FARM CREDIT ADMINISTRATION

12 CFR Parts 611, 618, and 620

RIN 3052ÄAB42

Organization; General Provisions; Disclosure to Shareholders

AGENCY: Farm Credit Administration.

ACTION: Proposed rule.

SUMMARY: The Farm Credit Administration (FCA), by the Farm Credit
Administration Board (Board), issues a proposed rule that would amend the
director compensation regulations to reflect changes to the Farm Credit Act of
1971 (Act) made by the Farm Credit Banks and Associations Safety and Soundness
Act of 1992 (1992 Amendments) and to address concerns raised by Farm Credit
Banks and FCA regarding the current annual report disclosure rules for
director and senior officer compensation and reimbursable expenses. The
proposed rule would include an annual adjustment procedure for the bank
director compensation ceiling and would also establish an approval process for
exceeding the statutory limitation. These changes are being proposed in order
to comply with the requirements of the 1992 Amendments.

Also, the proposed rule would require written policies on reimbursement of
travel, subsistence, and other related expenses for directors, officers, and
employees of all Farm Credit institutions. In connection with this action, the
proposed rule would eliminate the requirement for individual disclosure of
reimbursable expenses paid to bank directors and require that the aggregate of
expenses reimbursed to the boards of directors of each Farm Credit institution
be disclosed. By proposing these changes, the FCA Board desires to reduce the
burden that may inadvertently be imposed on some banks that would have to
provide extensive additional disclosures to fully explain necessary and
reasonable expenses reimbursed to individual directors.

Finally, the proposed rule would amend the requirements for disclosure of
senior officer compensation in accordance with section 514 of the 1992
Amendments. The FCA Board believes that adopting more detailed disclosure
requirements, such as those imposed on commercial banks, for senior officers
of Farm Credit institutions, would accomplish the objectives set forth in
section 514.

DATES: Written comments must be received on or before January 24, 1994.

ADDRESSES: Comments may be mailed or delivered (in triplicate) to Patricia W.
DiMuzio, Division Director, Regulation Development Division, Office of
Examination, 1501 Farm Credit Drive, McLean, VA 22102Ä5090. Copies of all
communications received will be available for examination by interested
parties in the Regulation Development Division, Farm Credit Administration.

      FOR FURTHER INFORMATION CONTACT:

Laurie A. Rea, Policy Analyst, Regulation Development Division, Office of
Examination, Farm Credit Administration, McLean, VA 22102Ä5090, (703)
883Ä4498, TDD (703) 883Ä4444,

 or

Joy E. Strickland, Senior Attorney, Regulatory Operations Division, Office of
General Counsel, Farm Credit Administration, McLean, VA 22102Ä5090, (703)
883Ä4020, TDD (703) 883Ä4444.

SUPPLEMENTARY INFORMATION:

I. Overview

The Farm Credit Administration's (FCA) need to comply with the Farm Credit
Banks and Associations Safety and Soundness Act of 1992 (1992 Amendments) and
other issues raised by Farm Credit Banks and identified by FCA concerning
existing director and senior officer compensation and disclosure regulations
prompted the FCA to initiate a project to amend its regulatory guidance in
this area. The 1992 Amendments raised the maximum limit on compensation for
bank directors to $20,000 per year, adjusted annually to reflect changes in
the Consumer Price Index (CPI) for all urban consumers published by the Bureau
of Labor Statistics. The 1992 Amendments also provided FCA with the authority
to waive the limitation under exceptional circumstances, as determined in
accordance with regulations promulgated by the FCA.

When  611.400 was previously amended (57 FR 43393, September 21, 1992), The
Farm Credit Council (FCC) commented on behalf of its membership and objected
to disclosure of reimbursable expenses. The FCC commented that no other
Federal bank regulatory agency currently requires public disclosure of the
amount of expense reimbursements received by directors. Two banks endorsed the
FCC's comments but did not provide any additional suggestions. These were the
only comments received on the amendments during the public comment period. The
FCA Board determined that disclosure of reimbursable expenses was important
because these expenses are often a significant component of overall director
costs and can, in some cases, exceed compensation. Further, the FCA Board
determined that stockholders of banks should be afforded the opportunity to
review reimbursable expenses in order to guard against excessive expenditures
by directors. The disclosure requirement is consistent with the stockholders'
common-law right to inspect the corporation's books and with congressional
concern over the impact of director costs on the borrower.

