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arose from Menards’s rate of return on its shareholders’
investment for TYE 1998 has been rebutted. Accordingly, we shall
review the parties’ experts’ comparisons of Mr. Menard’s
compensation to compensation paid to CEOs by comparable publicly
traded companies and consider them in deciding whether Mr.
Menard’s salary for 1998 was reasonable within the meaning of
section 162.
2. Expert Reports
At trial, petitioner and respondent presented expert
testimony comparing Mr. Menard’s compensation with the
compensation paid to CEOs in comparable companies. In reviewing
the conclusions of each expert, we may accept or reject the
testimony according to our own judgment, and we may be selective
in deciding what parts of the experts’ opinions, if any, we
accept. See Parker v. Commissioner, 86 T.C. 547, 561-562 (1986).
a. Petitioners’ Expert
Petitioners’ expert on valuing CEO compensation was Craig
Rowley, vice president of national retail practice of Hay Group,
Inc., an international management consulting firm known for
compensation analysis and design.
(i) Comparable Companies
For purposes of comparing Mr. Menard’s compensation with
that of similarly situated executives, Mr. Rowley selected a
comparison group of publicly traded companies that sold hard
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