Freddie Mac 2012 Annual Report Download - page 339

• FHFA has directed that its approval be obtained before taking action involving: (i) entering into new compensation
arrangements or increasing amounts or benefits payable under existing compensation arrangements for senior vice
presidents and above and other officers as FHFA may deem necessary to successfully execute its role as Conservator;
(ii) any establishment or modification by us of performance management processes for such officers, including the
establishment or modification of a conservatorship scorecard; and (iii) any assessment by us of our performance
against a conservatorship scorecard.
• FHFA retains the authority not only to approve both the terms and amount of any compensation prior to payment to
any of our executive officers, but also to modify any existing compensation arrangements.
Chief Executive Officer Compensation
Mr. Layton’s compensation consists solely of an annual base salary of $600,000, a level established by FHFA. He does
not participate in the Executive Compensation Program and therefore has no compensation subject to either corporate or
individual performance. Mr. Layton is, however, eligible to participate in all other employee benefit plans offered to Freddie
Mac’s other senior executives pursuant to the terms of those plans.
Elements of Total Direct Compensation (TDC)
Compensation under the Executive Compensation Program for the NEOs other than Mr. Layton consists solely of salary
with two components — Base Salary and Deferred Salary — which are described in the table below.
Element of
Compensation Description
Primary
Compensation Objective Key Features
Base Salary Earned and paid on a semi-
monthly basis
To provide a fixed level of
compensation to each NEO for
the responsibility level of his/
her position.
Cannot exceed $500,000 per
year, except for the CEO and
CFO, or other exceptions as
approved by FHFA.
Deferred Salary Fixed Deferred Salary is earned
on a semi-monthly basis. The
amount earned each quarter is
paid on the last business day of
the corresponding quarter of the
following year, referred to as the
Approved Payment Schedule.
To encourage executive
retention.
Equal to Target TDC less Base
Salary and At-Risk Deferred
Salary.
At-Risk Deferred Salary is
earned and paid in the same
manner as Fixed Deferred
Salary, but is subject to
reduction based on corporate
and individual performance.
To encourage achievement of
corporate and individual
performance goals.
Equal to 30% of Target TDC.
Half of At-Risk Deferred Salary
is subject to reduction based on
corporate performance, and half
is subject to reduction based on
individual performance.
The objectives against which
2012 corporate performance
was measured are described in
“At-Risk Deferred Salary Based
on Corporate Performance.”
See Other Executive Compensation Considerations — Effect of Termination of Employment for more information on the
effect of a termination of employment, including a discussion of the timing and payment of any unpaid portion of Deferred
Salary upon all types of termination events.
Compensation Applicable to the Prior Executive Compensation Program
In addition to the compensation earned during 2012 under the Executive Compensation Program, each of the current
NEOs other than Mr. Layton was eligible to receive the second installment of the 2011 Target Opportunity, or TO, for 2012
under the terms of the executive compensation program previously in effect. The second installment of the 2011 TO is the
final remaining element of the prior executive compensation program and was the primary reason for the year-over-year
increase in actual total compensation for certain of our NEOs, as reported in the Summary Compensation Table. The TO was
a performance-based award designed to encourage the NEOs to achieve specific corporate performance measures.
334 Freddie Mac