Reviewing a Compensation Expert Report: Eleven Questions for Counsel

A compensation expert report should explain how the evidence supports the opinion. The questions below are general review considerations, not findings about a particular expert or case. A limitation may call for explanation, adjustment or additional evidence; it does not automatically make an opinion inadmissible.

1. Are the industry and organizational comparisons relevant?

Check the selected comparison population and explain material differences in industry, size, complexity and responsibility.

2. How does organizational performance fit the assignment?

Identify whether performance, profitability or other business context is relevant to the question and period being examined. Explain its role rather than assuming it always determines pay.

3. Are public-company comparisons appropriate for a private business?

Public-company data may be useful, but differences in ownership, scale, incentives and reporting should be evaluated. Public/private status alone does not establish that a comparison is valid or invalid.

4. What does the sample support?

Consider sample size, representativeness, missing data and uncertainty. A large sample does not cure poor comparability, and a small sample calls for appropriate limits rather than an automatic conclusion.

5. Is ownership structure relevant?

If employee ownership or another ownership feature affects the analysis, explain how it matters and what evidence supports the adjustment.

6. Were actual duties matched?

Compare responsibilities, decision authority, time commitment and organizational scope, not job titles alone.

7. What supports any pay hierarchy?

Explain the evidence for ranking roles and selecting market levels rather than assuming one title must always command more pay than another.

8. Are comparisons applied consistently?

Check whether the same role-matching and adjustment principles are applied throughout, and explain justified exceptions.

9. Are individual qualifications and contributions relevant and supported?

Identify which qualifications, time commitments and contributions matter to the assignment and what records support them.

10. Does the expert have the expertise this analysis requires?

Evaluate the witness’s relevant knowledge, experience, training and ability to explain the methods. Industry experience can be valuable, but it is not the only route to qualification.

11. Are adjustments and statistical methods explained?

Ask for the rationale and sensitivity of material adjustments. In regression, examine model assumptions and whether predictors are highly correlated. Multicollinearity concerns relationships among predictors; interaction terms concern whether one predictor’s effect varies with another. These are distinct issues and require different checks.

A useful review connects each concern to its effect on the opinion. Counsel determines the applicable disclosure and admissibility requirements, while the expert remains responsible for independent analysis and its limitations.

References

• Federal Rules of Evidence 702–703
• NIST: Variance inflation factors
• NIST: Interaction definitions

This material is general educational information, not legal or tax advice for a particular matter. Requirements vary by jurisdiction and can change. Counsel and tax advisers should verify the governing rules. No tax treatment, privilege, admissibility or case outcome is guaranteed. An inquiry does not create an engagement.