Business
Feddie Mac Chief Gets New Pay Package
The pay package given to Freddie Mac’s new chief financial officer should have sent a message from Washington to corporate America about how executive compensation standards must change. Instead, it did just the opposite.
The government-controlled mortgage finance company is giving CFO Ross Kari compensation worth as much as $5.5 million. That includes an almost $2 million cash signing bonus and a generous salary that could top $2.3 million.
The Federal Housing Finance Agency, which oversees Freddie Mac, approved the pay package. A spokeswoman pointed to a statement that justified the agency’s approval of the pay, which was done in part because the amount was comparable to what others in the financial services industry make.
That way of thinking is exactly what helped feed the surge in executive pay over the last decade. Everyone wants to make at least as much, or more, than their peers.
Freddie Mac is not just another company. It’s alive today, and nearly 80 per cent owned by the government, only because almost $51 billion in taxpayer funds were pumped into it over the last year. More bailout money also may be needed in the quarters ahead as losses from its troubled mortgages mount.
Outside pay experts are outraged. “We are in a period when this shouldn’t be acceptable,” said Paul Hodgson, a senior research associate at The Corporate Library, an independent corporate governance research firm. “Even if pay is competitive to the market, that doesn’t make it OK today.”
Lawmakers, regulators and corporate directors have spent the last year talking about how to “fix” executive pay following the outcry over what many Americans deem as excessive compensation.
Banks have come under fire for paying top executives big bonuses, which many see as encouraging excessive risk-taking and a focus on short-term results. The Obama administration also has proposed giving shareholders of all public companies a nonbinding vote on compensation.
Financial companies that receive bailout funds under the $700 billion Troubled Asset Relief Programme, or TARP, are bound by rules on compensation. So long as they hold the government money, they can’t pay cash bonuses to top executives, retention awards to top managers or stock compensation subject to performance-based vesting.
Freddie Mac doesn’t have to follow those restrictions because its government aid has come from outside TARP.
Instead, Freddie Mac and its sibling, Fannie Mae, operate under “conservatorship” of the U.S. government after being crippled by losses last year. That was done because of the vital role both companies play in the mortgage market by purchasing loans from lenders and selling them to investors. Together, they own or guarantee about half of all U.S home mortgages.
The McLean, Va.-based Freddie Mac has been without a permanent CFO for more than a year, when its two top executives stepped down as part of the government takeover in early September 2008. Acting CFO David Kellermann committed suicide in April.
Given the close government control over Freddie Mac, the pay package for its new CFO could have been held up as an example of reasonable compensation. Instead, his pay package doesn’t reflect much restraint.
When Kari joins Freddie Mac on October 12, he will receive a base salary of $675,000 and is entitled to an additional $1.66 million in cash for the year. The company said Kari will be paid in installments, but did not specify the timing of those payments in a September 24 securities filing. The company declined to comment beyond the filing.
Kari will also receive performance-based pay at the board’s discretion. The target amount for that cash compensation is $1.16 million, but what is actually given to Kari could be higher or lower.
His cash signing bonus totals $1.95 million and will be paid out in semi-monthly installments over the year. That money is supposed to cover what he forfeited in stock options and grants when he left Fifth Third Bancorp, where he served as CFO since last November.
Freddie Mac also said it would immediately allow him to sell his home to the company, waiving a 60-day offer period that is required for other executives. It did not, however, specify which of his homes would be covered; Kari has residences in Ohio, Oregon and Washington State, according to the filing.
No doubt that Kari is an able executive and has a hard task at hand. Before his 10-month stint at Fifth Third, he worked in the executive ranks at the insurance company Safeco and Wells Fargo.
Freddie Mac’s regulator, the FHFA, highlighted his qualifications in a statement it made after the pay package was disclosed. The agency said the approval of Kari’s pay was done after consulting with the Treasury Department. The FHFA declined further comment, and the Treasury Department didn’t return a request for comment.
In its statement, FHFA also said that Kari’s hire came at a “critical time for our nation’s economy and for the company.”
A better approach for Kari’s compensation would have been to require him to wait at least three years to receive a bulk of his compensation, instead of allowing him to get as much as 80 percent of it in cash over one year.
“It’s that kind of pay package that got us into trouble in the first place, because it encourages short-term thinking,” said Richard Ferlauto, director of pension and benefits policy for the American Federation of State, County and Municipal Employees, a Washington-based labour group representing government workers.
At Fifth Third, Kari’s yearly salary was $580,000 and he received a $100,000 signing bonus. He also received a restricted stock grant of 20,000 shares and 40,000 stock appreciation rights, both of which would have vested after four years but were terminated once he left the Cincinnati-based bank.
Had he stayed at Fifth Third, he would not have been able to cash out of his equity compensation until the bank repaid the $3.4 billion in TARP funds it received. But Carol Bowie, head of the Governance Institute at RiskMetrics Group, a financial risk management firm, notes that his cash signing bonus at Freddie Mac effectively allows him to accelerate his receipt of equity he forfeited when he left Fifth Third.
Bowie acknowledges that attracting top talent is critically important to a troubled company like Freddie Mac, and supports the idea of executives being paid for their skills.
But she also thinks figuring out what’s fair in pay doesn’t mean sticking with the bad practices from the past.
The daughter of late Nigerian banking executive, Herbert Wigwe has sold her father’s luxury yacht for $6.5 million which is the equivalent of N8.74 Billion following legal proceedings involving her, Otutochi Wigwe, and the company holding the vessel, Grosvenor Marine Ventures Limited.
This was contained in an online report obtained by The Tide Source in Port Harcourt recently.
The Source further clarified that $6. 5 Million dollars or N8.74 Billion was the asking price as at March this year but was unable to prove, if the said amount was exactly what the vessel went for.
