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to the direct terms of the bonus plan. The bonus plan provided
that the officers were to be paid a bonus equal to 10 percent of
the gross increase in sales of petitioner for the fiscal year
1990 over its gross sales for its fiscal year 1989. Under the
bonus plan, the total bonuses paid to all officers from the bonus
pool would have been $1,068,858. The bonus plan clearly provided
that the bonuses were to be paid in an amount equal to the ratio
of an officer's annual compensation to that of all officers
applied to the gross bonus pool. The record is unclear as to the
amount the Penalbas received in base salary for petitioner's
fiscal year 1990. However, the evidence indicates that the
Penalbas' base salaries were approximately equal if not
identical. Mrs. Penalba testified that her salary, which was the
same as Mr. Penalba's for the year here in issue, was
approximately $125,000. Mr. Blumberg implied that the Penalbas'
base compensation in petitioner's fiscal year 1990 was $682,000.
Since under the bonus plan Mr. and Mrs. Penalba were to have been
paid in the same proportion as their base salary, we conclude
that the bonuses paid for the year at issue were not paid
pursuant to a structured, formal, and consistently applied
program. Also, the total amount of the bonuses appears to have
been improperly computed.
Respondent contends that neither Mr. nor Mrs. Penalba needed
an incentive to work harder since they owned the business. Both
Mr. and Mrs. Penalba testified that they gave their full efforts
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