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Executive greed hits the profession

Philip Fisher shines a light on partner remuneration and questions whether KPMG's decision to withdraw mobile phones from staff is a false economy.

3rd Oct 2019
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Earlier this week, Richard Hattersley wrote an impeccably researched article informing readers that KPMG had decided to withdraw mobile phones from many members of staff.

This might sound like a relatively minor announcement but the underlying implications could well reverberate around the profession for quite some time.

The context is very simple. The average KPMG partner takes away approximately £600,000 each year. This means that he or she must get something like 25 times as much pay as their most junior full-time employees.

If press reports are accurate, the best-paid partner took home £2.1m, which is in the region of 100 times as much as a junior employee.

When figures of this kind are bandied around in the context of the corporate sector, there is what many regard as justifiable outrage accompanied by gleeful accusations of “executive greed”.

Typically, this hits the headlines when an organisation is on the skids, either performing badly or going out of business at a rate of knots. In this case, KPMG is doing perfectly well but has a nasty knack of finding itself in the spotlight as other companies that it has audited go under.

However, the Big Four firm has recently announced that it is taking on 800 new auditors as well as transferring a similar number of business advisers into its audit team. Puzzlingly then, the firm has decided that it can only afford an adequate investment in its future by taking mobile phones away from employees.

The numbers are relatively simple. It is hard to believe that a firm of this magnitude could not manage to cut a deal with a mobile provider that would mean that the average cost per phone is around £500 a year.

Assuming that the firm is withdrawing no more than 10 phones per equity partner, the saving will be £5,000 or, after tax, somewhere south of £3,000. In reality, the firm will not make this much of a saving anyway, since they will be obliged to pay at relatively swingeing rates for business calls and will probably suffer the odd disaster as a result of broken communications.

Unless this columnist’s calculator is malfunctioning, the relatively conservative estimate above represents 0.5% of an average partner’s remuneration. Looked at differently, it is probably only equivalent to a couple of boozy lunches or all-expenses-paid trips to Ascot.

This cost-saving, which frankly smacks of desperation, therefore seems like pettiness gone mad. The consequences could also be far greater.

People like to feel valued and when employees get told that they no longer rate a mobile phone, that will come across with all of the attractions of a slap in the face.

Staff will also be well aware that by moving to a rival practice, not only will they probably get a healthy pay increment but also that valuable asset: a mobile phone. Even better, it will probably be a sexy, new up-to-date model. This heady combination could be enough to tip some over the edge, which will instantly lead to greater recruitment costs which completely negate any perceived savings.

As Richard’s article so cogently outlined, KPMG has enough difficulties with regulators and the media at present without shooting itself in the foot by taking its problems out on junior employees.

Alternatively, perhaps this is a plot devised on political lines where having told employees that they are about to suffer, the firm’s powers that be will have a late change of heart trying to make their people grateful about something that they were taking for granted anyway.

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By enanen
04th Oct 2019 10:38

It may have the benefit of stopping the employee feeling owned and accessible 24/7 by their employer.

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By AndyC555
08th Oct 2019 11:11

"Executive greed hits the profession"

Ah, but as a great man once said......

"The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind."

:-)

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