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:
- Engage the Committee and management to define how the “peer group” will be used (e.g., pay levels, pay practices, or both)
- Outline a set of objective characteristics for which to evaluate potential peer companies (e.g., size, growth, valuation, industry)
- Determine whether additional secondary criteria should be used to narrow the universe of potential peers (e.g., geographic footprint, ownership structure)
- 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
- Ensure that peer companies are within a reasonable range of the client’s revenue if using for pay levels comparisons
- 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
- Confirm disclosure requirements with company’s internal and external counsel
-Liz Dunshee, CompensationStandards.com February 24, 2021
