Accountancy firms criticised over diversity

The UK accounting regulator has criticised the firms it supervises for allowing “white men” to dominate their most senior ranks, and said it was “ironic” that they were advising large corporations on diversity strategies.

The Financial Reporting Council accused the accounting profession of lagging behind other UK businesses in promoting women and black, Asian and minority ethnic (BAME) people to partnership level. Women made up 17 per cent of partners at accounting firms on average, research by the FRC found, compared with 30 per cent of board members and 21 per cent of executive committee members at FTSE 100 companies.

“The business case for improved diversity has been made and now it’s time for the audit and accountancy profession to take further positive action,” said Sir Jon Thompson, who became chief executive of the regulator this month. “More needs to be done to ensure the firms are not limiting access to the most senior roles.”

The proportion of women in middle-management positions at accounting firms had swelled to 46 per cent, the FRC said, but, across firms of all sizes, as seniority increased the number of women holding top jobs dropped off, it added.

According to its research, at accounting firms with fewer than 200 employees more than half of managers were women, but women represented just 11 per cent of partners. Small firms were also the worst performers in promoting BAME and disabled people, each making up less than 1 per cent of partners.

At the largest firms, which the FRC categorised as having more than 2,000 employees and includes the Big Four of PwC, Deloitte, KPMG and EY, about 42 per cent of managers were women, but just 17 per cent of partners.

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The accounting firms it monitors are typically structured as partnerships, under which the most senior workers receive a share of profits based on their performance and hierarchy instead of a salary.

The FRC researched the diversity of senior management at accounting firms it supervises, which are those that conduct audits of public interest entities — mostly listed companies and financial institutions — as part of its annual report on the state of the industry. To measure diversity, it sampled eight large firms, nine medium-sized firms, and seven small firms. It said a further eight firms it approached did not collect diversity data for their workforce.

Women make up 29 per cent of the FRC’s board and 50 per cent of its executive committee. Its median gender pay gap is 28 per cent, which is greater than most of the large firms it supervises. KPMG has a pay gap of 28 per cent, while EY and PwC have a gap of 19 per cent, and Deloitte’s is 14 per cent.

The Big Four firms have faced criticism for a lack of gender or ethnic diversity at senior levels. At PwC, 79 per cent of its partnership is male and 91 per cent is non-BAME; at EY, 79 per cent is male and 90 is non-BAME; at Deloitte 81 per cent of its partnership is male and 95 per cent is non-BAME; and at KPMG 81 per cent is male and 92 per cent is non-BAME. 

Women make up 37 per cent of total membership of the accounting professional bodies, such as the Institute of Chartered Accountants in England and Wales, up from 35 per cent five years ago.

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