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(d) Amount of Maximum Reasonable Compensation
(1) RMA Ratios
Both Hakala and Ding direct our attention to RMA surveys of
companies that specialize in mobile home retailing. None of the
expert witnesses was able to identify any published surveys of
the amounts of executive compensation for the mobile home
retailing industry. However, it was noted that the RMA’s surveys
provided financial ratios, including a ratio for executive
compensation to company sales.
In her analysis of the RMA data, Ding stated that
petitioner’s--
average compensation [total executive compensation,
including what petitioner paid to Mary] to sales ratio for
the period 1986-1996 was 4.6%, which was slightly above the
RMA 75th percentile of 4.2% and considerably below our
[i.e., Ding’s] projection of the 90th percentile average of
5.9% (Exhibit F).
Ding regarded the following considerations as being among those
leading to her conclusion that Jack “achieved exceptional
financial performance” at petitioner, “justifying a comparison of
compensation above the 75th percentile and as high as the 90th
percentile”:
Petitioner’s sales grew at an average annual rate of 17
percent while the industry grew at an average annual rate of
only 10.8 percent.
Petitioner’s inventory turnover rate, “a key measure of
efficient use of capital and inventory management”, was more
than one-third higher than the mobile home retail industry
as a whole.
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