Industry is "far and away" the most common criterion used by companies in selecting peers, according to Equilar's 2015 Peer Group Report for the S&P 1500. The report, which analyzed how companies create peer groups and select individual peers and how companies stack up against peers with regard to company size and CEO pay, included the following findings:
- The most common range of peers in the S&P 1500 was 16-20 peers, with larger companies including more peers (the median number of peers for the S&P 500 was again 17 peers, identical to the 2014 report).
- Only about 8% of companies used more than one peer group, reflecting fears that use of multiple peer groups might raise concerns with investors and proxy advisors about companies "gaming the system" by using separate peer groups for evaluating pay and performance.
- More than 1,000 S&P 1500 companies used industry as a criterion for selecting peers, followed by revenue (952) and market cap (672); competition for talent was also used by a large number of companies (593) .
- 3M was again the most highly sought-after peer, followed by Honeywell, Eaton and Johnson & Johnson, reflecting the fact that these companies are in multiple industries.
- Over two-fifths (43%) of S&P 500 companies included at least one foreign peer (defined as a company with headquarters outside the US), and more than a quarter had foreign companies comprising more than 10% of their peer group (the three most common locations were Ireland, Canada and the UK).
- The "regression to the mean" continued among S&P 500 companies, especially large-cap companies, where average percentile ranking for revenue hovered almost exactly at the 50th percentile of the peer group. Similarly, the average large-cap company was slightly larger than its peers, and ranked at the 51th percentile of peers with regard to pay.