Subsequent to the publication of the final amendment to  611.400, two banks
requested that FCA rescind the requirement to disclose the reimbursable
expenses paid to each bank director. One bank stated that the disclosure
requirement results in an inequitable treatment due to the widespread
geographic locations of its directors relative to the bank's headquarters
location. The bank explained that it may be necessary for directors who live
greater distances from the bank headquarters or directors who serve on
national committees to incur greater travel expenses. Thus, an inequitable
implication may result from the individual disclosure because stockholders
would not have a full understanding of the reasons why some directors have
legitimately higher reimbursable expenses. The bank suggested in its letter
that FCA amend the regulation to require disclosure of the aggregate
reimbursable expenses paid to the directors as a group, rather than
individually. Another bank requested that FCA reconsider the requirements of 
611.400 because of the variation in expenses due to the geographic location of
directors, committee assignments, and other circumstances. The bank also
reiterated comments made on the proposed amendments to  611.400 and stated
that the requirements for disclosure of expenses exceed the disclosure
requirements placed on other financial institutions. Thus, the bank requested
that FCA eliminate the expense disclosure requirement entirely. As a result of
the changes made by the 1992 Amendments and the concerns raised after
publication of the final amendments, the FCA Board has reevaluated the issue
of disclosure of reimbursable expenses.

In addition, the FCA Board has reconsidered the issue of senior officer
compensation. In section 514 of the 1992 Amendments, Congress determined that
disclosure of compensation paid to directors and senior officers of Farm
Credit institutions provides stockholders with information necessary to better
manage their institutions. Congress directed the FCA to ensure that the
information reported by Farm Credit institutions provides stockholders with
sufficient information to assist them in making informed decisions regarding
the operation of their institutions. The FCA Board believes that adopting more
detailed disclosure requirements, such as those imposed on commercial banks,
for senior officers of Farm Credit institutions would accomplish Congress'
objectives. The proposed regulation would require institutions to disclose the
individual compensation of the five highest paid senior officers, the total
compensation paid to all officers as a group, and a description of the
compensation plans of the aforementioned individuals. These disclosures would
provide shareholders, investors, Congress, and the public with the necessary
information to assist them in evaluating whether senior officer compensation
plans approved by the Farm Credit institution boards are reasonable and
appropriate in view of the financial condition and performance of the
institution. Additionally, the FCA Board believes that disclosure of
individual senior officer compensation, along with an explanation of the
compensation program, would aid readers of the annual report in understanding
the impact of individual senior officer compensation on operating expenses as
well as any significant compensation fluctuations. Further, the proposed
regulation would provide shareholders, investors, Congress, and the public
with uniform information concerning the compensation of Farm Credit
institution senior officers similar to that published by other
Government-sponsored enterprises.

II. Section-by-Section Analysis

A. Section 611.400 Compensation of Bank Board Members

The bank director compensation regulation that became effective on January 29,
1993, addressed the maximum level of compensation that can be paid to bank
directors and modified the disclosure requirements. Existing  611.400
eliminated the $200 per day maximum that existed in the previous regulation
and raised the director compensation ceiling to "limits established by the
Farm Credit Act of 1971, as amended.'' The 1992 Amendments replaced the
$15,000 per year cap with a new limitation of $20,000 per year, annually
adjusted to reflect changes in the Consumer Price Index (CPI) for all urban
consumers published by the Bureau of Labor Statistics.

      In response to the 1992 Amendments, the FCA Board issued a bookletter
entitled "Annual Adjustment Procedure for the Maximum Amount of Director
Compensation'' (August 11, 1993), which discusses the methodology for
adjusting the $20,000 per year limitation on director compensation to reflect
changes in the CPI. Proposed  611.400 would incorporate this methodology. FCA
studied several approaches for determining an annual adjustment procedure and
sought a method that would be a fair representation of the actual change in
the cost of living over an entire year and that would be easily understood and
applied. Proposed  611.400(b) would require that the current year's maximum
bank director compensation be determined by adjusting the prior year's maximum
compensation level by the prior year's annual average percentage change in the
CPI for all urban consumers. For example, the 1994 statutory maximum bank
director compensation can be determined as follows: 1994 Maximum
Compensation=1993 Maximum Compensation multiplied by (the Annual Average 1993
CPI divided by the Annual Average 1992 CPI). For more information, the annual
average CPIs for all urban consumers can be found in publications by the
United States Department of Labor, Bureau of Labor Statistics, Division of
Consumer Prices and Price Indexes, and in the Economic Indicators, published
by the United States Government Printing Office, as well as in several other
publications.

