• Approved! All Together Now – EY To Be One Firm (Except US, Of Course)

    By • Jun 3rd, 2008 • Category: Audit Quality, Deloitte, EY, Liability Caps, PricewaterhouseCoopers

    Ernst & Young Completes Groundbreaking Globalization Move

    EY Partners Overwhelmingly Approve the Creation of EMEIA

    LONDON–(BUSINESS WIRE)–Ernst & Young today announces that its partners across Western and Eastern Europe, the Middle East, India and Africa have overwhelmingly approved the proposed integration of its country practices into a single EMEIA Area.

    The new Area will be a US$11 billion organization with more than 60,000 people and 3,300 partners. It will operate as a single unit, led by Mark Otty as Area Managing Partner, and a single executive team. EMEIA will be effective from 1 July 2008.

    Chairman and CEO Jim Turley said, “I am of course delighted by the tremendous response from our partners in favor of this significant step change in the globalization of our business. I have also been greatly encouraged by the level of feedback I have received from many of our clients across the globe, our young people and our regulators. The feedback is that this is a groundbreaking and positive step both for our own organization, and the profession as a whole.”

    “Our clients tell me this move is important because it is going to enable us to better meet their needs to deliver seamless, consistent high-quality service, not just across EMEIA, but right across the world. Our people want to be in an organization where their opportunities are without boundaries. They want and expect mobility, challenging international assignments and a diverse and teaming culture on a truly global scale,” Turley said.

    For my comments on the merger,  listen to my podcast with Broc Romanek at www.The CorporateCounsel.Net.
    And for another perspective on this story, see Jim Peterson’s Re: Balance blog.
    The following story originally posted on April 21, 2008

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    Blockbuster news coming out of the UK late Sunday.

    The rest of the world is afraid of the big, bad US litigation environment.  Maybe they should be afraid of the big, bad US quality and integrity problems instead.
    So, PwC, Deloitte and KPMG (to a lesser extent as they have started down this path already…), what are you waiting for?
    Ernst & Young to form single business

    Ernst & Young is to launch the biggest shake-up of the professional services industry since the collapse of Arthur Andersen by merging its European partnerships and integrating a further 42 countries into a single unit.

    The move, to be announced on Monday, is the boldest shift by a Big Four firm to overcome the country-level legal and regulatory restrictions that have limited the national partnerships and frustrated their efforts fully to mirror the global reach of their multinational clients.

    The new unit includes 87 countries – covering Europe, the Middle East, India and Africa – and will be led by a single management team, headed by Mark Otty, the UK chairman. The firms in the region already work closely but this will mark a new step by integrating them financially with a single profit-sharing scheme and region-wide investment decisions.The Big Four networks face a perennial struggle between the desire to meet clients’ worldwide needs, the strict national regulations governing audit firms and the desire to limit the risk of a catastrophic lawsuit against one partnership bringing down the entire network.

    John Ferraro, E&Y’s global chief operating officer, said: “We’ve looked at the risk and we don’t believe we’ve taken on appreciably more risk by doing what we’re doing. In terms of operating across the 87 countries in a more connected and integrated way, we think there are a lot of benefits to that.”

    The 3,330 partners in the affected firms must agree on the changes, and votes are scheduled in May following a roadshow by senior executives. E&Y plans fully to merge its 45 European partnerships into a single legal entity – a practice made possible by recent changes in European regulation but still subject to voting by each partnership. Firms elsewhere will be formally combined where laws permit…Although they are global brands, the four are, in fact, networks of largely autonomous national firms, which has sometimes led to patchy quality.

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    4 Responses »

    1. I read one comment on this story from CFO.com. The reader believed that the network firms constituted one firm anyway. He also stated that these firms were hiding behind a veil to shield themselves from liability.

      My view, contracting with member firms can be like pulling a tooth. It’s extremely painful. After all the work is done, it needs to be re-reviewed.

      Besides, if the network was really like one firm, why consolidate members? Any suggestion that network firms are one firm is simply not grounded in the facts.

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