The big four accounting firms struggle to shake their sexist pasts

Written by Ian Gow, Professor and Director of Melbourne Centre for Corporate Governance and Regulation, University of Melbourne

In many ways, the big four accounting firms – Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers (PwC) – have influenced how we work, how we manage, how we invest and how we are governed.

Apart from their staff, the brands themselves are the big firms’ most valuable assets. The value of those brands is grounded in the firms’ histories. But looking into their past reveals many stories of discrimination that the firms may have to face up to to re-brand their future.

Globally, the firms dominate key markets for accounting, tax and audit services. Nearly all the largest businesses in the United States and the United Kingdom, for example, are audited by one or more of the firms.

In 2016 their total revenue exceeded US$130 billion ^[1]. With almost one million staff ^[2], the firms are collectively one of the world’s top employers. The number of people who have worked for a big four auditing firm at some point in their career is much larger still.

Today, however, the auditors are facing challenges to their power from technology ^[3] and regulators ^[4]. But perhaps the most gravest challenge is cultural.

A chequered past

All four firms trace their history back to 19th century England. In the firms’ earliest incarnations, their partners and staff were all male.

As the firms spread out across the globe, they retained their overwhelming maleness. As late as 1940, for example, only 175 of the 16,000 certified public accountants in the United States were women ^[5].

Strong forces in society kept things that way. Colleges and universities discouraged women from majoring in accounting. If a woman did graduate with an accounting qualification, she found it difficult to find a position in a major firm.

Arthur Andersen, a firm founded by a former Price Waterhouse partner, waited till 1965 before hiring female accountants. Those accountants were mostly confined to junior and administrative roles – comptometrists, ledger-posting clerks – and they had to leave when they married ^[6].

At professional gatherings, men opined gravely on the question of women, and what they might be able to do ^[7]. The opinions awkwardly foreshadowed today’s conversations about digital automation. What accountants said then about women, they say now about robots.

The accounting monoculture’s defining features included blokey, locker-room humour, a competitive, hothouse atmosphere, and a staff induction process that has been likened to brainwashing ^[8].

When inevitably the monoculture began to wane, the clash with modern ideas was ferocious, and often appalling.

In 1990, for example, Ann B. Hopkins of Price Waterhouse alleged she’d been denied promotion to the partnership on grounds of sexual discrimination. A US judge ^[9] ordered the firm to offer Hopkins a partnership, and around US$400,000 in back pay.

In 2008, former PwC partner Christina Rich received a significant settlement after a series of alleged incidents that included male partners talking about her breasts. The boys club culture had allegedly thwarted her progression at the firm. In 2014, Erik Pietzka won a discrimination case ^[10] against PwC on the grounds that his requests to work part-time for family reasons had damaged his prospects for promotion.

Are they really progressing?

In light of this history, the big four in Australia have recently adopted proactive policies that promote equality, diversity and flexibility. Examples include Deloitte’s GLOBE leadership forum ^[11] and Inspiring Women strategy, aimed at getting an “unfair share of female talent ^[12]”.

Yet there is a real risk that these policies will not lead to the substantive culture shift that the firms need. The continued emergence of sorry episodes ^[13] suggests that more work is needed.

The dilemma for the firms’ leaders is this: How to retain the best of their histories while renouncing the prejudices and behaviours that defined the old monoculture? How best to embrace change without dumping much of what defined the firms for so many years?

Beyond further strengthening policies and standards, the firms are becoming more nuanced in the stories they tell about themselves and their past. That past, though, includes an abundance of horrors and blunders.

Sooner or later, the firms will have to fully reckon with their past. When that moment comes, the firms might have to let go of a good deal of their history, their culture, their structure and even their brands.

This piece was jointly written with Stuart Kells.

Professor Ian Gow and Dr Stuart Kells are the authors of The Big Four: The Curious History and Perilous Future of the Global Accounting Monopoly ^[14].