Proposed  611.400(c) would address FCA's statutory authority to establish
regulations to waive the limitation on bank director compensation set by
section 4.21 of the Act. Prior to developing the proposed rule, FCA identified
certain exceptional circumstances in which it might be appropriate to consider
granting a waiver of the statutory limitation, such as merger or significant
special assignments to an individual or board committee. FCA also considered
whether the statutory limit would need to be frequently waived due to the
changing structure of the System. The FCA Board believes that circumstances
may arise when a waiver of the statutory limitation, within reason, is
justified. Nevertheless, the FCA Board believes that the need to waive the
statutory limitation on bank director compensation should be rare, as the
periodic adjustment procedure was instituted to ensure that the limitation on
bank director compensation remains fair and reasonable. The FCA Board also
believes that the responsibility to justify the need to exceed the ceiling
should be left with the bank.

The FCA Board believes that the decision as to whether a waiver of the
statutory bank director compensation limitation is warranted should be made on
a case-by-case basis. The circumstances that may necessitate a waiver of the
ceiling are intended by statute to be "exceptional.'' Developing a regulation
that captures all exceptional instances that may truly warrant a waiver of the
statutory maximum is not practicable. There may be circumstances in which it
would be appropriate to exceed the compensation ceiling that may be overlooked
in such a regulation. Furthermore, circumstances identified in the regulation
that would ordinarily warrant the ceiling to be exceeded may not always, due
to the particular circumstances, justify an exception to the ceiling.

      The proposed regulation would require a bank to provide the FCA Chairman
with a written request for approval to exceed the statutory limitation before
disbursing any funds. The request must include an explanation of the
exceptional circumstance(s) that the bank believes necessitates a waiver, and
justification of the amount each bank director would receive based on the
extraordinary amount of time and service devoted to the bank's business.
Further, under the proposed regulation, the FCA would not grant a waiver that
allows a bank to pay any director in excess of 25 percent more than the
statutory maximum compensation as adjusted by the CPI. Congress set a maximum
limit on bank director compensation to ensure that borrowers/stockholders are
not burdened with excessive director costs. The FCA believes that the
authority to waive the compensation ceiling in exceptional circumstances was
not intended by Congress to be a means to grant unlimited director
compensation. Nevertheless, the FCA believes that a reasonable level of
additional compensation beyond the statutory limitation should be provided in
recognition of the heavy burdens placed on directors as a result of
exceptional circumstances. The FCA would respond to any such request within 30
days of receipt of all the information required by the regulation and any
additional information that may be requested by the FCA.

Finally, the proposed regulation would remove the provisions for payment of
reimbursable expenses from  611.400 and place those requirements in the
proposed amendment to  618.8270, Travel, subsistence, and other related
expenses, which are covered under part 618 General Provisions, and are
applicable to all Farm Credit institutions.

B. Section 618.8270 Travel, Subsistence, and Other Related Expenses

Existing  611.400 requires that the amount of reimbursement to each director
for travel, subsistence, and other related expenses must be disclosed
separately from the amount of compensation received. The objective of the rule
was to ensure full disclosure of director compensation and expenses and
promote director accountability to shareholders. The regulation was not
intended to be burdensome or prejudicial against directors who travel greater
distances to board meetings; rather, the intent was to capture reimbursable
expenses that represent a significant portion of overall director costs.
Therefore, in order to reduce the perceived inequities and maintain an
effective oversight mechanism for monitoring variations in director expenses,
the proposed regulation would strengthen the regulatory framework regarding
policy formulation and remove the requirement for individual disclosure of
bank director reimbursable expenses.

      Existing  618.8270 requires institutions to establish a travel policy,
but does not contain detailed guidance as to what those policies must cover.
Therefore, proposed  618.8270 would combine and strengthen the requirements
of the existing  611.400 and 618.8270, and provide one regulation that
governs the travel and other reimbursable expenses for directors, officers,
and employees of all institutions. Proposed  618.8270 would require each Farm
Credit institution to establish written policies regarding travel,
subsistence, and other related expenses. Additionally, the proposed rule would
require all Farm Credit institutions to develop guidelines and set specific
limitations that ensure expenses being reimbursed to directors, officers, and
employees are necessary and appropriate for conducting official duties.

