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In establishing his compensation, Herold focused on some
executives he knew personally and on some he knew by reputation,
measuring himself against his personal competitors, executives at
other companies, with whom he sought to achieve parity. He did
not find directly comparable companies or make a statistically
rigorous analysis. He looked at firms in related fields and came
up with a figure that he considered an appropriate level to
aspire to for himself. In 1992 and 1993, he considered $1.2
million the salary target compared to the executives he measured
himself against. He set this figure as his maximum compensation
in both years. He did not contemplate any increase in
compensation between 1992 and 1993 although he aimed for and
achieved substantial sales growth in that period.
Herold's bonus plans for 1988 through 1993 provided as
follows:
Sales Bonus Amounts
Increase1 1988 1989 1990 1991 1992 1993
0 - 14% - 0 - - 0 - $100,000 - 0 - - 0 - $200,000
15 - 19 - 0 - - 0 - same - 0 - $200,000 400,000
20 - 24 $100,000 $100,000 200,000 $100,000 400,000 600,000
25 - 29 same same same same 600,000 same
30 - 39 same same 300,000same same same
40 - 49 200,000 200,000 400,000 200,000 samesame
50 - 59 same same same same same same
60 - 69 300,000 300,000same 300,000 same same
70 - 79 same same same same same same
80 + 400,000 400,000 same 400,000 same same
1For the years 1988 through 1991, Herold's bonus was based on increases
in all of petitioner's revenues from its distribution and sales representative
activities. Beginning in 1992, only sales in petitioner's distribution
business under the trade name GTI were taken into account.
Herold failed to achieve his maximum bonus percentage during
2 of these years. The 1989 target was approximately $14 million
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