Does anyone still care about the EY split? Did anyone ever? Well, here’s your semi-weekly update anyway.
Wall Street Journal reports that EY Global CEO Carmine Di Sibio and EY US Chair Julie Boland will be going head-to-head in Palo Alto this week to hash things out. As you may remember, Boland dared to raise some questions about the split in a partner call a few weeks back so when this whole thing falls apart it will be her over whom the bus drives.
Though the history books will no doubt record Boland as the split’s biggest nemesis (despite her being in support, should the issues get worked out), up until her explosive partner call the split was held up by $7 billion-something in unfunded pensions, the issue of how to share legal liabilities without the firm’s traditional partnership structure, and even former partners sniffing around asking where their payouts were. And if all of that isn’t enough, there’s the issue of divvying up the tax people, with the audit side fighting to make sure they get enough of them.
It’s a lot. Maybe they’ll be able to work it out this week.
The fate of Ernst & Young’s proposed split may be determined in Silicon Valley this week when feuding executives meet to hash out a deal that is acceptable to all factions.
One of those powerful factions won’t be represented at the meeting and doesn’t even work for the global auditing firm. Yet some of EY’s retired partners are playing a key role in trying to block the deal.
This week’s meeting in Palo Alto, Calif., sets the stage for a potential showdown between the breakup plan’s architect, EY’s global leader Carmine Di Sibio, and the person most likely to derail it, EY’s U.S. leader Julie Boland. Tensions between the two senior executives have escalated sharply in recent weeks, the people familiar with the matter said.
Ms. Boland, EY’s U.S. chair and managing partner, last week said the firm still needed to resolve questions affecting the financial strength of both businesses that will be created by the split. Mr. Di Sibio responded with a direct appeal to EY’s 13,000 partners, telling them in an email they had “the right to vote on whether to proceed with a transaction,” according to a copy of his message reviewed by The Wall Street Journal.
Side note: is anyone hearing about a coup brewing at EY? Because we’re hearing things about Carmine.
So the WSJ piece tells us something interesting: Turns out Julie Boland’s dad Jim Boland is among the retirees holding up the split. The retired partners don’t get to vote but they do have quite a bit of influence and though they won’t profit from the split, their futures are tied up in it anyway:
Their central concern involves money. EY has around $7 billion of promised payouts to its retired U.S. partners that aren’t backed by a specific pot of money. Retired partners worry the audit-focused firm, weakened by the sale of the consulting arm, may not generate sufficient earnings to meet these pension-style commitments in future, according to memos reviewed by the Journal.
“We are the largest creditors of the company and want to make sure our rights are protected,” one retired U.S. partner said.
The firm told retired partners in an email in February that it was considering boosting pension payouts or even giving them shares in the consulting business if the split goes ahead. Prior to this, the retirees expressed concern that a split would weaken both sides of the business, particularly audit.
Good luck with all that, guys.