The proposed rule would require the institution's policies to address the
following areas: (1) Authorized purposes for which reimbursement of travel,
subsistence, and other related expenses may be made; (2) guidelines and
limitations on reimbursement for such items as modes of transportation,
mileage rates for use of personal vehicles, per diem allowances, including
maximums or limitations on lodging, meals, and incidental expenses, and
telephone calls, and any other miscellaneous expenses; (3) circumstances, if
any, under which reimbursement of expenses of spouses or others may be made in
connection with institution activities or functions; and (4) reimbursement
procedures, including required documentation for reimbursement and the timing
and frequency for adjusting any rates or limitations set on the reimbursement
of expenses.

Additionally, the regulatory requirements would be strengthened by requiring
institutions to have their internal auditors review the records maintained in
accordance with  618.8270 to determine if the policies are being consistently
followed by all individuals. The proposed rule would require the compliance
review to be conducted at least annually, with the results reported to the
institution's board audit committee or full board, if the board does not have
an audit committee.

C. Section 620.5(i) Compensation of Directors and Senior Officers

1. Director Compensation

The disclosure requirements in the proposed regulation remain largely
unchanged from the existing regulation. The proposed regulation would add a
requirement that if any of the bank's directors are granted a waiver of the
maximum bank director compensation level set by section 4.21 of the Act, the
exceptional circumstances allowing the waiver must be disclosed.

2. Senior Officer Compensation

Existing  620.5(i)(2) requires an institution to disclose the aggregate
amount of compensation paid during the last fiscal year to all senior officers
as a group, stating the number of persons in the group without naming them. At
a minimum, the aggregate amount must include the five highest paid officers,
whether or not designated as a senior officer by the institution's board. In
addition, a statement is required that the total compensation during the last
fiscal year paid to any officer included in the aggregate amount that exceeds
$50,000 is available to shareholders upon request. The FCA Board continues to
believe that this type of information is necessary to make informed decisions
regarding an institution and that it should be disclosed and made available to
shareholders. However, for the reasons previously stated, the FCA Board
believes that disclosure of senior officer compensation in the aggregate does
not provide shareholders with sufficient information to determine whether
compensation is reasonable.

Therefore, the proposed regulation would require institutions to disclose the
individual compensation of the five highest paid senior officers, the total
compensation paid to all officers as a group, and a description of the
compensation plans of the aforementioned individuals. While the differences in
the number of senior and other officers between small and large institutions
varies, the FCA Board believes that uniform disclosures between institutions,
regardless of size, are important for comparison purposes. Disclosing the
individual compensation of the five highest paid senior officers, as well as
all officers as a group, would provide stockholders with a more complete
portrayal of the costs of the institution's management. These disclosures
would be comparable to the disclosure requirements placed on senior officers
of commercial banks. For example, the Federal Deposit Insurance Corporation
requires compensation disclosures on an individual and a group basis (12 CFR
335.212), as well as a discussion of any compensation program and compensation
plans.

      Specifically, the proposed regulation would require Farm Credit
institutions to disclose the total amount of compensation paid and the amount
of each component of compensation paid to each of the five highest compensated
senior officers, naming each individual and his/her position or title. At a
minimum, disclosure is required for the five highest compensated officers,
whether or not designated as a senior officer by the board. Each Farm Credit
institution would also be required to disclose the aggregate amount of
compensation paid and the components of compensation paid to all officers as a
group, stating the number of officers in the group without naming them.
Finally, the disclosure would include a description of all plans pursuant to
which cash or noncash compensation was paid or distributed during the last
fiscal year, or is proposed to be paid or distributed in the future for
performance during the last fiscal year to the aforementioned individuals. The
proposed regulation would define compensation as annual salary, cash bonuses,
deferred compensation, vested pension benefits (unless the plan is made
available to all employees on the same basis), and any other noncash
compensation.

