This excerpt taken from the HPQ DEF 14A filed Jan 23, 2007.
Identifying Peer Companies and Benchmarking Executive Compensation
With input from management and its independent advisor, the Committee established a set of criteria to identify appropriate companies for executive pay and performance comparisons. Major objectives were emulating how institutional investors and their representatives would define such peers, avoiding self-selection, and providing continuity from year to year. Criteria used by the Committee were: (1) U.S. based companies from market sectors including information technology, industrials, telecommunications, and consumer staples where there generally are similar business and pay models; and (2) for those companies that meet the first criterion, those with a market capitalization of at least a $45 billion and at least $10 billion in annual revenue (generally the largest category covered by compensation surveys).
The peer group that was selected includes the following information technology companies: Apple Inc., Cisco Systems, Inc., Dell Inc., Intel Corporation, International Business Machines Corporation, Microsoft Corporation, Motorola, Inc., and Oracle Corporation. It also includes the following companies from the other relevant industry sectors, as described above: Altria Group, Inc., AT&T Inc., The Boeing Company, General Electric Company, The Procter & Gamble Company, PepsiCo, Inc., Sprint Nextel Corporation, Texas Instruments Incorporated, United Technologies Corporation, United Parcel Service, Inc. and Verizon Communications, Inc.