Category: Big 4

If it happens at a Big 4 accounting firm, we’re talking about it here.

PwC Unveils Changes to Compensation Structure

~ Note updates after the jump.

In the last week or so there has been lots of compensation news coming out of PwC, starting with the news from last Friday that “exciting changes” to the compensation structure were happening. There was a lot of speculation and up through yesterday’s Steve Beguhn capping Town Hall webcast about what those changes would be and now we’re happy to report that we’ve got the details for you.

Late yesterday we spoke to a person within PwC who helped develop the new compensati�������������������� employees and it sounds like their are plenty of exciting changes that are being unveiled today. These changes to the comp structure are part of a large shift in culture and values that all started last fall with the unveiling of the new logo (and here you thought it was all about colors and shapes). But enough with the pleasantries, you’re probably anxious to the know the details.


There are three major pieces to the change in the compensation structure starting with:

Transparency – PwC hopes to communicate to its employees just how they come up with the numbers that go into your numbers. For example, all those “surveys” and “benchmarks” that get thrown around? The firm plans to tell you exactly what surveys and benchmarks they are using, who participates in them, how many they use, etc. Once all that data is accumulated, the firm will present employees with graphs and other visuals to illustrate ranges of compensation for all the service lines and non-partner levels. They will also show the market midpoint and average vs. the PwC midpoint and average. This will allow employees to know where they are relative to their peers in terms of compensation and through an “open dialogue” in the performance review process, why they are making what they are.

Earning Potential – The next piece is your earning potential. In other words, how well you can expect to do while you’re working at PwC. From brand new associate to a new partner, you’ll be able to see what kind of scratch you’ll be pulling down at each level and in each line of service. Along with this, a new bonus structure will be announced in July for fiscal year 2012. Under this new structure, the firm will state exactly what will come out in the bonus pool; there will be no cap on the pool and it will be based on the following metrics:

Firm performance – The better PwC does, the better you can do.

Line of service performance – Yes, this means that if advisory had a kick ass year, their bonuses will be larger than the audit group’s. Likewise, the next time advisory goes through tough times and the tax group keeps on truckin’, they’ll enjoy a better bonus. Assurance, you’re just screwed (I kid, I kid).

Individual performance – The rating system relative to your peers will remain in place.

Each line of service will receive quarterly updates on the bonus pool. This is something that is already done in the advisory practice and will now be practiced in assurance and tax. All non-client facing support employees will also be eligible. The firm is launching a microsite and will provide flip books that will lay out all the details in case you ever forget all this.

Recognition and Milestone Awards – Spot bonuses have been around for some time but there was concern that it wasn’t always clear how they were earned and what they are. This will also become a more transparent process (sensing a trend yet?). Along with the spot bonuses, the firm is introducing milestone awards that will occur at the senior associate, manager and senior manager/director levels. Here are some of the details for each:

Senior Associate – In addition to compensation awards, new seniors will receive highly specialized individualized offsite training that will help the new seniors make decisions about their careers. This will last for 12-18 months as they adjust to their new roles. UPDATE: And by “offsite,” this means “an offsite marquis location.”

Manager – New managers will receive a bonus that is equal to 25% of pay. This will be phased in over a couple of years, starting with this year’s bonus of 15%, next year 20% and finally reaching 25% in 2013. Since the promotion to manager is such a major achievement, the firm felt recognition of that achievement is appropriate. UPDATE: The reason for the phase-in is so that recently promoted managers will not be jumped in total compensation by their less-experienced counterparts. The firm looks at compensation from a total cash perspective as opposed to comparing salary to salary or bonus to bonus.

Senior Manager/Director – New SMs and Directors will receive four-week sabbaticals to use however they like. They can work to further their professional credentials, spend time with family, take a vacation, whatever they choose.

So there you have it. Some people probably won’t be pleased by the changes because well, some people simply can’t be pleased. But from the sound of it, the firm is trying to give employees what they asked for and that is more information about the process, what “staying competitive with the market” really means and probably all kinds of stuff you didn’t even think you might want to know. Again, some people will be skeptical but those people also probably think OBL is still getting dialysis treatments.

