John L. Weinberg Center for Corporate Governance and Frederic W. Cook & Co. Contribute Commentary on Peer Group Creation
Redwood City, CA (March 3, 2014)—Equilar, the leader in executive compensation benchmarking and governance research, today announced the release of its 2014 S&P 1500 Peer Group Report, written in partnership with the John L. Weinberg Center for Corporate Governance at the University of Delaware and nationally recognized consulting firm Frederic W. Cook & Co. The report provides insight into methods and trends in the peer group creation process and offers disclosure examples highlighting CEO compensation.
“In recent years, companies have come under increased scrutiny to justify executive compensation packages,” said Aaron Boyd, Equilar’s Director of Governance Research. “Faced with intense pressure from both shareholders and proxy advisory firms, companies must take great care to create peer groups with clear and logical explanations in terms of peer selection.”
In the 2014 S&P 1500 Peer Group Report, Equilar found that 68.7% of peer groups in the S&P 1500 consisted of a set size of 11 to 20 companies. Though most companies had peer group sizes within that range, the number of peers increased with the size of the company. Also, the number of international company references has grown, with 32.0% of companies disclosing at least one peer headquartered outside of the United States.
“We are pleased to have had the opportunity to work with Equilar on its latest piece of research to offer an alternative perspective on the use and effectiveness of peer groups,”said Charles Elson, Director of the John L. Weinberg Center for Corporate Governance. “The peer group itself could be useful as a reality check at the end of a board’s process, but using it at the starting point results in skewed pay and pay that’s organizationally separated. Boards should keep this in mind as they set pay for top executives.”
“We find that most companies use industry and size similarity in selecting peer groups,” shared Matthew Stinner, Managing Director at Frederic W. Cook & Co. “However, companies are faced with unique issues in regard to peer group selection. This comprehensive report provides great insight into how companies are addressing these issues across industries and size ranges.”
Headquartered in Redwood City, Calif., Equilar is the leading provider of executive compensation data and governance tools for corporations, nonprofits, consulting firms, institutional investors, and the media. As the trusted data and executive solutions provider to 70% of the Fortune 500, Equilar helps companies accurately benchmark and track executive and board compensation, pay for performance results, and compensation practices. In addition, Equilar offers a leading business and event networking solution focused on serving executives and board members. Equilar’s research is cited regularly by Bloomberg, The New York Times, The Wall Street Journal, and other leading media outlets.