‘Peer Grouping’ Leads to Pay Escalation, Academics Say in New Research Report

Unjustified reliance on external peer-group benchmarking has contributed significantly to the dramatic rise in executive pay and will continue to foster a steady increase in compensation despite the best intentions of an independent board, according to a study presented during an Oct. 17 webcast.

The academic study, released by the New York-based Investor Responsibility Research Center Institute (IRRCi), analyzed the mechanics of peer-group benchmarking for purposes of setting chief executive officer pay and showed that “peer grouping” is based on a false underlying assumption, the authors said.

Charles M. Elson, the Woolard chair in corporate governance and director of the ...