So, let’s have it P. Dubbers. Discuss the new and exciting changes and throw the questions out there that you’re too afraid to ask – TPTB are definitely reading (and it sounds like they are fans of live-blogging).

Former American Idol Contestant Steve Beguhn Sang at PwC’s Town Hall Meeting

Hopefully this isn’t what Bob Moritz meant when he was talking about “exciting changes” to the comp structure. This is according to a tip we’ve just received over the Twitter wire. In case you need a refresher on Steve:

Here’s a confirmation email we received a short time ago:

I have a friend who sent me a stream of consciousness via text while he listened to the webcast. Basically, it was no bonuses for the year (apparently everyone on his team started flipping out when they heard that), you’ll get to know how your salary compares to the rest of your group (er, who really wants to know that?), a extra day off for 7/4, and they got Steve to end the webcast by singing and dancing.

Wow.

SEE UPDATE BELOW: “[N]o bonuses for the year” apparently means “partners haven’t discussed handing out FYE bonuses and it doesn’t appear that they will.” On the bright side we heard that Steve sang Adele’s “Rolling in the Deep” and “some John Mayer song.”

UPDATE:
Based on the conversation below and other chatter we’ve heard, it appears the timing of the payout will not be accelerated rather than “no bonuses.”

Barry Salzberg Recalls That His First Boss Was a Jerk, Being From Brooklyn Had Its Disadvantages

Dr. Phil doppelgänger and incoming Deloitte Global CEO Barry Salzberg spoke at Wharton recently about leadership and how it has changed quite a bit since he started at Haskin & Sells in 1977. He riffed about the old days in his speech including how jackets were all but mandatory (especially if you were from Brooklyn) and the aforementioned boss from Hell:

“In those days, [Deloitte] was a fancy, formal place,” Salzberg recalled, “so formal that you would get bawled out — and I did — if you were caught in the hallway without your jacket, especially if you arrived speaking a foreign language like Brooklynese.” His first leadership lesson came on his third day. “Bosszilla,” as he calls his first boss, asked him for a photocopy of a tax ruling. Eager to please and show off his legal savvy, Salzberg included his own two-page interpretation. “Mr. Salzberg,” Bosszilla hissed, “I asked you for a copy of the ruling, not your interpretation. One copy, stapled.”

Of course, the Big Salz knew that this wasn’t how he wanted to lead so you can bet your signed copy of As One that he spends plenty of time at the Xerox machine. Another leadership trait that has gone the way of the Dodo is that CEOs don’t mingle with the commoners. Bar is out there mixing it up on the regular:

“What I do is get out and talk to people to give them the opportunity to share. And then what you have to do is act on it, so people understand that you can change your mind.” As head of Deloitte’s U.S. operations, Salzberg visits as many as 25 to 35 offices every year, sitting down with partners to hear their concerns. When he becomes global CEO, he plans to travel more, he said. “There’s nothing that can replace face-to-face interaction. Getting the rubber on the shoes worn out is how to do it.”

And of course, in this day in and age, you simply can’t ignore animal metaphors:

“No burying your head in the sand if there’s a problem, and no ignoring the elephant in the room. Much better to name and tame an issue, no matter how difficult it is,” than to ignore it or pretend it isn’t there, he said. “Making sure the truth is told and discussed with all is the foundation of leadership. Without that, you can’t build trust.”

Got it? Ignoring problems – even the really tough ones – is a thing of the past:

Deloitte CEO Barry Salzberg on Leadership as ‘the Norm, Not the Exception [K@W]

Comp Watch ’11: Deloitte Auditor Has PwC Bonus Envy

From the mailbag:

Caleb,

I am reading about PWC getting some spring love in the form of a bonus, and other firms already openly discussing compensation with their employees. Apparently Big D missed that memo.

