Fannie Mae 2010 Annual Report Download - page 223

been terminated for cause and that the officer’s actions materially harmed the business or reputation of the
company, the officer will forfeit or must repay, as the case may be, deferred pay, long-term incentive
awards and any other incentive payments received by the officer to the extent the Board of Directors
deems appropriate under the circumstances. The Board of Directors may require the forfeiture or
repayment of all deferred pay, long-term incentive awards and any other incentive payments so that the
officer is in the same economic position as if he or she had been terminated for cause as of the date of
termination of his or her employment.
•Effect of Willful Misconduct. If an executive officer’s employment: (a) is terminated for cause (or the
Board of Directors later determines that cause for termination existed) due to either (i) willful misconduct
by the officer in connection with his or her performance of his or her duties for the company or (ii) the
officer has been convicted of, or pleaded nolo contendere with respect to, a felony consisting of an act of
willful misconduct in the performance of his or her duties for the company and (b) in the determination
of the Board of Directors, this has materially harmed the business or reputation of the company, then, to
the extent the Board of Directors deems it appropriate under the circumstances, in addition to the
forfeiture or repayment of deferred pay, long-term incentive awards and any other incentive payments
described above, the executive officer will also forfeit or must repay, as the case may be, deferred pay
and annual incentives or long-term awards paid to him or her in the two-year period prior to the date of
termination of his or her employment or payable to him or her in the future. Misconduct is not considered
willful unless it is done or omitted to be done by the officer in bad faith or without reasonable belief that
his or her action or omission was in the best interest of the company.
Certain of the bonus or other incentive-based or equity-based compensation for our Chief Executive Officer
and Chief Financial Officer also may be subject to a requirement that they be reimbursed to the company in
the event that Section 304 of the Sarbanes-Oxley Act of 2002 applies to that compensation.
Our complete compensation repayment provisions are attached as Exhibit 99.1 to our Form 8-K filed on
December 24, 2009.
The Compensation Committee plans to review our compensation recoupment policy and revise it as necessary
to comply with the Dodd-Frank Act once rules implementing the Act’s clawback requirements have been
finalized by the SEC.
Stock Ownership and Hedging Policies
In January 2009, our Board eliminated our stock ownership requirements because of the difficulty of meeting the
requirements at current market prices and because we had ceased paying our executives stock-based compensation.
All employees, including our named executives, are prohibited from transacting in derivative securities related to
our securities, including options, puts and calls, other than pursuant to our stock-based benefit plans.
Tax Deductibility of our Compensation Expenses
Subject to certain exceptions, section 162(m) of the Internal Revenue Code imposes a $1 million limit on the
amount that a company may annually deduct for compensation to its CEO and certain other named executives,
unless, among other things, the compensation is “performance-based,” as defined in section 162(m), and provided
under a plan that has been approved by the shareholders. We have not adopted a policy requiring all compensation
to be deductible under section 162(m). The impact of a potential lost deduction because of Section 162(m) is
substantially mitigated by our current and projected tax losses, and this approach allows us flexibility in light of the
conservatorship. Awards under the 2008 Retention Program, 2009 deferred pay and long-term incentive awards for
2009 performance received by the named executives in 2010 do not qualify as performance-based compensation
under section 162(m). In addition, 2010 deferred pay and long-term incentive awards for 2010 performance are not
structured to qualify as performance-based compensation under section 162(m).
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