LeapFrog 2010 Annual Report Download - page 151

compensation peer group (as described below), as well as data from third-party compensation surveys. The
compensation committee uses the results of this analysis to assess the competitiveness and risks of our
executives’ total compensation packages.
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 sizes that closely match our own 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 five criteria:
Qualitative Quantitative
Must be: Fall within 0.5x to 2.5x LeapFrog’s size in:
• In a related business or industry*, or • Revenues,
• A San Francisco Bay Area technology company • Market capitalization, or
• Number of employees
* Toys, educational products, consumer packaged goods for children, games (handheld or electronic,
hardware or software), software or e-commerce
The following companies comprised the direct peer group in 2010 approved by our compensation
committee in March 2010:
Blackboard Build A Bear Workshop Cybersource
iRobot JAKKS Pacific K12
NetSuite Openwave Systems Palm
RC2 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 2010:
Activision Blizzard Electronic Arts Hasbro
Mattel Scholastic Take-Two Interactive Software
The McGrawHill 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 at least three of the five criteria
required to be included in the direct peer group.
While the compensation committee does not believe that the Peer Group data is appropriate as a stand-alone
tool for setting compensation due to the unique nature of our business, it considers this information to be a
valuable reference source during its decision-making process. In addition to reviewing analyses of the Peer
Group, the compensation committee employs the collective experience and judgment of its members and
advisors (including Compensia, management and the Company’s human resource department) in determining the
total compensation and the various components provided to our named executive officers, as well as reviewing
data from third-party compensation surveys.
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