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Petitioner “has very high capitalization relative to
industry norms which reduce risk to the shareholder in the
event of a downturn in business, saves interest costs on
loans, enables faster growth, and causes ROE [returns on
equity] ratios to understate true profit performance.”
From the foregoing and other matters, Ding concluded as
follows:
When all the above factors are taken into consideration, it
is apparent that Brewer Quality Homes’ performance is among
the best in the industry. CEOs who achieve top performance
in their industry receive top pay, therefore it is
reasonable to expect that Jack Brewer would receive
compensation above the 75th percentile and as high as the
90th percentile.
Hakala, on the other hand, stated that for 1995 and 1996
Jack’s “compensation level * * * [as a percentage of sales] was
significantly higher than the third quartile levels of the RMA
comparable firms.” He stated that this high compensation level
resulted in a drop in profitability which, together with an
elimination of dividends, provided “low returns to its
[petitioner’s] shareholder.”
In his rebuttal report, Hakala presented several criticisms
of Ding’s use of RMA data. We consider these criticisms
seriatim.
Ding used average percentages over time, while Hakala
focused on year-by-year figures for 1994 through 1996. Table 6
compares petitioner’s total officer compensation (Jack’s plus
Mary’s, in the case of petitioner) as a percentage of mobile home
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