Fat cats still rake it in despite poor performanceby
As the economy struggles and the profession is embarrassed by poor performance, PwC partners are still making big money.
There is little doubt that Big Four partners work very hard for their pay. Indeed, some might justify the exorbitant amounts that they receive by explaining that careers are frequently cut short as a result of burnout.
Even so, every year when the media publishes stories about remuneration levels, they raise eyebrows, not least among those of us in the profession who have to work a decade to see the same impact on our bank balances.
Some of the top bods at PwC may be a little put out after discovering that following last year’s record-breaking profit shares, which topped £1m on average, in the year to 30 June 2023 they dropped back to just £906,000.
You don’t need to look far beneath the surface to discover that last year there was a capital gain worth £100,000 per person, which largely explains the difference. Even so, with wage inflation at FTSE director level still running well into double figures, even a small contraction in actual terms isn’t the greatest news.
Looked at from a different perspective, the fact that “fat cat” accountants are making between 20 and 25 times the average UK salary may not reflect well on the profession.
I also wonder how many hard-working partners at small practices will be impressed to learn that many are earning only around 10% of their equivalents.
Pattern of profitability
Perhaps the most revealing statistic is the pattern of profitability. Although the £906,000 figure represents a small decrease on the adjusted 2022 partner profit of £920,000, it is significantly higher than the £765,000 achieved in 2019 before the pandemic struck with such damaging consequences for so many clients.
This means that PwC partners have increased their remuneration by around 20% during the pandemic years when the majority of businesses were struggling. This figure doesn’t even take into account the capital gain in 2022, which is enhanced by a significantly lower rate of tax.
Accountants’ rewards may not compare with directors of many top companies but, when compared with average pay inflation or the amounts offered by the government to doctors, nurses and teachers, they appear exorbitant.
PwC’s chair and senior partner Kevin Ellis attempts to explain the financial success by stating: “Our strong performance is due to the adaptability of our business in supporting our clients and is a credit to the talent of our people.” Perhaps he is lining up a future role as a politician?
For some reason, while there are numerous media attacks on price gouging and the remuneration of directors of major FTSE companies, which can often run into millions or even tens of millions, professionals are generally beneath such criticisms, even though it is hard to understand why their profits should shoot up as the economy tanks.
The fact that accountants are raking it in also seems distasteful to some, given that a week rarely goes by without some kind of scandal relating to the profession. Whether this is poor auditing performance on a general basis, in a specific case that has led to stakeholders losing billions or possibly exam rigging, insider dealing or promoting tax schemes that are too good to be true, our industry already finds itself painted an unflattering light more often than many of us would like.
This year’s profit shares also put into perspective the million pounds of fines levied by the FRC for misconduct – primarily around audits – which sound big to ordinary folk but, in these terms, represent a barely noticeable drop in the ocean.
To be clear, the issue isn’t restricted to partners at PwC. They just happened to have announced figures recently but it is highly likely that partners at the other big firms will have been doing equally well or possibly even better.
I leave readers to draw their own conclusions about whether we should regard this story as aspirational – we should all be trying to bring in a cool million every year, ignoring what could be to come if either the media eventually turns on the profession or clients call a halt and refuse to pay artificially inflated fees.