The Growing Complexity of Executive Compensation

While admittedly lengthier than most filings, Freddie Mac’s 10-K filed with the SEC records the massive compliance toll executive compensation takes in large organizations. Its conservatorship by the FHFA complicates matters greatly, but Freddie Mac nonetheless took 27 full pages to outline its 2011 compensation (starting at page 330) of its most recent 10-K explaining its various executive compensation arrangements.

The perks: cash salary; deferred salary; excess benefit plans; nonqualified deferred compensation; qualified plan participation; severance arrangements; performance-target bonuses; relocation expenses; and physical exams.

The downsides: the FHFA’s requirement that compensation is subject to “recapture” in later years; worthlessness of common stock for equity compensation purposes; inability to grant equity awards; public criticism (to put it mildly); and government-based restrictions on compensation.

While the limitations are apparently making it “difficult to retain and engage critical employees and attract people with the skills and experience” needed, the FHFA has imposed stricter limitations for 2012. Still, Freddie Mac’s CEO, who is resigning this year, is targeted to receive $5,400,000 if he decides to stick around (and meets performance targets).


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