24 Companies Make Up The Average Peer Group: A Key Factor for Executive Compensation Setting

Oct. 16, 2009 - PRLog -- Redwood Shores, CA – Equilar, the market leader in executive compensation data and research published an analysis of Fortune 500 peer group composition. The analysis, covering 401 companies, finds that most peer groups consist of 10 to 20 companies with a median group size of 19.

As attention to executive pay remains high, the government and the media have magnified their focus on more granular details of the executive compensation equation. All aspects of the pay package are under greater scrutiny, including the process behind setting pay. One important component of this process is peer group determination. Companies choose peer firms against which to measure and benchmark their compensation, ensuring their pay remains at a competitive level for executive talent. The companies selected to compose the peer group have a significant impact on the ultimate level and form of pay for executives.

The SEC requires firms to list all peer companies used as part of the pay determination process. In addition, the SEC has requested additional details regarding the process employed in selecting a peer group. Equilar’s Fortune 500 Peer Group Report reviews the current landscape of peer determination with an analysis of peers disclosed by Fortune 500 firms.

Some key findings from the study are presented below:

•   Among the Fortune 500, 27.2% of peer groups have between 16 and 20 companies listed
•   The average peer group size is 24 while the median size of peer groups is 19 companies
•   Most companies benchmark to peers one-half to two times their size
•   24% of companies named as peers also show up as peers of peers (2nd-degree peers)
•   Most companies are used in a peer group at least 10 times
•   The industries with the largest average number of stated peers in a group were Industrials with 35, Utilities with 28 and Services along with Technology both having 26

For more information on the Fortune 500 Peer Group Report, visit http://www.equilar.com/Executive_Compensation_Reports.php.

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About Equilar, Inc. (http://www.equilar.com)
Equilar's award-winning product suite is the gold standard for benchmarking and tracking executive compensation, board compensation, equity grants and award policies and compensation practices. Equilar products and custom research services enable corporations, human capital consulting firms, law firms, investors, individual executives, and the media to accurately compare pay packages across thousands of public companies using SEC and exclusive survey data. Equilar research is cited frequently by Bloomberg, BusinessWeek, Reuters, The New York Times, The Wall Street Journal and other leading media outlets. Equilar (Redwood Shores, CA) was recognized recently as one of the fastest-growing private companies in America by Deloitte, Inc., and the Silicon Valley Business Journal.