LeapFrog 2009 Annual Report Download - page 144

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In 2009 the nominating and corporate governance committee of our Board of Directors engaged Compensia
to provide it with advice and guidance on our director compensation practices.
Use of Competitive Data
To monitor the competitiveness of our executives’ compensation, the compensation committee uses a
compensation peer group that reflects the pay of executives in comparable positions at similarly situated
companies. Typically, this compensation peer group, or the “Peer Group, is composed of a cross-section of direct
competitors, as well as companies in related industries with a focus on toy, gaming, and educational products.
The Peer Group consists of both “direct peers” and “industry reference peers.” The direct peers include
companies with market positions and size that closely match ours, and represent the group that the compensation
committee uses to determine the competitiveness of our executive and director compensation programs.
To be included in the direct peer group, a company must meet at least three of the following six criteria:
Qualitative Quantitative
Must be: Must be 0.4x to 2.5x LeapFrog’s size in:
• In a related business or industry*, • Revenues,
• A San Francisco Bay Area technology company, or • Market capitalization, or
• A turnaround company • Number of employees
* Toys, educational products, consumer packaged goods for children, games (handheld, electronic, hardware
or software), software, or e-commerce
The following companies comprised the direct peer group in 2009 approved by our compensation
committee in October 2008:
BlackBoard Build A Bear Workshop CyberSource
iRobot JAKKS Pacific K12
Midway Games Openwave Systems Palm
RC2 Real Networks Renaissance Learning
THQ
The industry reference peer group was established as a secondary reference point for our executive and
director compensation programs to identify compensation design trends and “best practices” in our industry.
Industry reference peers include companies that provide toys, educational products, consumer packaged goods
for children, or games (handheld or electronic, hardware or software). The following companies comprised the
industry reference peer group for 2009:
Activision Hasbro Scholastic Corporation
Electronic Arts Mattel The McGraw-Hill Companies
Although they operate in a similar business or industry, these companies were included in the industry
reference peer group rather than the direct peer group because they did not meet two or more of the six criteria
established for the direct peer group.
Certain companies that were in our 2008 Peer Group were eliminated in the 2009 Peer Group because the
compensation committee determined that the compensation practices of those companies were less relevant to
LeapFrog, generally because of their sizes or business focuses being different from those of LeapFrog. We
believe the companies in our Peer Group represent a good cross-section of the companies against which we
compete for talent or that are similar to us in size and business focus.
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