Traditionally, companies picked a peer group by identifying 10-20 firms of similar size and industry that were used to benchmark pay levels and design practices. But with investors now watchful of whether executive pay is tied to corporate performance and expressing their opinion in Say on Pay votes, that's no longer an adequate approach.
This article discusses why the growing emphasis on the use of performance-based vehicles has made it essential to consider whether a potential peer's business cycle is aligned with the company. If they're misaligned, the competitive data from resulting peer group is likely to be an ineffective and inappropriate point of reference.
Among the issues discussed:
- Evolving Approaches to Peer Group Development
- The Business Cycle Issue
- Putting the Peer Group Together
- The Peer Group Index Approach
- Case Study Example
- The Final Analysis