The current disclosure of aggregate compensation, by itself, does not fully
explain the reason for individual senior officer compensation levels and large
fluctuations in total compensation. Large fluctuations can result, in part,
from incentive payments made to senior officers based on the institution's
performance, and these incentive programs are not fully explained through the
existing disclosure requirements. The more descriptive disclosures in the
proposed rule are intended to provide stockholders with adequate information
to hold the institution's board of directors accountable for justifying the
reasonableness of compensation levels paid to its senior officers.
Additionally, these proposed disclosure requirements are intended to achieve
Congress' objective of providing Farm Credit institution stockholders with
sufficient meaningful information to make informed decisions regarding their
institutions.

3. Travel, Subsistence, and Other Related Expenses

The FCA Board has reconsidered the disclosure requirements regarding
reimbursable expenses for the reasons previously explained. The FCA Board,
however, maintains its original intention of providing shareholders with a
mechanism to identify and respond to unreasonable expenses and variances in
expenses reimbursed to directors. The current requirement for individual bank
director disclosure of reimbursable expenses may be unduly burdensome for some
banks in light of the additional disclosures that may be needed to provide a
meaningful and accurate portrayal of expenses being reimbursed to each
individual bank director. Because reimbursable expenses continue to be a
significant portion of director costs and, in some cases, can exceed
compensation, some type of disclosure of expenses is still warranted. The FCA
Board continues to believe that disclosure provides shareholders with
information to make informed decisions about the directors they elect and
about the institution's operations. In addition, the existing disclosure
regulation for reimbursable expenses only applies to bank directors. The FCA
Board believes that all Farm Credit institution directors and senior officers
are an integral part of the System's management and should, in most instances,
be placed under the same scrutiny.

Proposed  618.8270 would require that the policy adopted by each Farm Credit
institution, as it applies to directors and senior officers, be discussed in
the annual report. The FCA Board is proposing this requirement in order to
provide shareholders with information that would assist them in determining
whether the expenses being reimbursed to the management of their institution
are reasonable. The proposed regulation would also require Farm Credit
institutions to provide shareholders with information as to where they could
receive a copy of the policy. Although shareholders/borrowers may be hesitant
to request information about a particular director or senior officer, they may
be less hesitant to request a general policy.

Proposed  620.5(i)(3) would require disclosure of the aggregate amount
reimbursed to each Farm Credit institution board of directors, rather than
individual bank directors, for travel, subsistence, and other related
expenses. Additionally, the proposed regulation would provide shareholders
information on developing trends by requiring a 3-year history of aggregate
expenses reimbursed to the board of directors.

The FCA Board believes that disclosure of the 3-year trend of the aggregate
expenses reimbursed to boards of directors and a discussion of the
institution's travel policy should provide shareholders with information to
assist them in evaluating the reasonableness of management expenses. These
disclosures are intended, in part, to provide shareholders with additional
insight into the efficiency of the institution's operations. Further, because
directors are accountable to the shareholders as their representatives in a
Farm Credit institution, the shareholders are in the best position to assess
and govern the use of the institution's funds.

      Proposed  618.8270 would require Farm Credit institution boards to
adopt policies governing travel, subsistence, and other related expenses for
all employees as well as directors and senior officers. However, it should be
noted that the disclosure requirements would only relate to the directors and
senior officers of the institutions. The FCA Board believes that monitoring
the expenses reimbursed to employees is the responsibility of management.

List of Subjects

12 CFR Part 611

Agriculture, Banks, banking, Rural areas.

12 CFR Part 618

Agriculture, Archives and records, Banks, banking, Insurance, Reporting and
recordkeeping requirements, Rural areas, Technical assistance.

12 CFR Part 620

Accounting, Agriculture, Banks, banking, Reporting and recordkeeping
requirements, Rural areas.

For the reasons stated in the preamble, parts 611, 618, and 620 of chapter VI,
title 12 of the Code of Federal Regulations are proposed to be amended to read
as follows:

PART 611 ORGANIZATION

1. The authority citation for part 611 continues to read as follows:

Authority: Secs. 1.3, 1.13, 2.0, 2.10, 3.0, 3.21, 4.12, 4.15, 5.9, 5.10, 5.17,
7.0Ä7.13, 8.5(e) of the Farm Credit Act; 12 U.S.C. 2011, 2021, 2071, 2091,
2121, 2142, 2183, 2203, 2243, 2244, 2252, 2279aÄ2279fÄ1, 2279aaÄ5(e); secs.
411 and 412 of Pub. L. 100Ä233, 101 Stat. 1568, 1638; secs. 409 and 414 of
Pub. L. 100Ä399, 102 Stat. 989, 1003 and 1004.

