With AGM season around the corner, and remuneration set to be a top issue for investors, chief executive pay ratios could again be about to come under the microscope.
And while the certain retailers could feel the heat, a number of City firms should be able to rest easy.
Pensions & Investment Research Consultants (Pirc) has drawn up a list of FTSE 350 companies with the highest and lowest chief executive-to-average employee pay ratios.
However, in a statement to the stock exchange today, Sports Direct, which was shown as having the second-highest ratio, disputed the figures, describing the data as "fake news" and saying it had contacted Pirc to request a copy of the report.
"We will be writing to them to express our disappointment," it said.
Pirc has declined to comment.
The data analysis, identifies property investment company Shaftesbury, challenger bank Shawbrook and real estate investment trust (REIT) Londonmetric Property as the companies with the lowest ratios, all 5:1.
Great Portland Estates, IG Group, Man Group, Jupiter Find Management and Intermediate Capital Group (ICG) also featured at the bottom of the table.
The FTSE 350 company at the top of the table was BGEO Group, a Georgia-focused bank, which Pirc found to have a pay ratio of 731:1.
It is worth bearing in mind here that BGEO is Georgia-based and so its employees are generally paid less than those in the UK. Sources close to the company also said its chief executive’s pay is strongly linked to shareholder performance.
Sports Direct, which came under pressure last year over claims its Shirebrook warehouse was run like a “Victorian workhouse”, came in at second with a ratio of 400:1. Pirc noted that the Sports Direct figure was heavily skewed because its chief executive "received a bonus of £6,610,000 in shares, based on previous performance. It is important to take into consideration that this ‘bonus’ payment is made every four years under the Sports Direct policy. In 2016, 2014, 2013 and 2012, the CEO received a salary of £150,000, which would bring the pay ratio down to 9:1."
Security behemoth G4S, which has a largely non-UK employee base, came in third (296:1), Russian miner Evraz fourth (277:1) and Tesco in fifth (258:1).
|At the top...|
|Sports Direct||400:1||Consumer services|
|Compass Group||219:1||Consumer services|
|Reckitt Benckiser||179:1||Consumer services|
|Kaz Minerals||156:1||Basic materials|
|At the bottom…|
|Intermediate Capital Group||9:1||Financials|
|Jupiter Fund Management||9:1||Financials|
|Cairn Energy||8:1||Oil and gas|
|Great Portland Estates||7:1||Financials|
According to Pirc, the average FTSE 350 pay ratio for 2015/16 was 52:1. By sector, consumer services had the biggest ratio (81:1), ahead of consumer goods (68:1), industrials (54:1), basic materials (47:1) and then, despite dominating the bottom end of the table, financials (43:1).
Below were healthcare (39:1), telecommunications (38:1), utilities (32:1), technology (30:1) and oil and gas (24:1).
To work out the ratios, Pirc divided chief executive pay (comprising salary, bonus and benefits, other than pension) by average employee pay, which is based on data available in financial statements.
“Consumer-facing companies have higher pay ratios because they tend to have large workforces, much of which is low-skilled,” said Oliver Parry, head of corporate governance at the Institute of Directors. “The ratio at an investment management firm, for example, will be significantly lower as they will have a smaller workforce and large numbers of well-paid employees.
“The inherent weakness of pay ratios is that investors will not be able to make a judgement on a company’s overall corporate governance based on this number alone.
“Context is everything and investors must rate companies based on a range of measures, including the make-up of the board and financial performance, as well as pay.”
Manifest, a corporate governance research and voting company, appeared to give its backing to the Pirc figures on Wednesday, describing them as “not fake”.