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CEO Pay Reflects Peer Group Selection
REDWOOD CITY, CA (July 13, 2016) — Companies weight CEO pay heavily in comparison to a set of peer companies,
and indeed, 95.4% of S&P 500 companies disclosed a compensation benchmarking peer group in their most recent
proxy statements, according to a new report from Equilar,
Peer Group Composition and Benchmarking 2016.
The report found that a majority of S&P 500 companies—or 53.5%—paid their CEOs between the 25th and 75th percentiles
of the peer groups they disclosed. And very few—less than 8%—paid the maximum or minimum in comparison to their
disclosed peer groups.
“Over the past few years, proxy advisors have played a role in influencing peer group creation and CEO pay
comparisons,” said Patrick Haggerty and Joe Mallin, Partners at compensation consultancy Pay Governance, in
comments provided for the Equilar report.
“Because proxy advisors establish their own peer groups to compare a company’s relative CEO pay and total
shareholder return—and typically share that information with compensation committee members—many companies
have adjusted peer group development to align with those advisory firm opinions,” the Pay Governance
consultants said.
Alternative comparisons to proxy-disclosed peers reflect the various viewpoints in the marketplace that investors
use to evaluate executive pay. For example,
Equilar Market Peers (EMP) identifies the 15 most
strongly linked companies within a target company’s larger peer network using analytics and algorithms proven in
the social networking space to generate an interconnected network of peer companies consisting of “who you know”
and “who knows you.”
When analyzing how companies pay CEOs compared to their Equilar Market Peers, less than half—or 49.3% of S&P
500 companies—paid between the 25th and 75th percentiles. Additionally, 8.6% of companies paid the maximum of
their EMP group, and 3.7% awarded CEO pay levels the minimum of their EMP group.
“Multiple peer group comparisons for CEO pay are constructive for investors who are attempting to paint a full
picture of their portfolio companies—and for companies who want a better sense of how they are being evaluated
by shareholders and proxy advisors,” said Amit Batish, Director of Content at Equilar. “Analyzing various peer
group criteria that exist in the marketplace can help companies prepare for shareholder engagement around
executive pay.”
In addition to the CEO pay analysis described in this release, the Equilar Peer Group Composition and
Benchmarking 2016 report examines how S&P 500 companies construct their proxy-disclosed peer groups.
Data includes distributions of peer group size, number of peer groups, criteria used to determine peer
groups, whether companies have peers outside the U.S., the most common companies disclosed as peers, and
more. Pay Governance offered independent commentary to provide color and context on how companies
formulate and utilize peer groups for compensation benchmarking.
Equilar is the #1 provider of executive data, collecting information on more than 140,000 executives and
board members from thousands of public companies. Our cloud-based platforms organize executive data into
easily digestible formats, delivering compensation benchmarking, corporate governance and shareholder
engagement tools with accuracy and integrity. These platforms bring together companies, shareholders and
advisors to inform better business decisions and drive exceptional results. Founded in 2000, Equilar is
the trusted data provider for 70% of the Fortune 500, and is cited regularly by The New York Times,
Bloomberg, Forbes, Associated Press, CNN Money, CNBC, The
Wall Street Journal and other leading media outlets.
Amit Batish
Director of Content & Marketing Communications
abatish@equilar.com
650-241-6697