Freddie Mac 2012 Annual Report Download - page 366

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
Policy Governing Related Person Transactions
The Board has adopted a written policy governing the approval of related person transactions. This policy sets forth
procedures for the review and approval or ratification of transactions involving related persons, which consist of any person
who is, or was at any time since the beginning of our last completed fiscal year, a director, a director nominee, an executive
officer, or an immediate family member of any of the foregoing persons.
Under authority delegated by the Board, our General Counsel and the Nominating and Governance Committee (or its
Chair under certain circumstances), each, an Authorized Approver, are responsible for applying the Related Person
Transactions Policy. Transactions covered by the Related Person Transactions Policy consist of any transaction, arrangement
or relationship or series of similar transactions, arrangements or relationships, in which: (a) the aggregate amount involved
exceeded or is expected to exceed $120,000; (b) we were or are expected to be a participant; and (c) any related person had
or will have a direct or indirect material interest. The Related Person Transactions Policy includes a list of categories of
transactions identified by the Board as having no significant potential for an actual conflict of interest or the appearance of a
conflict or improper benefit to a related person, and thus not considered potential related person transactions subject to
review.
Our Legal Division assesses whether any proposed transaction involving a related person is covered by the Related
Person Transactions Policy. If so, the transaction is reviewed by the appropriate Authorized Approver. In consultation with
the Chair of the Nominating and Governance Committee, the General Counsel may refer any proposed transaction to the
Nominating and Governance Committee for review and approval.
If possible, approval of a related person transaction is obtained prior to the effectiveness or consummation of the
transaction. If advance approval of a related person transaction by the appropriate Authorized Approver is not feasible or
otherwise not obtained, then the transaction is considered promptly by the appropriate Authorized Approver to determine
whether ratification is warranted.
In determining whether to approve or ratify a related person transaction covered by the Related Person Transactions
Policy, the appropriate Authorized Approver reviews and considers all relevant information which may include: (a) the
nature of the related person’s interest in the transaction; (b) the approximate total dollar value of, and extent of the related
person’s interest in, the transaction; (c) whether the transaction was or would be undertaken in the ordinary course of our
business; (d) whether the transaction is proposed to be, or was, entered into on terms no less favorable to us than terms that
could have been reached with an unrelated third party; and (e) the purpose, and potential benefits to us, of the transaction.
Corporate Governance Guidelines
In September 2012, the Board adopted our amended Corporate Governance Guidelines, or our Guidelines, which are
available on our website at www.freddiemac.com/governance/pdf/gov_guidelines.pdf.
Director Independence
The non-employee members of the Board evaluated the independence, as defined in both Sections 4 and 5 of our
Guidelines and in Section 303A.02 of the NYSE Listed Company Manual, of (i) each of the non-employee members of our
Board currently serving (including Mr. Kohlhagen, our new director), each of whom (other than Mr. Kohlhagen) also served
on our Board in 2012, and (ii) Messrs. Robert R. Glauber, Laurence E. Hirsch, John A. Koskinen, and Clayton S. Rose, each
of whom served on our Board until March 2012. In connection with these evaluations, the non-employee members of the
Board determined that (i) all current members of our Board (other than Mr. Layton, our CEO) are independent and
(ii) Messrs. Glauber, Hirsch, Koskinen, and Rose were independent during their service in 2012. Mr. Layton is not
considered an independent director because he is our CEO. Mr. Haldeman was not an independent director with respect to his
service in 2012 because he served as our CEO until May 2012.
The non-employee members of the Board also concluded that all current members of the Audit Committee, the
Compensation Committee, and the Nominating and Governance Committee are independent within the meaning of both
Sections 4 and 5 of our Guidelines and Section 303A.02 of the NYSE Listed Company Manual. The non-employee members
of the Board also determined that all current members of the Audit Committee are independent within the meaning of
Rule 10A-3 promulgated under the Exchange Act, and Section 303A.06 of the NYSE Listed Company Manual.
361 Freddie Mac