Industry as Peer Group Criterion

Posted by Louisa Lan, Equilar, Inc., on Saturday, February 9, 2019 Editor's Note: Louisa Lan is a Research Analyst at Equilar, Inc. This post is based on her Equilar memorandum. Related research from the Program on Corporate Governance includes the book Pay without Performance: The Unfulfilled Promise of Executive Compensation, by Lucian Bebchuk and Jesse Fried. Regarding the process of benchmarking executive compensation, the SEC has detailed requirements for companies to disclose their peer group companies with appropriate justification. Peer group analysis has become a key step to ensure competitive pay practice. However, selecting which companies to consider as “peers” can be a difficult process for many, especially for companies that have a foot in multiple industries. This process also gives valuable insight to shareholders about the industry landscape in which the company frames its compensation decisions. Peer group construction…

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