Fannie Mae 2012 Annual Report Download - page 178

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• alterations or changes to the terms of the master agreement between us and one of our top five single-family sellers
or top five single-family servicers that are not otherwise mandated by FHFA and that will materially alter the
business relationship between the parties;
• the termination of a contract between us and one of our top five single-family sellers or top five single-family
servicers, other than an expiration pursuant to its terms;
• actions that in the reasonable business judgment of management, at the time that the action is to be taken, are likely
to cause significant reputational risk to us or result in substantial negative publicity;
• creation of any subsidiary or affiliate, or entering into a substantial transaction with a subsidiary or affiliate, except
for the creation of, or a transaction with, a subsidiary or affiliate undertaken in the ordinary course of business;
• setting or increasing the compensation or benefits payable to members of the Board of Directors;
• entering into new compensation arrangements or increasing amounts or benefits payable under existing
compensation arrangements of executives at the senior vice president level and above, and other executives as FHFA
may deem necessary to successfully execute its role as conservator;
• any establishment or modification by us of performance management processes for executives at the senior vice
president level and above and any executives designated as “officers” pursuant to Section 16 of the Exchange Act,
including the establishment or modification of a conservator scorecard;
• any assessment by us of our performance against a conservator scorecard;
• establishing the annual operating budget; and
• matters that require the approval of or consultation with Treasury under the senior preferred stock purchase
agreement. See “Note 14, Equity (Deficit)” for a list of matters that require the approval of Treasury under the senior
preferred stock purchase agreement.
The new instructions also state that, in regards to the matters described above, the Board should review and approve these
matters before they are submitted to the conservator for approval. For more information on the conservatorship, refer to
“Business—Conservatorship and Treasury Agreements—Conservatorship.”
Composition of Board of Directors
In November 2008, FHFA directed that our Board should have a minimum of nine and not more than thirteen directors. There
is a non-executive Chairman of the Board, and our Chief Executive Officer is the only corporate officer serving as a director.
Our initial directors were appointed by the conservator and subsequent vacancies have been and may continue to be filled by
the Board, subject to review by the conservator. Each director serves on the Board until the earlier of (1) resignation or
removal by the conservator or (2) the election of a successor director at an annual meeting of shareholders.
Fannie Mae’s bylaws provide that each director holds office for the term for which he or she was elected or appointed and
until his or her successor is chosen and qualified or until he or she dies, resigns, retires or is removed from office in
accordance with applicable law or regulation, whichever occurs first. Under the Charter Act, each director is elected or
appointed for a term ending on the date of our next annual shareholders’ meeting. As noted above, however, the conservator
appointed the initial directors to our Board, delegated to the Board the authority to appoint directors to subsequent vacancies
subject to conservator review, and defined the term of service of directors during conservatorship.
Under the Charter Act, our Board shall at all times have as members at least one person from each of the homebuilding,
mortgage lending and real estate industries, and at least one person from an organization that has represented consumer or
community interests for not less than two years or one person who has demonstrated a career commitment to the provision of
housing for low-income households. It is the policy of the Board that a substantial majority of Fannie Mae’s directors will be
independent, in accordance with the standards adopted by the Board. In addition, our Corporate Governance guidelines
provide that the Board, as a group, must be knowledgeable in business, finance, capital markets, accounting, risk
management, public policy, mortgage lending, real estate, low-income housing, homebuilding, regulation of financial
institutions, and any other areas that may be relevant to the safe and sound operation of Fannie Mae. In addition to expertise
in the areas noted above, our Corporate Governance Guidelines specify that the Nominating & Corporate Governance
Committee will seek out Board members who possess the highest personal values, judgment, and integrity, and who have an
understanding of the regulatory and policy environment in which Fannie Mae does business. The Committee also considers
whether a prospective candidate for the Board has the ability to attend meetings and fully participate in the activities of the
Board.
The Nominating & Corporate Governance Committee also considers diversity when evaluating the composition of the Board.
Our Corporate Governance Guidelines specify that the Nominating & Corporate Governance Committee is committed to