Fact Sheet Farm Credit Administration

1501 Farm Credit Drive

McLean, Virginia 22102-5090

September 13, 2012 Contact: Michael Stokke or Christine Quinn,

703-883-4056

E-mail: info-line@fca.gov

Website: www.fca.gov

Fact Sheet on Senior Officer Compensation Disclosures

and Related Topics Final Rule

The Farm Credit Administration (FCA) adopted a final rule today to revise its regulations 

governing disclosures of senior officer compensation, supplemental retirement plans, and 

compensation committee responsibilities. The rule also contains new requirements to report 

significant events to shareholders and to hold nonbinding, advisory votes on senior officer 

compensation.

Economic and business environments are changing, and there have been recent developments 

in best practices related to compensation. As a result, FCA is updating and strengthening its 

regulations to reflect current practices in the Farm Credit System (System) and to maintain the

high standards expected of a government-sponsored enterprise composed of cooperative 

institutions.

The rule seeks to improve the transparency, completeness and timeliness of disclosures to

shareholders; encourage member participation in the control and management of their

institution; and continue to ensure the exercise of good stewardship by compensation 

committees.

Summary of Rule Provisions

New §§ 611.360 and 611.410 Advisory voting: The rule requires a nonbinding, advisory

vote by voting shareholders of System banks and associations on CEO or other senior officer

compensation if compensation increases by 15 percent or more from the previous reporting

period or, at associations only, if 5 percent of the voting shareholders petition for the vote. 

The advisory vote provides shareholders a means to clearly express and easily communicate

either their approval or disapproval of CEO or senior officer compensation practices to their

institution’s board. 

§ 620.5(e)(4) Description of liabilities: The rule requires banks and associations to disclose in

their annual reports information about supplemental retirement plans for all employees. The

disclosure enhances the transparency and completeness of an institution’s obligations and 

commitments.

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§ 620.6(c)(4) Retirement compensation of senior officers: The rule requires disclosure in a 

table of pension benefit and supplemental executive retirement plans for senior officers. 

Disclosures include the name of the plan, years of credited service for the CEO and average 

years of credited service for the other senior officers, present value of accumulated benefits, 

and payments made during the fiscal year. The enhanced disclosure provides clarity and 

transparency on the complete compensation packages for senior officers. 

§ 620.6(c)(5) Relationship of compensation of senior officers to institution operations:

The rule requires disclosure of the overall risk and reward structure for senior officer

compensation plans and practices, the relationship of senior officer compensation to the

institution’s overall performance, and the relationship of the compensation to the senior 

officers’ performance.

New § 620.15 Notice of significant or material events: The rule requires timely and 

transparent communication to shareholders and investors of significant or material events that 

occur at System institutions between annual reporting periods. Boards of directors must 

develop policies to identify events to be communicated. Notice must be made within 90 days 

of the event’s occurrence. The events may be communicated in either a separate notice to

shareholders or as part of the quarterly report to shareholders.

§§ 620.31(b) and 630.6(b)(2) Compensation committee responsibilities: The rule clarifies

and enhances the responsibilities of compensation committees to ensure that each committee 

documents that it determined the following:

• Long-term compensation and retirement benefit obligations are appropriate and not 

excessive.

• Incentive-based compensation programs and payments consider the potential for future 

losses or undue risks to the institution.

• Compensation programs support the institution’s long-term business strategy and the 

System’s mission.

• Compensation programs for groups of employees other than senior officers pose no 

imprudent risk to the institution.

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