensation Process and Decisions
What was the effect of the conservatorship on our process for setting executive compensation in 2009?
As discussed above under “Business—Conservatorship and Treasury Agreements—Conservatorship,” we have
been under the conservatorship of FHFA since September 2008. The conservatorship has had a significant
impact on the compensation received by our named executives in 2009, as well as the process by which
executive compensation for 2009 was determined. Regulatory requirements affecting our compensation process
include:
• Our directors serve on behalf of FHFA and exercise their authority subject to the direction of FHFA.
More information about the role of our directors is described above in “Directors, Executive Officers and
Corporate Governance—Corporate Governance—Conservatorship and Delegation of Authority to Board of
Directors.”
• FHFA, as our conservator, has directed that our Board consult with and obtain FHFA’s consent before
taking any actions involving hiring, compensation or termination benefits of any officer at the executive
vice president level and above and including, regardless of title, executives who hold positions with the
functions of the chief operating officer, chief financial officer, general counsel, chief business officer,
chief investment officer, treasurer, chief compliance officer, chief risk officer and chief/general/internal
auditor.
• Under the terms of the senior preferred stock purchase agreement with Treasury, we may not enter into
any new compensation arrangements with, or increase amounts or benefits payable under existing
compensation arrangements of, any named executives or executive officers without the consent of the
Director of FHFA, in consultation with the Secretary of the Treasury.
• Under the terms of the senior preferred stock purchase agreement, we may not sell or issue any equity
securities without the prior written consent of Treasury, other than as required by the terms of any binding
agreement in effect on the date of the senior preferred stock purchase agreement. This restricts our ability
to offer stock-based compensation.
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