The Advisors' Blog

As this FW Cook blog highlights, a few unique dynamics are making it more challenging than usual to ensure that your compensation peer group remains accurate:

– Industry Consolidation.  With the gangbuster M&A dealmaking year, it’s no surprise that industry consolidation is flagged as adding difficulty to peer group selection.  FW Cook notes that companies can use “compensable factors” to help screen potential compensation reference companies – sample compensable factors include quantitative factors like margins and revenue growth, and qualitative factors like global sprawl or place in the business cycle.

– Uneven Impact of COVID-19 Pandemic on Companies.  We’ve previously blogged about executive pay being potentially impacted by the pandemic’s disparate impact on companies. FW Cook suggests a couple approaches a company can take: (1) delay making changes to peer groups until market conditions stabilize, (2) broaden the peer screening criteria, and (3) use supplemental measurement periods to help normalize for market disruption.

– Blurring of Industry Lines. As WSJ wrote a while back, everyone can be a “tech” company now, which adds to the confusion when choosing peer companies. FW Cook suggests potentially broadening the peer group to increase exposure to a company’s new end markets and segments (e.g., a brick-and-mortar retailer might include online retailers / ecommerce companies) or transitioning from using revenue to market capitalization.

As Liz previously blogged, the ISS window for peer groups closes this Friday, December 3rd. Even if you’re not submitting changes to the proxy advisor, it’s not too late to continue refining your peer group process.

– Emily Sacks-Wilner