Freddie Mac 2011 Annual Report Download - page 367

profits. In evaluating the impact of Mr. Rose’s annuity from JPMorgan on his independence, the non-employee members
of the Board considered the structure of the annuity, the amount of the annuity as a percentage of Mr. Rose’s annual
adjusted gross income, the retiree medical benefits and Freddie Mac’s business relationship with JPMorgan. The non-
employee members of the Board also were informed that Mr. Rose had agreed to recuse himself from discussing or acting
upon any matter to be considered by our Board that could threaten the viability of JPMorgan. The non-employee members
of the Board concluded that Mr. Rose’s JPMorgan annuity and retiree medical benefits do not constitute a material
relationship between him and Freddie Mac that would impair his independence as a Freddie Mac Director.
Board Diversity
The Board identifies Director nominees or candidates when the Conservator has requested that the Board identify
candidates for the Conservator to consider for election by written consent and when there is a vacancy on the Board, at
which time the Board may exercise the authority delegated to it by the Conservator to fill such vacancies, subject to
review by the Conservator.
Our charter provides that our Board must at all times have at least one person from the homebuilding, mortgage
lending, and real estate industries, and at least one person from an organization representing community or consumer
interests or one person who has demonstrated a career commitment to the provision of housing for low-income
households. In addition, the examination guidance for corporate governance issued by FHFA provides that in identifying
individuals for nomination for election to the Board, the Board should consider the knowledge of such individuals, as a
group, in the areas of business, finance, 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 our safe
and sound operation.
In addition, the Board has adopted a formal policy (articulated in our Guidelines) with regard to the consideration of
diversity in identifying director nominees and candidates. As articulated in the policy, the Board seeks to have a diversity
of talent, perspectives, experience and cultures among its members, including minorities, women and individuals with
disabilities, and considers such diversity in the candidate solicitation and nomination processes. The policy also states that
the Board seeks to have a diversity of talent on the Board and that candidates are selected, in part, for their experience
and expertise. The policy also explains that when identifying director nominees, the Nominating and Governance
Committee considers, among other factors, our needs, the talents and skills then available on the Board, and, with respect
to incumbent directors, their continued involvement in business and professional activities relevant to us, the skills and
experience that should be represented on the Board, the availability of other individuals with desirable skills to join the
Board, and the desire to maintain a diverse Board.
FHFA also has adopted a final rule regarding minority and women inclusion that became effective on January 28,
2011. The final rule implements section 1116 of HERA and requires us to, among other things, promote diversity and the
inclusion of women, minorities, and individuals with disabilities in all activities, including in the election of directors, as
required by these regulations.
Board Leadership Structure and Role in Risk Oversight
The positions of Chief Executive Officer and Non-Executive Chairman of the Board are held by different individuals.
This leadership structure was established by the Conservator when it appointed separate individuals to hold those two
positions in September 2008. The examination guidance for corporate governance issued by FHFA provides that once
separated, the functions of the Chief Executive Officer and the Non-Executive Chairman of the Board should remain
separated until such time as the Director of FHFA determines otherwise.
The responsibility for risk oversight is shared by two committees of the Board, the Business and Risk Committee and
the Audit Committee. The Business and Risk Committee is responsible for assisting the Board in the oversight, on an
enterprise-wide basis, of our risk management framework, including management of credit risk (including counterparty
risk), market risk (including interest rate and liquidity risk), model risk, operational risk, strategic risk, and reputation risk.
The risk oversight responsibilities of the Audit Committee include reviewing: (a) management’s guidelines and policies
governing the processes for assessing and managing our risks; and (b) our major financial risk exposures (including but
not limited to market, credit, and operational risks) and the steps management has taken to monitor and control such
exposures.
The Business and Risk Committee and the Audit Committee generally meet in joint session at least quarterly to carry
out their respective risk oversight responsibilities on behalf of the Board. The membership of those two committees
collectively consists of all members of the Board except Messrs. Koskinen and Haldeman, who generally also have
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