In addition to this training, on a regular basis Board members will receive more detailed briefings on specific Farmer Mac related subjects from the Farm Credit Administration and Farmer Mac management. Board members participated in an eight-hour training program on Director Professionalism presented by the National Association of Corporate Directors. In December 2003, Farmer Mac's Board of Directors began an annual formal training program including consultation and participation with outside counsel. The Board receives regular governance briefings from FCA. The board members received director professionalism training from corporate governance experts at the law firm of Shearman & Sterling, LLP in December 2004. Farmer Mac worked with corporate governance advisors to verify that the Board nomination process complies with applicable laws and regulations and is fully understood by the Board members.Īlthough the Farmer Mac board has taken steps to strengthen its corporate governance practices, the Chairman, Farmer Mac, should further enhance those practices by formalizing executive management succession plan and communicate plan with all board members to provide transparency. Also, Farmer Mac and its counsel believe the nomination process is fully and fairly disclosed in its Proxy Statement, which is reviewed and approved by the entire Board. As of June 2004, Farmer Mac's Board has reviewed, and confirmed by unanimous resolution, that all of its members understand the nomination process and consider it to be transparent. To help ensure that Farmer Mac's management can properly identify, manage, and control risks, it should ensure that it has adequate staff resources and technical skills to continue to reduce its credit risk by improving its documentation of policies and procedures, and management's actions and judgments by continuing to gather documentation supporting management's assessment of loans approved using underwriting standard 9, including quantification and evaluation of compensating risk factors, and develop a process for utilizing such information in the management decision process for future exceptions and for estimating credit losses.Īt its April 2005 meeting, the Board confirmed that it believes the nomination process is transparent and understood by all members. Documentation of results of the model compared to actual portfolio and of the reconciliation to the amounts recorded in the financial statements is consistent with GAAP requirements.įederal Agricultural Mortgage Corporation (Farmer Mac)
This new model follows the practice of using actual charge off data from the past few years. However, if Congress intends for Farmer Mac to operate as a publicly traded company, it may wish to consider amending (1) Farmer Mac's board structure to ensure an independent board and independent and competent audit committee and (2) the structure of Farmer Mac's Class C common stock to include a one share, one vote principle to provide the opportunity to better reflect all shareholder interests.Īs of the end of 2005, Farmer Mac has fully migrated to the new loan loss estimation model.
If Congress intends for Farmer Mac to operate in a cooperative manner and maintain its current board structure of Class A and Class B stock, it may wish to consider making Farmer Mac a true cooperative entity like the Federal Home Loan Bank System, and rescind Farmer Mac's authority to issue Class C stock. Closed - Not ImplementedWhile the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.Ĭongress has not passed any recent legislation affecting Farmer Mac.