Everybody at Deloitte had a terrible busy season, that is no secret. We changed our audit methodology, and then in December the powers that be decided to do some last minute tweaking, aka destroy any hope of a bearable busy season. I am a senior working out of Boston and have been pretty busy since October. To reward my hard work Deloitte has given me absolutely nothing. There was no post audit dinner, no monetary reward, not even a free cup of coffee. I did however (and so did everyone else in Boston) receive emails from every executive partner in the NE thanking us for all our hard work, reminding us how much money we made the firm, and telling us to reward ourselves by taking some time off. Apparently being rewarded now means using our own PTO to take a day off. I have had to work both firm holidays up to now (one in January and one in April for the Boston Marathon), so I am not sure when they think we can reward ourselves by using the PTO we already earned. Usually engagement teams hand out “Applause Awards” to their people for hard work, and maybe I am just on a few teams with Ebenezer Scrooge Partners, but I think it is crazy that either Deloitte, or the Boston Office, or one of my engagement partners couldn’t scratch together a few dollars as a thank you for the long hours.

Partners and HR continue to wonder why people leave, but we are continually asked to do more and more and never rewarded for it. With the other firms opening up the piggy banks already, what are the chances that Deloitte follows suit? They missed the mark last year on the compensation, and everyone suffered as a result with the crush of seniors headed for the door. As a result they ended up giving a mid-year raise just to stem the bleeding. Are partners too busy looking to next year or playing golf at their fancy country clubs to remember the little people?

Of course our writer is referring to the PwC bonuses we wrote about on Monday. Don’t know if this is a Deloitte problem or a Boston Deloitte problem but it sounds like Green Dots in Beantown are wicked pissed. How’s your office faring? Tell us below or email us.

Jim Quigley Reflecting on His Time as Deloitte CEO via Twitter

Davos regular and out-going Deloitte Global CEO Jim Quigley is reflecting on his time in the big chair on Twitter and so far he’s said that “Experience has taught me in a world that seems increasingly focused on sprints, great professional relationships are the work of marathoners,” and “I’ve learned we often allow the urgent to crowd out the important; getting in front is the way we will stay in front.” These are nice thoughts and we’re big on reflection but what do you think Jimbo is really thinking that the Deloitte Twitter filters aren’t letting through?

Luckily, we’ve obtained JQ’s copious Tweet notes, all of which were ultimately denied by Deloitte’s Ministry of Propoganda. Here are some of the denied tweets:

• Really kicking myself after turning down Queen Rania’s offer to buy me a drink at Davos last year. #IDIOT

• Disappointed that I only get 5 months to Tweet under @deloitteceo. Not sure what my new handle will be. Is @deloittekicksass taken?

• @JustinBieber how do you get ready for a big show?

• I’m just going to say it: Sharon Allen has awful taste in music.

• Good luck Barry! I guess I don’t have to warn you that this job will make you lose your hair.

Of course, many of you know Jim better than us, so feel free to speak/Tweet on his behalf below.

What Was Discussed on Ernst & Young’s ‘All Hands Broadcast’?

We’ve heard from a couple people that Ernst & Young had an “all hands webcast” of some kind today but so far, no one has given us any details as to what was discussed.


Of course there were probably kind words about all your hard work this busy season, your commitment to the firm and so on and so forth but we want to get to the crux; this calls for speculation on our part, until we get something more solid. Possible topics include:

1. Hazing methods for the folks from LECG Corp.

2. The announcement of special screenings of In a JIT.

3. Two minutes’ hate for a certain Governor.

4. Mysterious references to “exciting changes” to the compensation structure that won’t be revealed until “details” are sorted out (i.e. management knows what PwC is doing).

5. Your input.

First Marblehead Taking a Mulligan on Financial Statements

More importantly, how are the KPMG auditors celebrating (because we want to know)?

From the 8-K, filed this morning:

On May 10, 2011, The First Marblehead Corporation (the “Corporation”) announced that its board of directors (the “Board of Directors”), in consultation with management, the audit committee of the Board of Directors (the “Audit Committee”) and KPMG LLP, the Corporation’s independent registered public accounting firm, concluded that certain unaudited financial statements previously issued by the Corporation should no longer be relied upon.

