Fannie Mae 2009 Annual Report Download - page 219

governance framework operational, developing a plan to lower our operational costs and achieving over
$10 million in 2010 run rate savings from transformation work in 2009.
•Housing and Economic Recovery Act-Compliant Sourcing. The sixth objective was to design an
approach to sourcing that is compliant with the Housing and Economic Recovery Act’s requirement
that we implement standards and procedures to ensure the inclusion and utilization of minorities and
women, and minority- and women-owned businesses, in all of our business and activities. We met this
objective by developing a sourcing framework that is designed to be compliant with the Housing and
Economic Recovery Act’s requirement and by finalizing a policy on compliance with the Act.
•Performance-Based Culture. The seventh objective was to move toward a performance-based culture
in order to accomplish our goals and position the company for long-term success. We successfully
completed all 2009 milestones associated with this objective, which included collecting employee input,
selecting areas of focus, implementing action plans and measuring our performance against those plans.
We also attained our goals of retaining high-performing employees at a higher rate than lower-
performing employees and maintaining a diverse workforce at all levels.
The Compensation Committee determined that we achieved this performance goal and five of the seven
related objectives. The Committee determined that our failure to meet two of the related objectives was
based on sound business rationale. As noted above, we did not meet our headcount target and did not meet
all of our 2009 housing goals and subgoals. The Committee determined that exceeding the headcount target
was necessary to support our responsibilities under HAMP and other government housing initiatives and to
support our credit-related initiatives. The Committee also agreed with management’s determination that the
missed housing goal and subgoal were infeasible given the current market and economic conditions.
In evaluating our performance with respect to this goal, the Committee also considered our financial
performance and the amount of our draws under the senior preferred stock purchase agreement. The
Committee noted that significant losses in 2009 had been anticipated at the time the corporate goals were
established. These anticipated losses stemmed primarily from business originated prior to 2009 and were the
principal reason for our draws under the senior preferred stock purchase agreement. Moreover, the
Committee noted that the housing and financial markets in 2009 proved weaker than had been anticipated
when the goals were initially established, which exacerbated our losses and the amount of our draws under
the senior preferred stock purchase agreement. The Committee recognized the numerous activities and
programs we undertook in 2009 to stabilize the housing market and provide market liquidity. The
Committee also recognized our efforts to enter into profitable business transactions in 2009 and the variety
of initiatives we undertook with the goal of reducing our future credit losses below what they otherwise
would have been.
•Goal 3: Our third 2009 performance goal was to measure, manage and reduce enterprise risk more
effectively. Our performance against this goal was to be measured by our achievement of the following
two objectives:
•Risk and Controls. The first objective was to achieve and maintain a strong control and risk
environment. We met all 2009 milestones associated with this objective, which consisted of
implementing an updated enterprise risk framework, remediating the material weakness in our internal
control over financial reporting relating to model inputs for assessment of other-than-temporary
impairment for private-label mortgage-related securities, resolving certain significant deficiencies,
designing operating metrics, and creating and implementing a new operational risk framework.
Although we met all 2009 milestones relating to our risk and controls objective, we experienced a
number of operational incidents in 2009 related to inadequately designed or failed execution of internal
processes or systems. For example, in July and August 2009, we publicly identified errors in certain
information reported about our MBS trusts and published corrected data relating to these errors.
•Credit. The second objective was to develop and implement a new Board reporting framework to
measure the performance of our acquisitions for the second half of 2008 and 2009 with regard to actual
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