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Pay Packages for CEOs
Likely to Spur Scrutiny

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 million.

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."

Many top 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.

Presidential nominees 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 executives."

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 Scannell at kara.scannell@wsj.com¹ and Phred Dvorak at phred.dvorak@wsj.com²

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