This client uses GRG each year to benchmark the market competitiveness of remuneration for top executives (MD & direct reports) and the fees of non-executive directors. For consistency they use the same comparator group for executives and non-executive directors.
The client is a top 100 Industrial Company with a very stable business but which tends to experience relatively high volatility in its share price and therefore in its size as determined by reference to market capitalisation. This share price volatility is largely caused by volatility in the cost of its raw materials. Had market capitalisation been used as the basis for selecting the comparator group of companies to be used for benchmarking the market competitiveness of KMP remuneration practices, then inconsistent outcomes would have been presented from year to year as the company’s size and the companies in the comparator groups would have fluctuated from year to year. To achieve consistent outcomes the Board decided to use a consistent reference group of companies. The companies were selected from the top 100 but focusing on companies that had similar size and complexity of operations. A group of approximately 20 companies has been used over recent years.