- 42 -
numbers, Mr. Menard’s compensation exceeded the 90th percentile
of total direct CEO compensation for TYE 1998.41
b. Respondent’s Expert
Respondent’s expert on valuing CEO compensation was Dr.
Scott D. Hakala, principal, CBIZ Valuation Group, Inc. Dr.
Hakala has testified previously before this Court as a reasonable
compensation expert. See, e.g., Brewer Quality Homes, Inc. v.
Commissioner, T.C. Memo. 2003-200.
(i) Comparable Companies
For his analysis, Dr. Hakala selected a comparison group and
divided it into two sets. The first set comprised the other two
major home improvement retail chains, Home Depot and Lowe’s,
which Dr. Hakala described as “directly comparable” to Menards.
The second set contained seven major retail chains with “somewhat
similar operating characteristics” as Menards: Dollar General,
Kohl’s, May Department Stores, Office Depot, Staples, Target, and
TJX.
(ii) Proxy Statements
Instead of using TYE 1999 proxy statements for analyzing TYE
1998 compensation, Dr. Hakala extracted data from TYE 1998 proxy
41Mr. Rowley also compared Mr. Menard’s compensation to 17
leading U.S. retailers using the Hay Retail Industry Senior
Executive Remuneration Survey. Because petitioners failed to
establish that these surveyed companies are comparable to
Menards, we do not consider this portion of Mr. Rowley’s
analysis.
Page: Previous 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 NextLast modified: May 25, 2011