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November 23, 2022

Accounting News Roundup: Partner Compensation and Theology | 08.22.17

Partner compensation

At Accounting Today, Allan Koltin writes about why accounting firms fail succession planning and hoo boy, he covers a lot. Everything from “eliminating the B and C students” to a projection that “new hires out of college could drop by as much as 50 percent by 2020” to vague non-solicit agreements. The whole thing is worth a read if you’re working at a small or medium-sized firm with succession issues.

Still, my favorite part of it comes near the end of the column, and naturally, it concerns compensation:

I compared CPA firms to law firms and asked why law firms publicly share their average equity partner compensation when they report their profitability in publications like The American Lawyer. CPA firms go to great measures to “hide” this information from their associates and potential recruits. It may not be “all about the money,” but the leaders of these great law firms will tell you that this metric gives them a major recruiting advantage when going after top talent. I’m not saying to go out and brag, but at least find a way to really let them know how financially successful a partner can be at your firm.

I’ve never understood why accounting firms don’t share metrics like average equity partner compensation. Maybe I haven’t been looking hard enough, but if Koltin says CPA firms “go great measures to hide this information,” then I’m inclined to believe that they really don’t want to share it.

There’s always going to be a segment of CPAs who are most concerned with making money. Yes, even quite a few millennials who need purpose and constant feedback and casual dress also want to have a good idea of what kind of money partners make. And guess what? It’ll motivate some of them to go for it! So, while AK isn’t saying it, may I suggest an alternative: Go out and brag! You can send your firm’s partner compensation info to [email protected] and we’ll be sure to share it. It may end up being the best recruiting move you’ll ever make.

Theology

Luca Pacioli may have written the first treatise on double-entry accounting, but he was a Franciscan friar first, which means he took morality pret-tay pret-tay pret-tay seriously. This Forbes column dives into the theology of accounting, making particular note of Dr. John Thornton of Azusa Pacific University:

One of his areas of research specialization is looking at why accounting firms get fired. He found that the chief reasons were corruption and incompetence. It was only after the data led him to that conclusion that he learned that his favorite accountant in the Bible, Daniel, was one of whom it was said that his critics “could find no ground of accusation or evidence of corruption, inasmuch as he was faithful, and no negligence or corruption was to be found in him.” (Dan. 6:4 NAS)

For Thornton, accounting formalism is not enough to keep the system honest. Character was needed. There are never enough rules to force people to be honest, so you need to find honest people to do the work. Even corrupt people, Thornton says, want non-corrupt people handling their money. The ultimate sanction for Thornton is the final judgment when each person ‘must give an accounting for things done in the body’. “I know I lied, but I still followed FASB,” will not cut it on that day.

I don’t know for sure, but it stands to reason that some Going Concern readers that take moral and ethical matters even more serious than they take their careers. This creates a conflict since, as we’ve noted, the most successful accountants are usually the ones that come up with creative ways to comply with rules, even if that creativity isn’t within the spirit of those rules.

Again, I haven’t had any in-depth conversations with anyone about this, but it also stands to reason that some accountants find reconciling matters of morality with matters of accounting and how that affects their standing in the modern world a real struggle. Depending on how corrupt you consider the business world to be, you might think that most accountants are either losing that personal battle or are indifferent to it. I mean, sure, there are whistleblowers out there, after all; but not as many as there could be.

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