WASHINGTON - Freddie Mac's 13-member board raised the pay this year for its 11 outside directors by 20 percent to $60,000, said the government-chartered company, which has tried since 2003 to recover from a $5 billion accounting scandal.
The board for the McLean, Va.-based company - the second-largest source of money for U.S. home mortgages - also raised directors' compensation per meeting to $1,500 from $1,000, the annual pay for committee chairmen to $10,000 from $5,000, and the annual pay for audit committee chairmen to $20,000 from $10,000.
The board approved the increase Dec. 3 based on a committee recommendation after its consultant, Hewitt Associates, surveyed directors' pay at similar companies, Freddie Mac spokeswoman Shawn Flaherty said yesterday. Freddie Mac has failed since 2003 to provide timely financial results because of accounting mistakes disclosed in 2003. It plans to release results for 2004 by March 31.
The increase is an effort by Freddie Mac to be "competitive with comparable financial institutions on compensation for directors," Flaherty said. "Expectations have increased for board members" in light of the heavy work load in recent years and "the scrutiny facing corporate America."
Freddie Mac annually pays its directors 71 percent more than what Fannie Mae, its larger rival, gives its outside directors. Washington-based Fannie Mae pays its directors a retainer of $35,000 annually, according to its April 23 proxy statement. Fannie Mae pays $10,000 annually to each committee chairman and $1,000 for attendance at a board meeting.
Corinne Russell, spokeswoman for the Office of Federal Housing Enterprise Oversight, declined to comment. The OFHEO is the federal regulator for Freddie Mac and Fannie Mae.
Freddie Mac disclosed in 2003 that it understated its profits by $5 billion from 2000 to 2002 in an effort to reduce earnings volatility. It also ousted top executives and was fined a record $125 million in a settlement with federal regulators.
Six of the company's 11 outside directors have remained on the board since the 2003 revelations. They are Michelle Engler, a trustee of JNL Variable Funds; John McCoy, former chief executive officer of Bank One Corp.; Shaun O'Malley, lead director and former chairman of PricewaterhouseCoopers; Ronald Poe, president of Ronald Poe & Associates; Stephen Ross, a finance professor at the Massachusetts Institute of Technology; and William Turner, manager of Signature Capital Inc.
Freddie Mac and Fannie Mae own or guarantee almost half the $7.6 trillion mortgage market. Congress created the companies to increase financing available for homeownership by selling bonds and using the proceeds to acquire mortgages from banks.