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Petitioner, nevertheless, asserts that an independent
investor would still be satisfied with the corporation's 36.05
percent cumulative average annual return on equity through the
1990 fiscal year. We disagree.
In our opinion, the cumulative average annual return on
equity petitioner experienced over the period from July 1, 1980
through June 30, 1990, would not be as significant to an
independent investor as the corporation's return on equity for
the current 1990 fiscal year in issue. Indeed, the record
reflects that petitioner's directors' usual practice had been to
tie Mr. Martin's annual bonus to the corporation's financial
performance during the recent fiscal year. Also, the higher
36.05 percent cumulative average annual return is somewhat skewed
by the much higher annual returns on equity petitioner enjoyed
during its earlier years of operation, when its equity was much
lower.
E. Internal Consistency
The fifth factor focuses on whether the compensation was
paid pursuant to a structured, formal, and consistently applied
program. Bonuses not paid pursuant to such plans are suspect.
Similarly, bonuses paid to controlling shareholders are also
suspect "if, when compared to salaries paid non-owner management,
they indicate that the level of compensation is a function of
ownership, not corporate management responsibility." Elliotts,
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