The federal agency that oversees mortgage finance companies Fannie Mae and Freddie Mac has recommended a number of corporate governance changes to “address current weaknesses and help reduce the potential for future corporate misconduct.”
“As government-sponsored enterprises, Fannie Mae and Freddie Mac should be held to the highest standards of business conduct and corporate governance, and that is why I am proposing to implement stronger corporate governance requirements,” said Armando Falcon, director of the Office of Federal Housing Enterprise Oversight, in a statement.
Among the changes proposed by the OFHEO for Fannie Mae and Freddie Mac:
- separate the positions of chief executive officer and chairman of the board
- establish a term limit of 10 years and an age limit of 72 for board members
- require audit partner rotation every five years and auditor rotation every 10 years
- require “appropriate and reasonable” compensation that looks to legal compliance and organizational stability and not just to earnings
- require a review of codes of conduct no less often than every three years.
The proposed rule will be open for public comment for 60 days.