Freddie Mac 2011 Annual Report Download - page 323

• Update our policies and procedures to document control processes.
• Provide additional training to IT individuals that execute or manage security controls.
• Explore options to enter into various strategic arrangements with outside firms to provide operational capability
and staffing for these functions, if needed.
In view of our mitigating actions related to these material weaknesses, we believe that our consolidated financial
statements for the year ended December 31, 2011 have been prepared in conformity with GAAP.
Changes in Internal Control Over Financial Reporting During the Quarter Ended December 31, 2011
We evaluated the changes in our internal control over financial reporting that occurred during the quarter ended
December 31, 2011 and concluded that the following matters have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
Raymond G. Romano, Executive Vice President — Chief Credit Officer and John R. Dye, Senior Vice President —
Interim General Counsel & Corporate Secretary, left the company during the fourth quarter of 2011. On October 26, 2011,
FHFA announced that Charles E. Haldeman Jr., Chief Executive Officer, has expressed his desire to step down in 2012,
and that the Board and FHFA will be developing a succession plan.
In addition, a number of senior officers left the company in earlier periods. We maintain succession plans for our
senior management positions, which has enabled us to fill some of our vacant senior management positions quickly.
However, we may not be able to continue to do so in the future. We have eliminated other vacant senior management
positions through reorganizations. In addition, we have experienced elevated levels of voluntary turnover in the fourth
quarter of 2011 and earlier periods, and expect this trend to continue as the public debate regarding the future role of the
GSEs continues. We continue to have concerns about staffing inadequacies, management depth, and employee
engagement. Disruptive levels of turnover at both the executive and employee levels could lead to breakdowns in any of
our operations, affect our execution capabilities, cause delays in the implementation of critical technology and other
projects, and erode our business, modeling, internal audit, risk management, information security, financial reporting,
legal, compliance, and other capabilities.
Based on our assessment as of December 31, 2011, we identified a material weakness related to our inability to
effectively manage information technology changes and maintain adequate controls over information security monitoring,
resulting from increased levels of employee turnover. For additional information related to this material weakness, see
“Management’s Report on Internal Control Over Financial Reporting.”
FHFA also announced on October 26, 2011, that two Board members, John A. Koskinen (Chairman) and Robert R.
Glauber (Chairman, Governance and Nominating Committee), have reached the company’s mandatory retirement age and
would be stepping down from the Board. This occurred at the end of their then-current terms in March 2012. In order to
promote a smooth transition, per FHFA’s announcement, Christopher Lynch, previously the Chairman of the Audit
Committee, assumed the position of Non-Executive Chairman of the Board effective at the December 2011 Board
meeting. A third Board member, Laurence E. Hirsch, notified the company on October 18, 2011 that he would not seek
re-election to the Board when his term expires. Mr. Hirsch’s term expired in March 2012. In addition, on March 7, 2012,
Clayton Rose (Chairman of the Audit Committee) notified the company that he will resign from the Board of Directors
effective as of 6:00 pm Eastern Standard Time on March 9, 2012.
ITEM 9B. OTHER INFORMATION
Election of Directors
Upon the appointment of FHFA as our Conservator on September 6, 2008, the Conservator immediately succeeded to
all rights, titles, powers and privileges of Freddie Mac, and of any stockholder, officer or director thereof, with respect to
the company and its assets, including, without limitation, the right of holders of our common stock to vote with respect to
the election of directors and any other matter for which stockholder approval is required or deemed advisable.
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