This excerpt taken from the HPQ DEF 14A filed Jan 23, 2006.
Review of External Data
Each year, we survey the compensation practices of our peers in the United States as well as other countries in which we have significant employee populations in order to assess our competitiveness. For fiscal 2005, we targeted the aggregate value of our Total Rewards at approximately the median level for our
"blended peer" group (which combines our technology and general industry peers) for most positions. However, we strongly believe in engaging the best talent in critical functions, and this may entail negotiations with individual executives who have significant retention packages in place with other employers. In order to make such individuals whole for the compensation that they would forfeit by terminating their previous employment, the Committee may determine that it is in the best interests of HP to negotiate packages that deviate from the general principle of targeting Total Rewards at the median of our peers. Similarly, the Committee may determine to provide compensation outside of the normal cycle to individuals to address retention issues. Therefore, for some executives, compensation was above the median.
Going forward, we determined to use a technology peer group for benchmarking purposes rather than our "blended peer" group. This ensures that the cost structures that we create will enable us to remain competitive in our markets. Our technology peer group is composed of International Business Machines Corporation, Dell Inc., Apple Computer, Inc., Cisco Systems, Inc., Electronic Data Systems Corporation, EMC Corporation, Intel Corporation, Lexmark International Group Inc., Microsoft Corporation, Motorola, Inc., Oracle Corporation, Sun Microsystems, Inc. and Xerox Corporation.
Overall, our outside consultants determined that our compensation programs, as structured, are at market relative to our technology peers. Based upon review of the compensation arrangements discussed below, peer group compensation levels and our assessments of individual and corporate performance, we believe that the value and design of our executive compensation program are appropriate.