Timely Executive Compensation Topics
This episode of The EC Minute takes a look at the second step in picking or updating a peer group–the qualitative assessment. After a company has a pool of potential peers using the quantitative assessment process, looking for companies that are within a reasonable range of the subject company, the next step is to consider the characteristics of each potential peer to determine if they, in fact, would make a good peer for the subject company.
SUMMARY
This episode of The EC Minute takes a look at the quantitative assessment that goes into creating, reviewing and updating a company’s peer group. Using quantitative metrics, companies typically generate a list of companies that are similar to them. Companies often use ranges of 1/3x to 3x or 1/2x to 2x in applying the metrics they decide to use. Most often, these metrics are run against companies in the same or similar GICS industry group(s). The goal is to generate a list of 25-50 potential peer companies that can then be refined using a qualitative assessment to derive a comparator/peer group consisting of 15-20 companies.
This episode of the EC Minute looks at how companies can start to find companies to consider for inclusion in their peer groups.