Executive Compensation at Fannie Mae and Freddie Mac

Abstract

Corporate governance - and executive - compensation arrangements in particular - should be an important component of the agenda to reform the housing GSEs. The GSEs' safety-and-soundness regulator - who is essentially the debtholders' and taxpayers' representative - must be admitted to the GSEs' boardroom in a way that is atypical of an ordinary publicly held company. This intrusion into the board's oversight of executive-compensation plans is justified given the GSEs' public purposes and their large potential cost to taxpayers. Prudent public policy requires greater supervisory control over executive compensation at the GSEs, which would follow a precedent set in banking.

JEL Classification: G18, G21, G34, M52