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Knowledge Center Reports

2013 TSX 60 Peer Group Study

February 12, 2014

The disclosure of peer groups used to benchmark executive pay is an important component of public compensation disclosure. It enables companies to show that pay is based on market practices and comparable to that of similar companies. Though, the use of peer groups is scrutinized by institutional investors and proxy advisors alike. With voluntary Say on Pay votes practiced by over 80.0% of companies in the TSX 60 during 2013, peer group selection has become one of the more examined aspects of compensation discussion and analysis sections in annual proxies. Clear disclosure of peer groups and the criteria considered in peer selection helps make pay practices justifiable and more understandable. Since proxy advisory firms often create their own peer groups for companies to measure relative pay and performance, clear disclosure and rationale is especially important when companies’ peer groups differ from those created by advisory firms.

However, the process behind peer group determination remains varied, unclear, and apparently subjective. A host of factors are considered when selecting companies to benchmark against. To discourage strategic positioning near the bottom of peer groups, companies are often near the median of their peer groups in terms of different comparative measures. Peer groups of TSX 60 companies ranged from five to over 70 companies, and reflect a diversity of corporate governance practices. In addition to its 2014 Peer Group Report, which takes an in-depth look at peer group practices in the S&P 1500, Equilar analyzed best practices among Canada’s largest companies.

Peer Group Size

While the median size of peer groups among the TSX 60 was 17, compared to the median size of 15 peers for S&P 1500 companies, there was considerable variance in size. While 10.3% of companies disclosed a peer group with 21 to 25 peers, 24.1% of companies disclosed a peer group of 11 to 15 peers and another 24.1% used a group of 25 or more peers. The greatest number of peer companies was 76, which was disclosed by Shoppers Drug Mart Corporation.


In addition, peer group size varied significantly by industry. The Manufacturing, Transportation and Public Utilities, and Services sectors all had higher median peer group sizes compared to the TSX 60 median, at 20, 22.5, and 24, respectively. Conversely, the Finance, Insurance, and Real Estate sector had a median of 13.5, while the Mining sector had the smallest median peer group size at 13, both under the overall TSX 60 median.

Disclosure Prevalence

During 2013, 58 TSX 60 companies released a proxy that disclosed the peer groups used for compensation benchmarking in the last fiscal year. The following table lists the ten most frequently referenced companies with the number of companies that benchmarked to each company. The majority are in the Energy industry, which is understandable given that Mining and Manufacturing are the two largest industries represented in the TSX 60 at 17 and 15 companies, respectively.


The following tables break down the most highly referenced peers by industry.




Peer Selection Criteria

Companies use a number of comparative factors incorporating financial, industry-specific, and both objective and subjective elements to determine a group of appropriate firms for benchmarking. The most common criterion for peer group inclusion was industry similarity. Other criteria included similar business model, competition for business or executive talent, size (including revenue, market capitalization, assets, or number of employees), and geographic presence.

In proxies filed during 2013, 58 TSX 60 companies disclosed the criteria used in the selection of peer companies as comparators. Industry was named by 96.5% of companies as a factor in determining peer groups (90.7% of S&P 1500 companies disclosed industry in peer group criteria). The next most common criterion was geography, cited by 73.7% of companies, followed by revenue, cited by 66.7% of companies. The least commonly disclosed criteria were profitability and number of employees. The chart below depicts the prevalence of criteria used in peer group selection.


Shoppers Drug Mart Corporation included this table in its 2013 proxy, depicting selection criteria and reasons for choosing peers. The table shows how the company balanced a number of criteria and considerations when creating a peer group that is a set of comparable companies from different industry sectors, executive talent pools, and geographic markets. Interestingly, different comparator groups were used for specific executive positions.


Geography of Peer Groups

Given the relatively small number of companies based in Canada, and therefore a smaller number of direct competitors for any given company to benchmark against, it is not surprising that location plays a much larger role in peer group selection among Canadian companies than among those based in the U.S. In 2013, just 18.8% of S&P 1500 companies disclosed geography as a criteria for peer selection, in contrast to the 67.9% of TSX 60 companies that used geographic base or presence as a factor in determining peer groups. While the majority of S&P 1500 companies benchmark entirely to U.S.-based companies, the TSX 60 benchmarked to U.S. companies about half as often as to Canadian companies.

Twelve companies disclosed only Canadian firms as peers, while 41 companies disclosed peer groups composed of only Canadian or U.S. firms. Canadian peer groups were comprised of 61.0% Canadian companies at the median, while the median percent of peer groups that were U.S.-based was 31.3%. One industry sector, Services, had a median of 100.0% Canadian peers. The most evenly split sector was Finance, Insurance, and Real Estate, with 43.3% of its peer group based in Canada and 43.6% based in the U.S.

The graph below shows the median percentage of peer groups that were Canadian and U.S.-based.


Please contact Dan Marcec at for more information. Dan Marcec is the Director of Content & Marketing Communications at Equilar. The contributing author of this paper was Alice Avery, Research Analyst.

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