Fannie Mae 2012 Annual Report Download - page 204

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COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors of Fannie Mae has reviewed and discussed the Compensation
Discussion and Analysis included in this Form 10-K with management. Based on such review and discussions, the
Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be
included in this Form 10-K.
Compensation Committee:
Brenda J. Gaines, Chair
Egbert L. J. Perry
Jonathan Plutzik
David H. Sidwell
COMPENSATION RISK ASSESSMENT
We conducted a risk assessment of our 2012 employee compensation policies and practices. In conducting this risk
assessment, we reviewed, among other things, our compensation plans, pay profiles, performance goals and performance
appraisal management process. We also assessed whether policies, procedures or other mitigating controls existed that would
reduce the opportunity for excessive or inappropriate risk-taking within our compensation policies and practices.
Based on the results of our risk assessment, we concluded that our 2012 employee compensation policies and practices do not
create risks that are reasonably likely to have a material adverse effect on the company. Several factors contributed to our
conclusion, including:
• Payment of incentive compensation is based on the achievement of performance metrics that we have concluded do not
encourage unnecessary or excessive risk-taking. Our mix of multiple performance metrics without undue emphasis on
any one metric provides an appropriate balance of incentives.
• Our extensive performance appraisal process is designed to ensure achievement of goals without encouraging
executives or employees to take excessive risks.
• FHFA, with input from the Compensation Committee and Board of Directors, has the discretion to determine or
approve if scorecard goals have been achieved, the funding level for deferred salary and long-term incentive awards,
and the amount of incentive compensation paid to individual executive officers.
• Deferred salary and incentive compensation for our executive officers are subject to the terms of a clawback policy.
• We have no pre-arranged severance arrangements for our executive officers that would guarantee additional
compensation when an executive leaves.
Although we determined that our 2012 employee compensation policies and practices do not create risks that are reasonably
likely to have a material adverse effect on the company, we believe that we face an elevated risk of executive officer attrition
due in part to the level of our senior executives’ compensation as compared to 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 executive compensation program for each of our current named executives 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. Other factors that increase our risk of executive officer attrition include our conservatorship status, the
uncertainty of our future, and the heightened scrutiny of our actions by Congress and our regulators. See “Risk Factors” for a
discussion of the risks associated with executive and employee retention.
COMPENSATION TABLES
Differences in 2012, 2011 and 2010 Compensation
As described above in “Compensation Discussion and Analysis,” FHFA instituted new compensation arrangements for our
named executives in 2012. Under these new arrangements, FHFA:
• reduced total target direct compensation for each named executive by 10% from 2011 levels, except for one named
executive who received a pay increase in connection with a promotion;