This excerpt taken from the HPQ DEF 14A filed Jan 29, 2008.
Use of Benchmarking Data
During each fiscal year, management presents the Committee with an analysis of the compensation of Section 16 officers compared to that of HP's peer companies. This analysis is then discussed and reviewed by the Committee with its independent advisors. The comparative data is useful in setting and adjusting executive compensation. In general, the aim is to set target compensation levels between market median and the 75th percentile, with an opportunity to earn above-market rewards when stockholders have achieved above-market returns. In some cases, the Committee has determined that setting and paying target compensation above this range is justified due to a number of factors, including the relative size and complexity of HP and its business segments and the unique circumstances associated with any individual candidate.
The companies used for the compensation peer group analysis are within the S&P 500 in the Information Technology, Industrial, Telecom or Consumer Staples sectors; have market capitalizations greater than $45 billion and revenue in excess of $10 billion; and participate in the Towers Perrin executive compensation database. The peer group, approved by the Committee and identified below, remains unchanged from last year. It includes both technology companies against which HP competes directly or
indirectly in the market, as well as large industrial companies that are similar to HP in terms of market capitalization, complexity of business model, breadth of product offering and/or global presence.