Freddie Mac 2008 Annual Report Download - page 52

If we are unable to recruit, retain and engage employees with the necessary skills, our ability to conduct our business
activities effectively during the conservatorship may be adversely affected.
Our ability to recruit, retain and engage employees with the necessary skills to conduct our business may be adversely
affected by the conservatorship, the uncertainty regarding its duration and the potential for future legislative or regulatory
actions that could significantly affect our status as a GSE and our role in the secondary mortgage market. For example, our
Chief Executive Officer recently resigned, effective no later than March 13, 2009. In addition, new statutory and regulatory
requirements restricting executive compensation at institutions that have received federal financial assistance, even if not
expressly applicable to us, may be interpreted as limiting the compensation that we are able to provide to our executive
officers and other employees. Although we have established a retention program providing for cash awards that are designed
to help retain key employees, we are not currently in a position to offer employees financial incentives that are equity-based
and, as a result of this and other factors relating to the conservatorship that may affect our attractiveness as an employer, we
may be at a competitive disadvantage compared to other potential employers. Accordingly, we may not be able to retain or
replace executives or other employees with key skills and our ability to conduct our business effectively could be adversely
affected.
The price and trading liquidity of our common stock and our NYSE-listed issues of preferred stock may be adversely
affected if those securities are delisted from the NYSE.
If we do not satisfy the minimum share price, corporate governance and other requirements of the continued listing
standards of the NYSE, our common stock and NYSE-listed issues of preferred stock could be delisted from the NYSE. On
November 17, 2008, we received a notice from the NYSE that we had failed to satisfy the NYSE’s minimum share price
standards for continued listing of our common stock. During the consecutive 30 trading-day period ended November 17,
2008, the average closing price of our common stock on the NYSE was less than $1.00 per share, and it has remained below
$1.00 per share since that date. Under an NYSE rule change effective as of February 26, 2009, the minimum price listing
standard has been suspended until June 30, 2009. If we do not regain compliance during the suspension period, the six-
month compliance period that began on November 17, 2008 will recommence and we will have the remaining balance of
that period to meet the standard.
If we are not able to cure the price deficiency, our common stock could be delisted from the NYSE, and this would also
likely result in the delisting of our NYSE-listed preferred stock. The delisting of our common stock or NYSE-listed preferred
stock would require any trading in these securities to occur in the over-the-counter market and could adversely affect the
market prices and liquidity of the markets for these securities.
Material weaknesses and other deficiencies in internal control over financial reporting and disclosure controls could
result in errors, affect operating results and cause investors to lose confidence in our reported results.
We face continuing challenges because of deficiencies in our accounting infrastructure and controls and the operational
complexities of our business. As of December 31, 2008, we had four material weaknesses in internal control over financial
reporting, and have determined that our disclosure controls and procedures were not effective as of December 31, 2008, at a
reasonable level of assurance. These material weaknesses and other control deficiencies could result in errors, affect
operating results and cause investors to lose confidence in our reported results. For a description of our existing material
weaknesses, see “CONTROLS AND PROCEDURES — Internal Control Over Financial Reporting.”
There are a number of factors that may impede our efforts to establish and maintain effective internal control and a
sound accounting infrastructure, including: the nature of the conservatorship and our relationship with FHFA; the complexity
of our business activities and related GAAP requirements; significant turnover in our senior management and Board of
Directors; uncertainty regarding the operating effectiveness and sustainability of newly established controls; and the uncertain
impacts of recent housing and credit market volatility on the reliability of our models used to develop our accounting
estimates. We cannot be certain that our efforts to improve our internal control over financial reporting will ultimately be
successful.
Controls and procedures, no matter how well designed and operated, provide only reasonable assurance that material
errors in our financial statements will be prevented or detected on a timely basis. A failure to establish and maintain effective
internal control over financial reporting increases the risks of a material error in our reported financial results and delay in
our financial reporting timeline. Depending on the nature of a failure and any required remediation, ineffective controls could
have a material adverse effect on our business.
Delays in meeting our financial reporting obligations could affect our ability to maintain the listing of our securities on
the NYSE. Ineffective controls could also cause investors to lose confidence in our reported financial information, which
may have an adverse effect on the trading price of our securities.
49 Freddie Mac