In order to correct errors in the recording of certain non-cash items, as described below, the Corporation will restate the unaudited financial statements contained in the Corporation’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2010 (the “Q1 Form 10-Q”) and the Corporation’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2010 (the “Q2 Form 10-Q”). The Corporation expects to file the restated Q1 Form 10-Q and the restated Q2 Form 10-Q, as well as the Corporation’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2011 (the “Q3 Form 10-Q”), no later than May 16, 2011.

If you really want to get into the gory details, First Marblehead is bringing 14 securitization trusts onto the balance sheet that were previously accounted for off-balance sheet and its deferred tax assets in Q1 and Q2 are jumping over to the liability side (and the corresponding benefits are becoming expenses). The company says this is NBD as CFO Ken Klipper said, “These restatements … do not affect our cash position and are expected to have no impact on our ongoing business operations.” But the next six days may be a little uncomfortable for the accounting department and the KPMG audit team.

New Leadership Appointment Causes Unrest Inside Deloitte Advisory

As we’ve discussed, there has been a bit of controversy around the leadership election process at Deloitte. We first reported this news to you in January with a follow-up story on the candidates, the sorry turnout that was expected, and finally the news that the three candidates had been elected to their respective positions.

Today we have more controversy from inside the house of D but this time it is from a sub-group in the Enterprise Risk Services (aka Advisory or “ERS”) practice. There have been a number of recent leadership appointments within ERS but one in particular that caused a Deloitte partner to reach out to GC. This individual belongs to the Security and Privacy Practice (“S&P”) which consists of approximately 80-90 partners and has been recognized as one of the “12 leading global information security & risk consulting service providers” by Forrester Research Leader for their expertise in this area, according to the Deloitte website.

According to our source, the issue that has caused concern amongst many partners in the S&P group is that the new leader does not have extensive experience in the Security & Privacy area. Our source explained to us that a recent theme inside the firm has been “leading from the front” best encapsulated by leaders like Theodore Roosevelt, Winston Churchill and others who lead based on setting an example. The feeling of the S&P partners is the most recent appointment is based more on cronyism rather than qualifications and past performance.

The leader of the ERS group who makes the appointments is Owen Ryan, a Deloitte veteran who has held several leadership positions at the firm and has led ERS for the past 2-3 years. Our source told us Mr. Ryan has run the advisory practice creating an environment of cronyism and nepotism by appointing individuals, including family members, closest to him and that this appointment in S&P has partners saying this is the latest example of “the emperor having no clothes.” S&P supposedly has many qualified partners who have held leadership positions in the past who could lead the group but were passed over. This has many of them worried about what will become of their reputation as a top service provider in the area and how clients will perceive this appointment.

We spoke to a former Deloitte partner who worked in the Securitization and Structured Products Group (also part of ERS) who confirmed these allegations of nepotism and cronyism. “I wouldn’t go so far to extrapolate what occurred in our group to others,” the former partner said, “but that was certainly my experience.”

Despite this, one insider who is familiar with the leadership at Deloitte described Mr. Ryan as a “results-oriented businessman” who is cognizant of how “his decisions will reflect on him.” This source further told GC that “[Mr. Ryan] would not compromise the potential success of the ERS group by appointing someone to a leadership position who wasn’t qualified.”

Mr. Ryan’s no-nonsense style has manifested itself into some interesting behavior. Our original source told us that he takes attendance at ERS partner meetings and fines individuals $20 for using their BlackBerrys or speaking to neighbors during them. Our source said the money collected goes to charity.

Mr. Ryan did not respond to our voicemail requesting an interview.

The concern in S&P is understandable; an outsider leading a niche group would rankle the feathers of the most laid back partner. However, these decisions are rarely made in a vacuum and Mr. Ryan has his own superiors to report to. The other aspect to consider is the difference between technical leadership and what one source called “visual” leadership. There are many partners capable of leading a practice based on technical merits but the vision and flexibility needed to keep a group progressive in a fast-paced market does not always accompany technical expertise. Quite simply, if the leadership appointments that are made on Mr. Ryan’s watch do not prove successful, he will certainly be held responsible, but there is a lot of concern that the reputations of many of the firm’s best service lines may suffer in the process.

