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Romanovitch and the battle for accounting’s soul

19th Oct 2018
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The news that Grant Thornton's CEO Sacha Romanovitch is stepping down has generated headlines both inside and outside the accounting world, but her travails also reflect a wider battle for how the profession is perceived.

After four years in the executive hot seat and 28 years at the Big Four challenger, earlier this week Romanovitch announced that she will not stand for re-election for a second term, despite telling the Times last week that she had no intention of quitting.

In her time at the top Romanovitch had established herself as an outspoken figure in a big firm world often characterised by cautious thinking and less than plain speaking.

As the first (and so far only) female chief executive of a large accounting firm, she spoke up on issues such as work-life balance and mental health, capped her own pay, moved the firm to a bonus system that gave all employees a share of its profits (rather than just partners), and made headlines during media silly season for a mildly wacky out-of-office message.

But as Romanovitch discovered, standing out also means leaving oneself open to criticism. Last month a group claiming to represent 15 disgruntled Grant Thornton partners leaked her performance review to the press, accompanied by a few carefully chosen barbs.

In an unprecedented attack, the pugnacious partners labelled her a leader “out of control” with a “socialist agenda” and “no focus on profitability”.

Romanovitch responded to the anonymous assault via the Times, stating that while it was “deeply frustrating” that the cadre of partners had leaked the report she understood their concerns to a degree.

“We are making decisions that will depress profits in the short term but will help profits in the long term,” she said. “If profits get unhinged from purpose it might not hurt you now, but it will come back and bite you on the bum.”

While there may be power struggles surrounding Romanovitch’s departure to which the average accountancy journalist is not privy, for an outsider it’s hard to understand how they add up to what the 15 partners describe as a ‘misdirection’ of the firm.

We await the firm’s financial results from this year, which have been delayed until November in the wake of the CEO change, so perhaps the anonymous partner cadre knows something we don’t. However, the latest figures show Grant Thornton’s profits rose 8% to £78m in the year ending June 2017 – not an organisation that looks particularly ‘out of control’, but we await November’s results – and those of their closest competitors’ – for confirmation.

Grant Thornton’s struggles in the audit market are also well-documented, but the firm claim these had no bearing on Romanovitch’s departure.

Earlier this year the FRC fined Grant Thornton £3m, a record outside the Big Four, for serious conflicts of interest on two audit clients, and in April the firm announced it would no longer bid for audit contracts from Britain’s largest listed companies. Most recently the firm has also come in for criticism for its Patisserie Valerie audit.

While GT may have dropped several audit clangers, to use non-accounting parlance, as we’ve discussed several times on our podcast there are much wider systematic issues at play in the audit market, and while Grant Thornton is no paragon of virtue, it is also far from the worst offender.

Which brings us back to Romanovitch’s leadership style, Grant Thornton’s next appointment and in many ways the battle for the soul of big firm accounting. Like it or not dear readers, this is what many outside the profession perceive as accountancy, and a common complaint from AccountingWEB small practitioner readers is that they are tarred with the reputational damage from the fallout around high profile audit failures like BHS (one of Grant Thornton's) and Carillion.

So do we want accountancy leaders doing what they’ve always done, toeing the line and trotting out carefully rehearsed PR lines? Or do we want them to try and move the profession off its current course, speak and behave like normal human beings, and occasionally use the word ‘bum’?

In a blog sent to the firm’s staff on Wednesday, Romanovitch said she had “made mistakes on the way” and headed up “blind alleys” and hadn’t always made things “as clear and simple for people” as she could have. It will be interesting to see if her successor will conduct themselves with the same candour.

Replies (3)

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By thegreatgrumbleduke
19th Oct 2018 10:56

'Ladies and gentlemen, the 5th biggests accountancy firm in the world'.

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By thomas34
19th Oct 2018 13:25

The Patisserie Valerie case I believe will be the biggest shock to the profession in living memory. It won't be the biggest in terms of monies or value but I reckon will show that the tick-box culture of auditors is no longer enough in order to sign off accounts. Is it really a coincidence that the CEO is stepping down now?

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By laurenceexigent
19th Oct 2018 21:06

This is about Culture change or rather the failure of it. Patisserie Valerie is just a convenient red herring. Romanovitch wants a more inclusive long term relationship based approach to clients whereas the 15 Partners still subscribe to maximise short term profits at any cost position. What is unsaid is that the majority of the other partners were sufficiently ambivalent and she lacked sufficient internal support to stay. It will be interesting to see how quickly GT reverts to profit share only for partners to see how far the pendulum has swung.

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