- 47 -
that the company's stock price rises greatly. In at least one
other case, the Commissioner conceded that the value of stock
options granted to employees in public companies should be
considered in determining what like enterprises paid for like
services. See Owensby & Kritikos, Inc. v. Commissioner, 819 F.2d
1315, 1330 n.60 (5th Cir. 1987) (experts calculated the average
amounts the top three executives could expect to earn in cash and
stock options for an outstanding performance), affg. T.C. Memo.
1985-267. When the compensation paid to Dennis and Curtis is
compared with that of other CEO's who did receive options, the
options must be considered as part of the compensation packages
being used for comparison. See Labelgraphics, Inc. v.
Commissioner, T.C. Memo. 1998-343, affd. 221 F.3d 1091 (9th Cir.
2000). Accordingly, we reject Dr. Lacey's opinion.
3. Paul A. Katz
Respondent offered the report and testimony of Paul A. Katz
(Mr. Katz) for purposes of establishing whether the compensation
petitioner paid to Dennis and Curtis in 1995 and 1996 was
comparable to that paid for similar positions in the industry.
Mr. Katz is a compensation consultant certified by the American
Compensation Association.
Mr. Katz compared the compensation paid to Dennis and Curtis
in 1995 and 1996 to the median compensation paid in those years
to CEO's, and COO's, respectively, as reported by the Economic
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