January 25, 2016
Peer Group Analytics
– Randi Morrison, CompensationStandards.com
Audit Analytics’ recent analysis of Russell 3000 executive pay peer groups revealed these and other interesting findings:
– Notwithstanding the fact that pay benchmarking peers usually include close competitors, companies of similar size and stature, regional companies, etc., 12 of the 13 companies most frequently named as a peer by others (at least 44 times) are considered manufacturing companies according to their SIC codes, and all are mature – with more than half having been public since at least 1965.
– Ten companies listed 100 or more peers (one company listed 366 peers), whereas the typical peer group for this index consists of 17 peers:
– Some companies don’t use any outside peers or other benchmarks.
– The most frequently cited peer company, 3M Company, disclosed in its 2015 proxy statement the following compensation peer group selection factors:
- Peer companies are monitored regularly by the same market analysts who monitor the performance of 3M (investment peers); and/or
- Peer companies have similar business and pay models, market capitalization (based on an eight-quarter rolling average), and annual revenues.