- 41 -
the applicable Treasury rate. Mr. Rowley did not discount for
future dividend payments or the possibility that the options may
not be exercised.39
(iv) Mr. Rowley’s Conclusion
In Mr. Rowley’s opinion, after conducting a financial
analysis of Menards and the comparison group companies, “a CEO of
Mr. Menard’s talents and results would be paid at the 90th
percentile or higher.” According to the financial analysis,
Menards performed in the 90th percentile with respect to its
return on equity, return on assets, and return on capital and
below the 10th percentile with respect to average debt. Mr.
Rowley concluded that Menards would want to reward Mr. Menard for
the company’s increased market share in home improvement sales40
and high sustained earnings by compensating Mr. Menard at or
above the 90th percentile.
Combining each CEO’s salary, bonus, and LTI to arrive at
“total direct compensation”, Mr. Rowley computed 25th, 50th,
75th, and 90th percentile categories of $7,839,787, $11,496,214,
$15,974,951, and $19,272,533, respectively. According to these
39In support of his decision against discounting for
dividends or forfeiture, Mr. Rowley testified that CEOs “don’t
think about” dividends and stay in their positions “for a long
time” and hold onto their options.
40Mr. Rowley based his conclusion that Menards increased its
market share on Menards’s substantial increase in sales and
multiple new store openings over the years.
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