Yaron Nili is a Professor of Law at Duke University School of Law. This post is based on his recent article, forthcoming in the Harvard Business Law Review.
Over the last two decades, peer groups have become ubiquitous in executive compensation. Spurred by investor scrutiny and reinforced by SEC compensation-disclosure reforms, boards increasingly justify pay decisions by reference to a set of “peer” firms. Boards rely on metrics such as where compensation sits relative to a peer median, whether incentives are “market,” and whether outcomes are “competitive.” This benchmarking practice has drawn substantial attention from regulators, investors, proxy advisors, and scholars.
But peer groups are doing more than policing pay. In its 2024 proxy statement, American Tower defended its opposition to a change to a core shareholder-rights rule—the ownership threshold required to call a special meeting—by explicitly grounding it in peer practice: “The existing 25% special meeting ownership threshold … is aligned with those of our peers and of S&P 500 companies.” The company immediately doubled down on the peer logic, noting that “of our 23 proxy peers, more than 65%” either had thresholds at or above 25% or provided no special meeting right at all. READ MORE
