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Mr. Reilly concluded that the total amount available as
reasonable compensation for Dennis and Curtis, as indicated by
the residual from a fair return of invested capital analysis, was
$1,230,566 for 1995 and $778,313 for 1996.
Mr. Reilly combined the results of his two analyses and
found that the upper end of the range of reasonable combined
compensation for Dennis and Curtis was approximately $1.2 million
for 1995 and $1.1 million for 1996, without any adjustment for
undercompensation in prior years. Mr. Reilly concluded that
Dennis and Curtis were undercompensated by more than $2 million
for the period from 1986 to 1994.
We question Mr. Reilly's use of his fair return on invested
capital analysis to show that Dennis and Curtis were
undercompensated in prior years. An executive has not been
undercompensated simply because the stockholders received an
excellent return on invested capital that greatly exceeds a
"fair" return. As Mr. Reilly acknowledged, a fair return on
invested capital is the minimum a stockholder would expect and
demand; a stockholder who has not received such a return will
either replace management or sell the stock.
Mr. Reilly's use of the cumulative excess amounts over a 10-
year period created a distortion that was merely an attempt to
justify payments in excess of the maximum Mr. Reilly could
compute using his other methods. The Court notes that Mr. Reilly
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