A wild goose chase…

August 20, 2004

Fannie Mae’s (FNM) Q from last week includes new employment contracts for its top three executives. Given the hefty size of the contracts — Chairman and CEO Franklin Raines’ contract weighs in at 25 pages, enough to warrant a table of contents — when compared with other employment agreements, an investor in Fannie Mae might expect to get all sorts of detailed information. Wrong! Instead, Fannie Mae sends investors on a wild goose chase that requires them to go back to the proxy, hunt down an earlier employment agreement and also locate the Compensation Committee charter on Fannie’s Mae’s website, which isn’t that easy to find. For example, the contract notes that Raines’ base salary shall not be “less than his base salary on June 30, 2004”. What was his base salary on that day? To find that out, you’d have to track down his earlier employment contract from May 1998, though last year’s proxy gives you an idea: $992,250 in base salary and a $4.18 million bonus. As for the other parts of Raines’ compensation such as stock options, annual incentives, performance shares, and restricted stock, the contract sends you to the charter, which doesn’t really provide any details either. It’s more of the same for the other two employment contracts in the Q. Making investors work this hard for what should be basic information is wrong. But for a company that touts its openess on its website, perhaps irony is the better word.

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