Subpart D Rules for Compensation of Board Members

2. Section 611.400 is revised to read as follows:

 611.400 Compensation of bank board members.

(a) Farm Credit System banks are authorized to pay fair and reasonable
compensation to directors for services performed in an official capacity at a
rate not to exceed the level established in section 4.21 of the Farm Credit
Act of 1971, as amended, unless the FCA determines that such level adversely
affects the safety and soundness of the institution.

(b) The bank director compensation level established in section 4.21 of the
Act shall be adjusted to reflect changes in the Consumer Price Index (CPI) for
all urban consumers, as published by the Bureau of Labor Statistics, in the
following manner: Current year's maximum compensation=Prior year's maximum
compensation adjusted by the prior year's annual average percent change in the
CPI for all urban consumers.

(c) A waiver of the compensation limitation prescribed by section 4.21 of the
Act may be granted under exceptional circumstances as approved on a
case-by-case basis by the FCA. The request for a waiver approval shall precede
any payments by the bank to its director(s) that exceed the maximum limitation
determined in paragraph (b) of this section. A bank seeking a waiver shall
provide the FCA Chairman with a written request that:

(1) Describes and explains the exceptional circumstance(s) that the bank
believes necessitates a waiver of section 4.21 of the Act;

(2) States the amount and the terms and conditions (if any) of the proposed
compensation level for each director that would exceed the statutory maximum
determined in paragraph (b) of this section; and

(3) Justifies the compensation level of each director that would exceed the
statutory limitation based on the extraordinary time and service they devoted
to bank business. The FCA shall not grant a waiver that allows a bank to pay
any director in excess of 25 percent more than the statutory maximum
compensation as determined in paragraph (b) of this section.

The FCA shall respond to written requests within 30 days of receipt of the
preceding information and any other information requested by the FCA.

(d) Each bank board shall adopt a written policy regarding compensation of
bank directors. The policy shall address, at a minimum, the following areas:

      (1) The activities or functions for which attendance is necessary and
appropriate and may be compensated, except that a Farm Credit System bank
shall not compensate any director for rendering services on behalf of any
other Farm Credit System institution or a cooperative of which the director is
a member, or for performing other assignments of a nonofficial nature;

(2) The methodology for determining each director's rate of compensation; and

(3) The exceptional circumstances under which the board would seek a waiver of
the statutory limitation on bank director compensation for any of its
directors and any limitations or conditions the board wishes to place on the
availability of such waivers.

(e) Directors may also be reimbursed for reasonable travel, subsistence, and
other related expenses in accordance with the requirements of  618.8270 of
this chapter.

PART 618 GENERAL PROVISIONS

3. The authority citation for part 618 continues to read as follows:

Authority: Secs. 1.5, 1.11, 1.12, 2.2, 2.4, 2.5, 2.12, 3.1, 3.7, 4.12, 4.13A,
4.25, 4.29, 5.9, 5.10, 5.17 of the Farm Credit Act; 12 U.S.C. 2013, 2019,
2020, 2073, 2075, 2076, 2093, 2122, 2128, 2183, 2200, 2211, 2218, 2243, 2244,
2252.

Subpart F Miscellaneous Provisions

4. Section 618.8270 is revised to read as follows:

 618.8270 Travel, subsistence, and other related expenses.

(a) Each Farm Credit institution board shall develop written policies
regarding the reimbursement of travel, subsistence, and other related expenses
to its directors, officers, and employees. The policies shall address the
following areas:

(1) Authorized purposes for which reimbursement of travel, subsistence, and
other related expenses may be made;

(2) Guidelines and limitations on reimbursement for such items as:

(i) Modes of transportation;

(ii) Mileage rates for use of personal vehicles;

(iii) Per diem allowances, including maximums or limitations on lodging,
meals, and incidental expenses; and

(iv) Telephone calls and any other miscellaneous expenses.

(3) Circumstances, if any, under which reimbursement of expenses of spouses or
others may be made in connection with institution activities or functions; and

(4) Reimbursement procedures, including required documentation for
reimbursement and the timing and frequency for adjusting any rates or
limitations set on the reimbursement of expenses. Required documentation shall
include:

(i) The activity or function for which the director, officer, or employee is
being compensated;

(ii) The reason the attendance of the director, officer, or employee (or other
individual) is necessary and appropriate;

(iii) The duration of the stay and the location of such activity or function;
and

(iv) An itemized explanation of the expenses claimed.

