Mar 15, 2017
Pirc’s Sports Direct pay claim shows value of ratios
According to calculations by Pensions & Investment Research Consultants, published by City AM, Sports Direct had a chief executive-to-average employee pay ratio of 400:1 - the second highest in the FTSE 350. Mr Ashley has neatly highlighted both the flaws in crude pay ratios, and their power to focus shareholders' minds nonetheless. Recent government support for publishing ratios stumbled over a "Suits you, sir" factor: partners at John Lewis in menswear and elsewhere are not that highly paid, giving the employee-owned retailer a ratio of 73:1; while partners at Goldman Sachs are so well paid they can afford Savile Row and a more tailored 45:1 ratio. Then there is the "Overalls" factor: outsourcing low-paid cleaning staff makes a pay ratio look better; putting them on payroll with benefits - as British Land and others have - makes a ratio worse. A company's pay ratio relative to others in the same sector can reveal its culture - and whether the CEO is worth it.
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