Peer Groups: Getting to “Yes”

A one-page checklist from Semler Brossy is great because it acknowledges that your peer group can’t please everyone – but there are still ways to identify one that will accomplish your defined objectives. Here are the steps it recommends:

1. Engage the Committee and management to define how the “peer group” will be used (e.g., pay levels, pay practices, or both)
2. Outline a set of objective characteristics for which to evaluate potential peer companies (e.g., size, growth, valuation, industry)
3. Determine whether additional secondary criteria should be used to narrow the universe of potential peers (e.g., geographic footprint, ownership structure)
4. Acknowledge that no peer group will be perfect and that not all companies in the resulting peer group will necessarily be direct competitors for business or executive talent
5. Ensure that peer companies are within a reasonable range of the client’s revenue if using for pay levels comparisons
6. Engage Compensation Committee Chair and management early to ensure buy-in and thorough understanding of the purpose of the peer group and rationale for peer constituents
7. Confirm disclosure requirements with company’s internal and external counsel

-Liz Dunshee, CompensationStandards.com February 24, 2021