By Damion Rallis, Senior Research Associate
Last month, Germany’s Der Spiegel magazine reported that a flight operated by Irish discount airline Ryanair Holdings plc (ISE:RY4B) nearly crashed after pilots “tried a new manoeuvre to make up lost time.” Additionally, the company has been under suspicion for alleged tax evasion in Germany and Italy, where it faces investigations and possible prosecution. This confluence of events is partly responsible for the recent decline of the company’s ESG rating into high-risk territory (rated “D” as of December 2012). These events also warrant a closer look at the company and a CEO who has become the darling of controversial headline writers all across the EU and North America.
Aside from the long-term risk reflected in Ryanair’s “D” rating for ESG, GMI Ratings’ Litigation Risk model has been showing warning signs about the cheap ticket airline for several months as its score has declined over four consecutive rating periods since its high of 33 at the end of August 2012. The company’s current score is 20 (meaning “Moderate Risk” but trending into “High Risk” territory), placing the company in the 20th percentile of all companies in Western Europe, indicating higher shareholder class action litigation risk than 80% of all rated companies in this region. Specifically:
- Board & Compensation Practices — Our ESG rating for Ryanair includes red flags for Related Party Transactions, the lack of an Audit Committee Industry Expert, and Pay Performance Links.
- Environmental & Social Red Flags – Ryanair has not incorporated Pay Linked to Environmental Impacts and is considered a High Social Impact Company
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