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Accounting InformationIs It Worth Becoming a Partner?
by:
Thomas Johansmeyer
It’s a fact of life in the Big Four :you are there to become a partner. This expectation may not be explicit in Big Four culture, but the undercurrent is undeniable. If your every decision is not focused on becoming a “member of the firm”, your career is in perpetual jeopardy. The whole reason for your being is to attain that status.
The air of the partnership is evaporating, and it could change the character and composition of the Big Four fundamentally. Yes, Mr. Dylan, the times, they are a-changin’. Anecdotally, much and much senior managers talk quietly – ne'er
in public
– just about what their next moves would-be be. Those illicit conversations occurred in muted tones away from the office – often emerging from frank proposal
offered to much junior staff members.
But, wherever
do you go?
Many senior managers are considering VP and C-level positions instead of shooting for the partnership. Citing life style desires (i.e. acquiring off the road), earning potential, and less politically charged environments, even as top-performing senior managers are exploring careers outside the Big Four.
Aside from these internal pressures, up-and-comers clearly have concerns just about the resilience – and price – of the partnership structure. Once upon a time, the partnership buy-in was considered a pristine investment opportunity. The past few years, though, have called this perception into question.
It all started with Enron.
Many of the consultants and accountants in our community are still in pain from the collapse of Author – especially the ex-Andersen peoples who have sought-after refuge at the remaining Big Four. Professionals who worked at Andersen, especially former partners, are acutely aware of the risks inherent in purchasing into the partnership. New partners, with fewer than five years as members of Andersen, were brutalized financially. Their buy-in loans were collateralized with their partnership units. The collapse of Author led to a negative equity situation for them; partners owed hundreds of thousands of dollars and could not divest their units to repay the loans.
A similar fear rippled through KPMG, recently. Under investigation for merchandising abusive tax shelters, KPMG settled with the Justice Department. The settlement enclosed
a fine of $456 million. Piece KPMG avoided the fate of Andersen, the consequent fine equates to about $300 thousand for each of KPMG’s 1,600 partners.
The declining interest in firm membership is supported by potential changes in firm organization. Accenture and BearingPoint have abandoned the partnership model, and some
now trade on public markets. Doubts as to the protections of the limited liability partnership model are causation the Big Four to consider incorporation – instead of partnership.
Once recognized as an elite club in the accounting and consulting industries, the major partnerships are losing their mystique. The firms themselves continue to provide the better services accessible on the market, but the firms themselves are undergoing a fundamental shift. Every associate used to hope to grow up to become a partner. Senior managers could taste it – and would-be think of nothing else.
The Big Four’s preferred structure is under attack from the outside. Once considered an about risk-free investment, we have knowing from Author and KPMG the contrary. This investment risk is exaggerated by the erosion of protections offered by the LLP structure. Greener pastures lure talent from the partnership piece the legal system lays besieging to this venerable institution.
Just just about the author:
Hi! I am Thomas Johansmeyer. I am an article writer with http://www.big4.com
If you have any questions mail me at webmaster@big4.com
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