How Should a Ex-Big 4 Intern Explain That He Snubbed a Full Time Offer?

Welcome to the Animal-Kingdom-to-Win-in-the-Preakness-edition of Accounting Career Emergencies. In today’s edition, a former Big 4 intern who turned down a full time offer wants to know how best to explain this snub to his new prospective employers without dragging his old firm through the mud.

Need help with a busy season break-up? Dealing with some crazies at your job? Do you feel ignored for your effohref=”mailto:advice@goingconcern.com”>advice@goingconcern.com and we’ll help you get some attention (or, at the very least, create a diversion).

Back to the Big 4 snub:

Hello,

I interned at a Big 4 tax recently and got a full time offer. My internship experience consisted of little work aside from fighting boredom and trying to find work. I was very disappointed with my experience, and to an extent, felt cheated. I was not expecting much as an intern, but I was expecting to learn at least a few things. Long story short, against the advice of people who say they have my best interest in mind, I turned down the offer.

I have a bad habit of not using my rear view mirrors when I drive, so I am not seeking advice as to whether I should beg for my offer back. My question relates to how I should approach recruiting in the future. Rule #1 is not to speak poorly of a past employer. Not sure how to get around that. Advice? Also, would saying that I was not happy with my internship hurt future opportunities due to the fact that it seems that few people full time seem to be happy (proven flight risk)? Should I leave this experience off my resume? My mother always told me honesty is the best answer, but then again she has been telling me I am special for the last 22 years of my life. Depends how one defines special perhaps.

Anyhoo, I am confident that I will land interviews in the coming season and I have connections with many firms who had extended me internship offers. I am just unsure how to go about explaining this little snag in a beneficial and professional way.

Thanks for any help.

Dear Momma’s Boy,

This is the first instance that I can recall hearing about an intern turning down a full time offer without another one in place. Your confidence in your decision is impressive but we can’t help but think that you had a slightly itchy trigger finger. But as you said, we’re not looking back. Onward!

You are correct that you should not speak poorly of your previous employer. Slamming your former firm for asking you to spend all day at the copy machine will make you sound petty, unprofessional and any prospects will immediately wonder how you’re talking trash about them once you’re out of their presence. Rather than get all mysterio about the experience, you should listen to your mother and be honest about it. But don’t focus entirely on the negative aspects of the internship; there has to be something you took away from it. Once you’ve described something positive (no matter how petty), you can explain why you turned the internship down. Just be careful to not make the situation personal. “It wasn’t a good fit” or “It wasn’t what I expected” is a far better than saying, “I was bored” or “I was smarter than everyone else” OR “I should be running that firm.” Keep it constructive and thought-provoking in when discussing it. Also, I would not leave the experience off your résumé simply because that misrepresents you. Best to go with honesty all the way.

So just keep your ego in check; did you turn a prestigious firm? Yes. Why? It was a decision made based a variety of factors and it wasn’t an easy one to make (even though it might have been). You’ll come off as contemplative and your integrity will be intact. Those aren’t bad qualities to have.

Bonus Watch ’11: PwC Gives Most of the Staff a Pat on the Back

Along with last Friday’s news of “exciting changes” coming in the compensation structure, we’ve received word a little bonus paid out PwC’s last run:

I’m a little surprised no one has emailed you about the bonuses that were paid out this last pay period to PwC associates and seniors. This wasn’t across the board to everyone like the first December bonus [Bonus Watch ‘10: PwC Holiday Payouts Coming In]. I think first years all got $500 (since they didn’t receive the first December bonus) then everyone else received a bonus that was tied to performance/utilization (and I’m told some individuals received nothing if the managers/partners thought they didn’t cut it). I’m curious what the payouts were in other markets.

I’m a second year senior in the Midwest market and got $1200. I know of another senior up for manager that received more than that. I think this is separate from whatever changes they’re going to announce this week about our pay structure. Pretty much the message I got from my partner was this was something like a down payment on the year end bonuses, which makes me believe when our year end bonuses are announced, they’re going to immediately bring up the money they gave us in December (two bonuses for some) and then this, and say that’s why our year end bonuses are lower.

