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traded companies. The returns on equity of the publicly traded
companies, however, ranged from a loss of 7.2 percent to a gain
of 39.6 percent for 1995 and from a loss of 19.1 percent to a
gain of 35.9 percent for 1996. Petitioner's equity showed a loss
of 0.5 percent for 1995 and a gain of 7.8 percent for 1996. Of
the 12 publicly traded companies, 2 had returns on equity lower
than petitioner's in 1995, and 5 had returns lower than
petitioner's in 1996. Petitioner's returns on equity were within
the range of the returns realized by the publicly traded
companies. Thus, without more,6 comparison to those companies
does not show that petitioner's returns on equity would not
satisfy the expectation of reasonable investors.
Dr. Lacey opined that the compensation paid to Dennis and
Curtis in salaries and bonuses exceeded the 1995 and 1996 total
cash compensation of management for the large publicly traded
companies he examined. However, as petitioner points out, Dr.
Lacey failed to take into account the stock options granted to
the executive officers of the publicly traded companies. Top
executives at many publicly traded companies typically receive
stock options as part of their compensation packages. These
stock options can produce substantial compensation in the event
6Dr. Lacey offered no evidence that stockholders sold their
stock in the corporations reporting losses, that the prices of
stock of the companies were lower, or that the corporations
replaced management.
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