The yacht, known as Chitochi, is a 2016 Custom Line 108 superyacht measuring approximately 33 metres (108 feet) in length. The transaction was handled by international yacht brokerage firm IYC, with its sales and charter consultant, Mark Elliott, overseeing the sale.
The disposal of the high-value vessel followed legal steps taken to address the corporate status of Grosvenor Marine Ventures Ltd., the company through which the yacht was held.
Otutochi Wigwe reportedly approached a court in the British Virgin Islands (BVI) to secure the restoration of the company to the corporate register, a move that enabled the necessary legal steps towards the sale of the vessel.
The proceedings were central to resolving the corporate issues affecting the company and facilitating the transaction, underscoring the legal complexities that may arise when valuable assets are held through corporate entities in foreign jurisdictions.
The sale is also significant in the context of estate administration, as luxury yachts require substantial financial commitments to maintain, even when they are no longer actively used by their owners or beneficiaries.
Such vessels typically attract considerable expenses, including crew salaries, insurance premiums, berthing charges, routine servicing and other maintenance costs, making their continued ownership a major financial responsibility.
Beyond the recurring expenses, luxury yachts are depreciating assets that may lose value over time. Their disposal can therefore form part of a strategy to preserve estate value, reduce liabilities and convert an expensive asset into liquid funds.
Wigwe, who was the former Group Chief Executive Officer of Access Holdings, died on February 9, 2024, in a helicopter crash in California, United States, alongside his wife, Chizoba; their son, Chizi; and former Nigerian Exchange Group chairman, Abimbola Ogunbanjo.
His death was widely mourned across Nigeria’s banking and business communities, where he was recognised for his contributions to the financial services industry, entrepreneurship and philanthropy.
Wigwe’s passing left behind an estate whose administration involves the management of assets and other financial interests, a process that can require legal and financial decisions to protect the interests of the estate and its beneficiaries.
The sale of Chitochi highlights the challenges associated with managing high-value assets held through corporate structures, particularly where the relevant companies and legal proceedings fall under different jurisdictions.
The $6.5 million transaction brings the yacht’s ownership chapter to a close while illustrating how legal procedures, financial considerations and estate management can intersect in the administration of the assets of a prominent business figure.
‘’We determined to get all our equipments and machinery functioning as we progress. For now we’ve about 105 workers, comprising daily paid harvesters and regular staffs. But aside these 105 staffs we also employ daily slashers who for now are about 100.
“During peak periods, hopefully on or before January 2026 we hope to increase our work force for maximum production”, the firm’s management Stated.
King Onunwor
Ariwera Ibibo-Howells, Yenagoa
Some traders at the Rumuwoji Market popularly known as Mile 1 Market have decried the continuous increase in the prices of food stuffs and other items in the ember season.
This was made known by the traders when The Tide visited the market recently.
The traders revealed varying changes in the prices of foodstuffs, with some commodities recording higher increase than others .
A trader Mrs Charity Obinna, at the market, said the price of yam remained the same last week and this week compared to the prices from last month to this month, adding that only a difference of about N100 to N200 was seen.
Another trader, Chukwuebuka Livinus who deals on garri, reported that the prices of some food commodities had been changing frequently.
According to him, the price of a bag of garri increased from N45,000 last week to N58,000 this week, representing an increase of N13,000.
Livinus described the increase as scary and called on the government to do something about it, especially as we get closer to the festive period.
A trader that deals on vegetables, Mrs Joy reported that a significant increase in the prices of pepper rose from N20,000 last week to N40,000 this week.
Similarly, the price of a bag of melon (egusi) increased from N420,000 toN490,000 this week.
In a separate report, Mrs Charity Obinna said that foodstuffs were generally cheaper last month than this month, with price differences ranging from N150 to N200 for some items.
Meanwhile, Giff Okoro reported a decrease in the price of tomatoes. According to her, a quantity of tomatoes that cost N45,000 last month now sells for N25,000, indicating a reduction of N20,000.
Another trader, Usman Ibrahim said the cost of transporting goods from the communities to urban areas where they are sold is one of the major reasons for high cost of goods.
He said transport cost has doubled due to the cost of petroleum products in Nigeria, adding the whole cost is part of the goods because “entrepreneurs must cover their cost and make their gains .
Ibrahim called on the government to help farmers and traders even with little capitals to expand and sustain their business.
Another trader, Mrs Choice Promise a fish retailer said a cartoon which sold at #35,000 last week now sells at #50,000 .
Promise complained that there is no gain or profit because the price has drastically increase and most people cannot afford to buy fish again.
“Mr. President’s Renewed Hope Agenda recognizes that economic ambition requires dependable infrastructure,” Tegbe said.
He added that investments in electricity infrastructure would strengthen the foundations for business expansion, employment and economic growth.
The Kankia substations comprise two 60 MVA, 132/33 kilovolt (kV) facilities designed to strengthen the transmission network serving Katsina State and neighbouring areas.
Tegbe said the infrastructure would improve the network’s ability to distribute available electricity, supporting commercial activities and household welfare.
He also urged residents to protect the facilities against vandalism and other activities that could disrupt electricity infrastructure, asking them to report suspicious activities to TCN or security agencies.
Katsina State Governor, Dikko Umaru Radda, described the project as a significant investment in the state’s electricity infrastructure.
Radda stated that improved electricity supply could support industrial development, economic growth and public service delivery.
He further commended the President, the Federal Ministry of Power and TCN for completing the project.
It would be noted that the latest projects come amid a broader government’s drive to address bottlenecks in Nigeria’s electricity transmission network, which has constrained the amount of electricity that can be delivered to distribution companies and end users.
Wali Chioma, Obasi Chidinma & Amarachi Uche
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