Wechsler & Co., Inc. - Page 45

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         compensation practices because they would place that investor in             
         the position of absorbing all of the downside in petitioner’s bad            
         years while not adequately allowing that investor to benefit from            
         and share in the upside in petitioner’s good years.                          
              Mr. Hakala suggested a method for reasonably compensating               
         Mr. Wechsler and petitioner’s other top managers under which Mr.             
         Wechsler and those managers, in addition to their salaries, would            
         receive annual bonuses totaling 20 percent of petitioner’s                   
         profits for that year before payment of bonuses.  Mr. Hakala                 
         explained that his approach would allow an independent investor              
         to obtain most of the profits from petitioner’s good years, yet              
         require that investor to absorb all of the downside from                     
         petitioner’s bad years.  He added that incentive compensation for            
         hedge fund managers is commonly set at 20 percent of the fund’s              
         annual trading profits.  Mr. Hakala further determined that his              
         prescribed annual “bonus pool” money for petitioner’s managers               
         would then be allocated 40 percent to Mr. Wechsler and 60 percent            
         to the other managers.  He based that allocation on certain                  
         surveys of other finance industry companies in which the highest             
         paid officer in a surveyed company typically received around 30              
         percent to 40 percent of total officer compensation.  Many of the            
         companies covered in those surveys were much larger than                     
         petitioner.                                                                  








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