- 41 -
The surveyed companies that Packard relied upon were
generally much larger companies that were not reasonably
comparable to petitioner. We do not believe that reasonable
compensation to Mr. Myers and Mrs. Myers should be based upon the
compensation paid to executives of the companies surveyed by Mr.
Packard.25 Accordingly, we also give Mr. Packard’s opinion little
weight on the issue of comparability of compensation paid by
similar companies.26
25Indeed, Mr. Packard essentially assumed that the same
mathematical relationship (calculated through regression
analysis) between the surveyed companies’ sales or net income and
those companies’ compensation to their executives, should hold
equally true for petitioner. However, we are not convinced that
assumption is valid. In explaining the regression analysis
technique, the Watson Wyatt survey notes that “Regression
equations are recommended for use in making direct comparisons
between management compensation in your own organization and that
paid by comparable organizations.” Moreover, Mr. Packard failed
to explain what, if any, adjustments he had made to take into
account the substantial differences between those surveyed
companies and petitioner. For instance, with respect to the
Watson Wyatt survey, Mr. Packard merely stated: “The information
* * * [from that survey] correlated well against the salaries
paid to public executives for similarly sized large companies but
correlated less well to the compensation paid to the CEO’s of
small companies. The report did however correlate well with
compensation and salaries paid to the non-owner employees of
companies regardless of the size of the company.”
26To be sure, some of the survey data does indicate that the
$1,113,800 in total compensation Mr. and Mrs. Myers were paid for
petitioner’s year ended July 31, 1996, was high. Yet, for this
data to establish persuasively that the compensation paid Mr. and
Mrs. Myers was unreasonably high, further analysis by
respondent’s expert was required. Among other things, the total
compensation packages furnished the executives working for the
much larger companies surveyed should have been evaluated and
compared against the total compensation package petitioner
(continued...)
Page: Previous 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 NextLast modified: May 25, 2011