Fannie Mae 2012 Annual Report Download - page 183

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As a result of reductions in overall pay levels, total target direct compensation for 2012 under the 2012 executive
compensation program for each current named executive was more than 30% below the market median for comparable firms
and, in the case of our Chief Executive Officer, was more than 70% below the market median. See “Other Executive
Compensation Considerations—Comparator Group and Role of Benchmark Data” for more information.
While reducing pay levels to conserve taxpayer resources is an important objective of the 2012 executive compensation
program, we and FHFA believe this objective must be balanced with the objective to attract and retain able and experienced
executives to prudently manage our $3.1 trillion book of business and be an effective steward of taxpayer resources. Under
the leadership of our experienced executives, the company achieved $17.2 billion in net income for 2012, which is the
company’s first annual profit since 2006 and the highest annual net income in the company’s history. The company also
substantially achieved the corporate goals for 2012 set by the conservator.
The 2012 executive compensation program is designed so that executive pay is reduced if the conservator’s goals are not
fully achieved. In March 2012, FHFA established a set of 2012 corporate performance objectives and related targets, referred
to as the 2012 conservatorship scorecard. In early 2013, FHFA evaluated the company’s performance against the 2012
conservatorship scorecard and determined that the corporate-performance based portion of 2012 at-risk deferred salary would
be paid at 95% of target for each named executive. See “Determination of 2012 Compensation—Assessment of Corporate
Performance on 2012 Conservatorship Scorecard” for more information on the company’s performance against the 2012
conservatorship scorecard. The remaining half of the named executives’ 2012 at-risk deferred salary was subject to reduction
based on individual performance, as determined by the Board of Directors in consultation with the Compensation Committee
and subject to FHFA’s approval. See “Determination of 2012 Compensation—Assessment of 2012 Individual Performance”
for a description of the individual performance of the named executives.
Although long-term incentive awards were eliminated as a component of the 2012 executive compensation program, in
February 2013 the named executives were entitled to receive the second and final installment of their 2011 long-term
incentive awards that were granted under our prior executive compensation program. This installment is required to be
reported as 2012 compensation for purposes of the “Summary Compensation Table for 2012, 2011 and 2010” because it was
determined based on performance for both 2011 and 2012. As a result of this final installment payment of the 2011 long-term
incentive award, the amount of the named executives’ total compensation as reported in the Summary Compensation Table is
generally higher for 2012 than for 2011, despite the 10% reduction in total target direct compensation for most of our named
executives under the 2012 executive compensation program. See “Compensation Tables—Differences in 2012, 2011 and
2010 Compensation” for a description of the differences in the named executives’ compensation in 2012, 2011 and 2010 as
reflected in the Summary Compensation Table. Compensation reported for 2013 will not include a long-term incentive award
component. See “Determination of 2012 Compensation—Assessment of Corporate Performance on 2011 Long-Term
Incentive Award Goals (Second Installment)” for a description of the company’s performance against the 2012 goals relating
to the second installment of the 2011 long-term incentive award.
2012 Executive Compensation Program
Program Objectives
FHFA has advised us that our 2012 executive compensation program was designed to fulfill, and to balance, three primary
objectives:
• reduce pay levels to conserve taxpayer resources and eliminate bonuses;
• attract and retain executive talent; and
• reduce pay if the conservator’s goals are not achieved.
Reduce Pay Levels to Conserve Taxpayer Resources and Eliminate Bonuses
A primary objective of the 2012 executive compensation program was to reduce pay levels given our conservatorship status
and reliance on taxpayer support. A related objective of the new compensation program was to eliminate bonuses. At FHFA’s
direction, we reduced total target direct compensation for our named executives by 10% in 2012 (except for one named
executive who received a pay increase in connection with a promotion) and we eliminated long-term incentive awards from
our executive compensation structure. In addition, beginning in 2013, total target direct compensation for our Chief
Executive Officer position has been further reduced. Total target 2012 direct compensation for Mr. Williams, our former
Chief Executive Officer, was $5,400,000. Total 2013 direct compensation for Mr. Mayopoulos, our current Chief Executive
Officer, is $600,000.
As a result of these reductions and prior reductions in compensation, total target direct compensation for our named
executives is significantly below the market median for comparable firms. As described in “Other Executive Compensation
Considerations—Comparator Group and Role of Benchmark Data,” total target direct compensation for 2012 under the 2012