Wechsler & Co., Inc. - Page 20

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              During its 1992 through 1999 fiscal years, petitioner did               
         not have a written compensation policy as to the payment of                  
         either base compensation or bonuses to its employees.                        
              In each fiscal year, petitioner generally paid Mr. Wechsler             
         and its other officers (1) a base salary, (2) a December or                  
         holidays bonus and (3) a May or fiscal-yearend bonus.  The                   
         December bonuses typically were based on petitioner’s year-to-               
         date earnings and the assumption of petitioner’s continuing                  
         profitability for the remainder of that fiscal year.  Generally,             
         the December bonuses were smaller than the May bonuses.                      
              Toward the middle of May, Mr. Wechsler prepared a                       
         spreadsheet listing all of petitioner’s employees and the                    
         proposed bonuses and salary adjustments for them.  Mr. Wechsler’s            
         proposed total May bonuses were based on his estimate of                     
         petitioner’s realized and unrealized profits for the fiscal year,            
         which he determined primarily by using petitioner’s most recent              
         monthly FOCUS reports, though he gave more weight to realized                
         profits because unrealized profits had not been reduced to cash              
         and petitioner wished not to liquidate investment assets.  In                
         addition, in determining the proposed May bonuses, Mr. Wechsler              
         took into account, to a small degree, his current expectations               
         and outlooks for the securities industry, petitioner, and                    
         petitioner’s portfolio.                                                      







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Last modified: May 25, 2011