37
Commissioner, T.C. Memo. 1993-298; Diverse Indus., Inc. v.
Commissioner, T.C. Memo. 1986-84; Owensby & Kritikos, Inc. v.
Commissioner, T.C. Memo. 1985-267. Probably the greatest flaw in
his methods, as we have often stated, is that he does not base
his conclusions on comparable businesses: perhaps it would have
been too difficult to get information about insulation
contractors in particular, but industry services--as opposed to,
say, building contractors--is far too broad. In addition, we
note that the method presents a serious risk of bias: the data
come from 643 out of 2,737 U.S. companies that chose to reply to
questionnaires. Mr. Brennan's method purports to depend on the
highest compensation actually paid by other businesses, but
Executive Compensation Service, in producing its reports,
excludes "outliers" that cannot be explained by its equations.17
Despite our difficulties with Mr. Brennan's methods, we note
that respondent continues to rely on Mr. Brennan to argue that
Mr. Munro was not entitled to compensation exceeding $300,000,
or, if we conclude that he rendered exceptional service as a
chief executive officer, $400,000. We agree with respondent that
Mr. Munro was not a truly superlative chief executive officer in
17We have trouble understanding the significance of Mr.
Brennan's use of "standard deviations" in this context. He
admitted that his data are asymmetrical and do not display the
percentage of outliers at distances of more than one or two
standard deviations from the mean that one would expect from a
bell-shaped curve; i.e., that the distribution of the population
is not normal.
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