Washington, D.C. – Armando Falcon, Jr., Director of the Office of Federal Housing Enterprise Oversight (OFHEO), safety and soundness regulator for Fannie Mae and Freddie Mac (the Enterprises), announced a final rule on corporate governance that enhances the transparency of regulatory standards for the executives and boards of directors of the Enterprises.
“This rule represents a solid foundation for corporate governance that OFHEO will continue to build upon,” said Director Falcon.
The final rule requires the Enterprises to:
Elect to follow the corporate governance practices and procedures of either the jurisdiction in which the Enterprise is located, Delaware law or the Model Business Corporation Act.
Establish and maintain audit and compensation committees of their boards of directors.
Ensure compensation of board members, executive officers and employees is not excessive, unreasonable or otherwise inconsistent with legal standards.
Implement minimum quorum and voting requirements for board actions.
Establish and maintain written conflict of interest standards.
Comply with specific minimum standards for the conduct and responsibilities of the Enterprises’ boards of directors.
The final regulation also states the broad authority of OFHEO to prohibit indemnification of an Enterprise’s board members and executives, including the indemnification of activities involving intentional misconduct or recklessness.
The rule becomes effective 60 days after publication in the Federal Register. Publication is expected tomorrow, June 4. The corporate governance regulation was proposed Sept. 12, 2001 by OFHEO and cleared by the Office of Management and Budget (OMB) May 29, 2002. The rule is part of OFHEO’s regulatory infrastructure project that aims to provide a strong foundation for OFHEO’s supervisory programs.
Stefanie Johnson (202) 649-3030