Pay Packages for CEOs
Likely to Spur Scrutiny
By KARA SCANNELL and PHRED DVORAK
September 9, 2008; Page A21
WASHINGTON -- The
multimillion-dollar pay packages that the ousted chief executives of
Fannie Mae and Freddie Mac are due to receive could stoke a
fresh round of election-year debate over executive compensation.
Freddie Mac's departing
chief, Richard Syron, could walk away with an exit package totaling as
much as $14.9 million, said David Schmidt, a senior consultant at James
F. Reda & Associates LLC, a compensation consulting concern in New York.
That includes a possible payment of $8.8 million to compensate for
forfeiting recent equity grants.
A Freddie spokesman quoted
Mr. Syron as saying he doesn't "anticipate receiving nearly that much."
A person close to Mr. Syron said he is unlikely to take the $8.8
The exit package for
Fannie Mae's Daniel Mudd, including stock he already owns, could total
$9.2 million, Mr. Schmidt estimates. Mr. Mudd is discussing matters with
the government, said Robert Barnett, Mr. Mudd's counsel. A Fannie Mae
spokesman declined to comment.
New York Sen. Charles
Schumer said he is looking into what might be done about the two CEOs'
exit packages. The Treasury Department and the Federal Housing Finance
Agency, which regulates Fannie and Freddie, haven't discussed the
matter. A representative for the agency said: "We are working through
the compensation issues and have nothing to say at this time."
financial-industry executives have lost their jobs amid the
credit-market turmoil. The size of the exit packages for departed
executives such as Merrill Lynch & Co.'s Stan O'Neal and Citigroup
Inc.'s Charles Prince also have drawn criticism.
Reducing the size of exit
packages for poorly performing executives is tricky, said Pearl Meyer,
senior managing director at New York compensation consultant Steven Hall
& Partners. Employment agreements typically lock in exit-pay terms
unless the executives commit crimes that hurt the company, she said.
Still, companies are
increasingly tying pay to performance, which could reduce the size of
payouts. Much of Mr. Mudd's severance package consists of a bonus and
performance-based share grant, which he may not receive, as well as
accelerated stock awards whose value has been torpedoed by the fall in
Fannie's share price, said Mark Reilly, a partner at Chicago-based
3C-Compensation Consulting Consortium.
If Fannie's board decides
to slash the bonus portion of Mr. Mudd's exit payout, the executive
could get between $5 million and $6 million, including an estimated $3.2
million in pension and a $1.98 million cash severance payment, said Mr.
Reilly. Similarly, it is unclear how Freddie will handle the bonus
portion of Mr. Syron's payout, which Mr. Schmidt estimates at $3.9
million. Messrs. Schmidt and Reilly noted that the two CEOs will leave
with much less money than recent payouts to Messrs. Prince or O'Neal,
both of whom left amid huge losses at their companies.
Barack Obama and John McCain have both been critical of high executive
pay during the credit crunch. Monday, Sen. McCain told a rally in Lee's
Summit, Mo., that "we can't allow" the Fannie and Freddie restructuring
"to turn into a bailout of Wall Street speculators and irresponsible
Last year Sen. Obama
sponsored a bill that would give shareholders an advisory vote on
executive compensation, dubbed "say on pay," but it didn't go anywhere.
Write to Kara
firstname.lastname@example.org and Phred Dvorak at