The webcast is supposed to be today but we don’t have the details and haven’t heard anything yet, so keep us updated.

Woman Insists She Didn’t Rip Off PwC Because She’s a Bad Person But to Hide the Fact That She Was Having an Affair with a Married Partner

When banging your boss, there are certain precautions one must take to ensure that the affair is not discovered. In the case of Angela Tilling, who was jailed for £33,000 in expenses fraud, she claimed “her behaviour was an attempt to prevent John Minard’s wife spotting suspicious payments on his credit card.” Mr. Minard admitted that he had sexual relations with that woman (that’s what I keep hearing in my head) but denied that they had “full intercourse.”

Of course smut isn’t the only part of this story. We learn that Angie reportedly “conned” P. Dubs into spending “£50,000 celebrity appearance at a Christmas party in a bid to boost her popularity,” among other expenses that weren’t kosher. You see, it appears that Angela wasn’t too good at making friends, so she threw around a bunch of the firm’s money so people would think she’s the bee’s knees.

“Some of the money was used to provide entertainment for others because what this lady craved was the respect of others.

“She liked to be the centre of attention, providing days and nights out. She is a lonely lady who bought the friendship and affection of people with whom she worked. It was not salted away for a rainy day.”

The court heard Tilling falsely claimed £2,183 expenses for a 47-head staff lunch at Birmingham’s Hotel Du Vin on December 7, 2004 and £2,146 for a company hotel conference in June 2005.

She blew a strict £25,000 budget when organising the company’s Christmas party on December 22, 2005, fraudulently transferring two £29,375 payments to cover a celebrity guest’s £50,000 appearance fee.

Tilling also falsely claimed a £15,000 payment by lying that she had paid the sum as a deposit to secure the guest, who the prosecution and booking agency refuse to name.

She was also paid a further £5,581.25 in bogus expenses on October 17, 2006 and £3,706 in June that year for Solihull College support staff.
In December 2007 she fraudulently claimed £2,225 for 60 theatre tickets at Birmingham’s Hippodrome – another company outing she organised.

It was all for love.

PricewaterhouseCoopers PA jailed over expenses fraud [Telegraph]

Today in Chinese Company Auditor Resignations: KPMG Doesn’t Appreciate Being Ignored

The House of Klynveld resigned as the auditor Shanghai-based ShengdaTech, Inc. effective April 29th after less than three years. According to the 8-K filed yesterday, KPMG was none too impressed with management blowing off their concerns:

KPMG previously informed the Company’s Audit Committee of certain concerns arising during its incomplete audits of the Company’s consolidated financial statements as of and for the year ended December 31, 2010, and the effectiveness of internal control over financial reporting as of December 31, 2010. These concerns included serious discrepancies and unexplained issues relating to, among others: (i) the Company’s bank balances; (ii) transactions with major suppliers; (iii) VAT invoices and payments; (iv) sales and payments for sales by third parties; (v) sales to the Company’s second largest customer; (vi) discrepancies between KPMG’s direct calls to customers and confirmations returned by mail; and (vii) concerns raised by directly confirming customer sales and accounts receivables.

In a letter dated April 19, 2011, KPMG informed the board of directors of the Company that in KPMG’s view the Company’s senior management has not taken, and the board of directors has not caused senior management to take, timely and appropriate remedial actions with respect to these discrepancies and/or issues, and KPMG stated that the continued lack of resolution of the issues would materially impact the financial statements for the year ended December 31, 2010 and possibly prior periods.

And as you might expect, this resulted in KPMG taking its audit reports and going home:

On April 29, 2011, we were also informed by KPMG, our former independent accounting firm, that disclosures should be made and action should be taken to prevent future reliance on their previously issued audit reports related to the consolidated balance sheets of ShengdaTech, Inc. and its subsidiaries as of December 31, 2008 and 2009, and the related consolidated statements of income, shareholders’ equity and comprehensive income, and cash flows for the years then ended and the effectiveness of internal control over financial reporting as of December 31, 2008 and 2009.

8-K [SEC via ShengdaTech]