An Accountability Problem in Accounting Firms
Implementing better reporting systems in the Big Four
2017 was a time of reckoning for all industries as the #MeToo movement gathered international recognition. Many companies struggled, and still struggle, with how to deal with internal sexual harassment claims and many cleaned house of its harassers as a statement of allegiance to the movement.
The Big Four is a famous nickname given to the top consulting firms by income, which is Deloitte, Ernst & Young (EY), PricewaterhouseCoopers (PwC), and Klynveld Peat Marwick Goerdeler (KPMG). All together, they employ over one million employees and have recently dealt with many sexual harassment and bullying claims.
In 2018, it was reported that the Big Four let go of 37 partners on claims of sexual harassment and bullying.
It started with Deloitte’s admittance of the termination of 20 partners, a dominoes effect ensued — KPMG admitted that 7 partners were let go, while EY and PwC disclosed that each had let go 5 partners for similar misconduct. With these terminations, each firm made it clear that they “will not tolerate this behaviour” and stated that they would look at ways to prevent misconduct like this in the future.
Or so it was said.
Culture of fear
In 2019, a Financial Times investigation revealed a culture of fear at these firms. Compiling the stories from 20 different former employees of various Big Four firms, FT identified a disturbingly common pattern of the treatment of misconduct complaints;
“most initially felt ignored, then isolated and were eventually pushed out”
Almost all whistleblowers filed complaints about an individual of a higher rank within the firm.
What were the other repercussions?
- In most of these cases, the whistleblower left within months of raising their concerns, while the alleged perpetrator remained.
- Nearly half of these whistleblowers stated they were pressured into signing NDAs. Many of them did not feel safe to tell their stories.
- One of them noted that they were only telling this story because they were worried about young graduates who leave university excited to join to be embraced by a culture that they did not expect. “The firms are blooming good at PR”. Another story stated that the Big Four’s lack of employee support was infuriating when considering how influential each firm is.
“Their clients are in every industry in the world, from universities to governments to businesses, and they are the ones setting the bar on ethics.
I have a really hard time accepting that the people who are writing the rules of the corporate world are the same people who, when the rubber hits the road, really have no ethics and will ruin someone’s life to protect their reputation”
Cesspools for sexual harassment, bullying & discrimination
Many argue that the structure of these firms is what allows these firms to flourish as “cesspools for sexual harassment, bullying, and discrimination”.
The former director of Workplace Gender Equality Agency in Australia, Libby Lyons, said —
“the structure [of time-based billing] firms can make them more susceptible to these types of problems”
The FT article showcases this due to the fact the Big Four want to protect their top fee-earners, even if this is to the detriment of the rest of the workforce. Those at the bottom of the ladder have no prestige attached to them.
One whistleblower puts it that —
“the reputational damage of having a partner being seen to misbehave is far more significant to them than paying someone off and telling them to shut up”
Partners have contributed decades of work to their organisations to receive that prestigious title.
The expectation of long working hours can also lead to discrepancies for diversity hiring, especially with the expectation of meeting partner level. In the U.K. Big Four, fewer than 1% of their partners are black and less than a quarter are female.
The more highly paid a sector is, the worse the pay gaps tend to be — the pay gap for female partners in the U.K. Big Four can range from 21 to 24% yet the numbers become more startling at each specific firm; at PwC female partners earn 38% less than men. In 2020, the U.K. national average for gender pay gap was 15.5%.
With less diversity at partner levels and a structure that promotes prestige through sacrifice, the Big Four have created a culture that resists change especially with regards to workplace misconduct.
Ken Charman, the CEO of uFlexReward, a data company that tracks and compares pay figures across companies, states that “bullying is inevitable within organizations with a strict hierarchy like the largest accounting firms, where the reward for making it to the top is a huge payday”. Demanding workloads and mounting pressures to get to the top creates an unusually strong bond between people who have weathered hard times together, and creates the worthwhile goal. It is somewhat similar to fraternity hazing, where members note that hazing “increases the value of the [organization], because you’ve undergone such a hard process of obtaining them”. FT writes that partners have worked together since the inception of their career with few outsiders entering that inner circle of seniority.
“When you raise issues with people who have grown up together, you become a problem for having raised an issue and finding fault with a friend,” says a former KPMG director.
2017 was a reckoning, therefore it can be assumed that positive changes have been made in each firm. Yet just last April 2021, Australian Financial Review broke a story containing a catalogue of workplace harassment complaints at Australia KPMG, which was nearly 100 complaints in the past five years. The same KPMG which fired several staff members in the UK who expensed the firm for strippers on their annual “boys’ night outs” that same year. While many of the complaints alleged to bullying against senior staff members and partners, a number of them were also sexual harassment complaints made against junior staff. In the past 5 years, KPMG Australia reported 18 allegations of sexual harassment, the second highest number after bullying (41). Over all the complaints equaled about 17 complaints a year or 1 per 500 staff. Much like in 2017, the other firms followed suit and Deloitte released their own complaints, which equaled 15 complaints a year, or 1 per 650 staff. With Two of the Four disclosing their data, there has been a growing pressure for EY, who declined to comment on the issue, and PwC, who did not respond for comment, to release similar information
As it shows, not even the top firms with all the resources at their fingertips have determined the best practices to end workplace harassment.
Following the ousting of their inappropriate partners in 2018, and the expose by FT in 2019, and the recent claims of 2021, the Big Four have all stated that they have clear policies that show that any kind of inappropriate behavior is unacceptable. Many employees state that they do not trust HR, they do not trust their whistleblowing hotlines, and they do not feel safe to report. In Part 2, we will analyze the changes in the past few years to misconduct policies at the Big Four and how they can attempt to improve their working culture.
