Fannie Mae: No stock options for top execs
March 14, 2005
Mortgage giant reduces bennies for its officials
Fannie Mae won't offer stock options to senior executives, and overall compensation for certain executive officers was reduced by about 45 percent compared to 2003, the mortgage giant revealed in a filing with the Securities and Exchange Commission Friday.
Fannie Mae's board of directors changed the elements of the company's long-term incentive compensation Thursday, according to Joe Pickett, chair of the compensation committee.
Instead of stock options, which they have received in the past, Fannie executives will be eligible for restricted stock awards that will vest over a three-year period, the company said in the SEC filing.
"The effect of the compensation decisions…including the decision not to pay bonuses and substantially reduced long-term incentive awards for the 2004 performance year, is that overall compensation for the group of…executive officers was reduced on average by approximately 45 percent compared to 2003," said Pickett.
The Securities and Exchange Commission ordered Fannie Mae in December to restate earnings back to 2001, a correction estimated at $9 billion. Last month, the OFHEO informed Fannie Mae's board of additional accounting problems.
The anticipated restatement in earnings could climb to nearly $12 billion if the company has to recognize the full additional estimated losses, The Wall Street Journal reported.
In December 2004, Fannie Mae replaced Franklin Raines, its chairman and CEO, who announced he was taking early retirement, and Fannie Mae's chief financial officer, Timothy Howard, resigned Dec. 21.
The two left in the wake of the SEC directive to make accounting corrections that could knock out some $9 billion of Fannie Mae's past profit. Fannie Mae's financial accounting troubles have drawn shareholder lawsuits and investigations by the Justice Department and the Securities and Exchange Commission.
House Financial Services Committee Chairman Michael G. Oxley (R-Ohio) has pledged to work toward a legislative reform package for Fannie Mae this Congress. Oxley has said that it is necessary to build a regulator for the GSE with the power, independence and funding to confront and handle such matters.
Copyright 2005 Inman News