(b) Each board shall ensure that the written records that are maintained to
document the expenses paid to directors, officers, and employees by the
institution are in accordance with the policies adopted by the board as
required in paragraph (a) of this section. The records shall be in such detail
to enable the personnel authorized to process reimbursements to verify that
the amounts being reimbursed are within the policy guidelines set by the
board.

(c) Each board shall require a review by the institution's internal auditors
of the records maintained pursuant to paragraph (b) of this section to
determine if the policies are being consistently followed. This review shall
be conducted at least annually, with the results reported to the board audit
committee or full board, if the board does not have an audit committee.

PART 620 DISCLOSURE TO SHAREHOLDERS

5. The authority citation for part 620 continues to read as follows:

      Authority: Secs. 5.17, 5.19, 8.11 of the Farm Credit Act; 12 U.S.C.
2252, 2254, 2279aaÄ11; sec. 424 of Pub. L. 100Ä233, 101 Stat. 1568, 1656.

6. Section 620.5 is amended by revising paragraph (i) to read as follows:

 620.5 Contents of the annual report to shareholders.

                                  * * * * *

(i) Compensation of directors and senior officers. (1) Director compensation.
Describe the arrangements under which directors of the institution are
compensated for all services as a director (including total cash compensation
and any noncash compensation that exceeds 10 percent of total compensation)
and state the total cash compensation paid to all directors as a group during
the last fiscal year. If applicable, describe any exceptional circumstances
under which a waiver of section 4.21 of the Act was granted by the FCA. For
each director, state:

(i) The number of days served at board meetings;

(ii) The total number of days served in other official activities;

(iii) The total compensation paid to each director during the last fiscal
year.

(2) Senior officer compensation. For the purposes of this paragraph,
compensation shall include annual salary, cash bonuses, deferred compensation,
vested pension benefits (unless the plan is made available to all employees on
the same basis), and any other noncash compensation that exceeds 10 percent of
total compensation or $25,000, whichever is less. The report shall disclose:

(i) The total amount of compensation paid and the amount of each component of
compensation paid to the five highest compensated senior officers or the five
highest compensated officers, whether or not designated as a senior officer by
the board, naming each individual and his/her position or title.

(ii) The aggregate amount of compensation paid and the components of
compensation paid to all officers as a group, stating the number of officers
in the group without naming them; and

(iii) A description of all plans pursuant to which cash or noncash
compensation was paid or distributed during the last fiscal year, or is
proposed to be paid or distributed in the future for performance during the
last fiscal year, to those individuals described in paragraphs (i)(2)(i) and
(i)(2)(ii) of this section. The description of each plan must include, but not
be limited to:

(A) A summary of how the plan operates and who is covered by the plan;

(B) The criteria used to determine amounts payable, including any performance
formula or measure;

(C) The time periods over which the measurement of compensation will be
determined;

(D) Payment schedules;

(E) Any material amendments to the plan during the last fiscal year;

(F) Amounts paid or distributed pursuant to the plan to the named individuals
and the group during the last fiscal year, less any amount relating to the
same plan that previously has been disclosed as accrued; and

(G) Amounts accrued pursuant to the plan for the accounts of the named
individuals and the group during the last fiscal year, the distribution or
unconditional vesting of which is not subject to future events.

(iv) The annual report shall include a statement that disclosure of the total
compensation paid during the last fiscal year to any senior officer or to any
other officer included in the aggregate whose compensation exceeds $50,000 is
available to shareholders upon request.

(3) Travel, subsistence, and other related expenses.

(i) Briefly describe the policy adopted pursuant to  618.8270 of this chapter
addressing reimbursements for travel, subsistence, and other related expenses
as it applies to directors and senior officers. The report shall include a
statement that the policy is available to shareholders upon request.

(ii) For each of the last 3 fiscal years, state the aggregate amount of
reimbursement for travel, subsistence, and other related expenses for all
directors as a group.

                                  * * * * *

Dated: December 16, 1993.

Curtis M. Anderson,

Secretary, Farm Credit Administration Board.

[FR Doc. 93Ä31282 Filed 12Ä22Ä93; 8:45 am]

BILLING CODE 6705Ä01ÄP