Freddie Mac 2012 Annual Report Download - page 353

and employees (including our NEOs) are prohibited from holding our securities in a margin account or pledging our
securities as collateral for a loan.
Section 162(m) Limits on the Tax Deductibility of Our Compensation Expenses
Section 162(m) of the Internal Revenue Code imposes a $1 million limit on the amount that a company may annually
deduct for compensation to its CEO and certain other NEOs, unless, among other things, the compensation is “performance-
based,” as defined in section 162(m). Given the conservatorship and the desire to maintain flexibility to promote our
corporate goals, the at-risk element of Deferred Salary and the Target Opportunity applicable to performance during 2012 are
not structured to qualify as performance-based compensation under section 162(m).
Compensation Committee Interlocks and Insider Participation
None of the members of the Board of Directors who served on the Compensation Committee during fiscal year 2012
were our officers or employees or had any relationship with us that would be required to be disclosed by us under
Item 407(e)(4) of Regulation S-K.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with
management and, based on such review and discussion, has recommended to the Board that the Compensation Discussion
and Analysis be included in this Annual Report on Form 10-K.
This report is respectfully submitted by the members of the Compensation Committee of the Board.
Anthony A. Williams, Chairman
Linda B. Bammann
Christopher S. Lynch
Compensation and Risk
With respect to 2012, our management conducted an assessment of our compensation plans and programs that were in
place during the year and that were applicable to employees at all levels, including the Executive Compensation Program in
which our executives participate. The purpose of the assessment was to determine whether the design and operation of our
compensation plans create incentives for employees to take inappropriate risks that are reasonably likely to have a material
adverse effect on us. The assessment was conducted by members of our enterprise risk management and human resources
teams, as well as by Aon Hewitt, management’s compensation consultant.
The review included an evaluation of:
• the mix of fixed and variable compensation;
• eligibility for participation in compensation programs;
• the process by which target TDC levels are established;
• the process for establishing performance objectives and for evaluating performance against those objectives
(including maximum individual payout levels); and
• the involvement of the Compensation Committee and FHFA in the compensation process.
An evaluation was also made of the linkage between corporate and divisional performance objectives.
The assessment was discussed with the Compensation Committee in December 2012. Management’s conclusion, with
which the Compensation Committee concurred, is that our compensation policies and practices in place during 2012 do not
create risks that are reasonably likely to have a material adverse effect on us.
Compensation Tables
The following tables set forth compensation information for our NEOs: our CEO, our CFO, our former CEO and our
three other most highly compensated executive officers who were serving as executive officers as of December 31, 2012.
348 Freddie Mac