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The EY accounting group must centralize power in a new European executive team, which will pool resources across the region, but worry that any financial success of the Electronic card scandal can also be shared.
The review breaks with the federated business model of the four large companies in an attempt to halve management costs and will empower the core team to decide on partner compensation, according to people on the plan.
Some partners fear that the new structure could lead to sanctions related to Wirecard sharing beyond the German team that managed the work. EY audited the payments group for a decade until last year it collapsed into a fraud scandal.
“French partners are doing it in full because they say‘ why should we pay for the Wirecard disaster now? “, Said a person close to the company.
Another person close to the matter said there was not “much transparency” about whether any financial success of Wirecard-related claims or regulatory actions will end up being shared by partners from other countries.
However, an EY person involved in the creation of the new structure said these concerns were “unfounded”, adding that separate legal entities would be kept in each country. The big four have traditionally protected against the responsibility that extends to their global companies by using separate partnerships in each country where they operate.
EY in February announced that it was creating a new Western Europe region, without providing details on the implications. The regional grouping, which includes 27,000 employees and $ 4.7 billion in annual revenue, will include Germany, France, the Netherlands, Italy, Spain and 20 other countries in Western and North Africa and is expected to will be launched on July 1st. United Kingdom, Ireland or Scandinavia.
EY and its three main rivals – Deloitte, KPMG and PwC – have been hampered by their traditional business model, in which profits and resources are largely confined to domestic businesses or small subregions, according to executives. the industry.
Under the EY plan, business lines such as advice and advisory on mergers and acquisitions will be directed to a single income statement. The regulation limits the extent to which audits and taxes can be merged.
Integration will go beyond existing payments between regions, which reflect the remittance of partners from one country to another. For the time being, each country’s partners also contribute a small proportion of revenue to finance shared international investments, such as technology and the salaries of international executives.
European management will decide on the remuneration of partners in each country, although there will be some consultation with local management, people familiar with the plans said. Partners in more profitable countries are likely to continue to retain a higher share of profits.
A person close to the suspicious partners said it was a “strange time” to align German operations with those of other countries.
The firm Big Four is facing an avalanche of lawsuits in Germany and has lost many prestigious customer audit in Europe’s largest economy, including Deutsche Telekom and Commerzbank.
The EY restructuring, which is part of the “NextWave” strategy started before the collapse of Wirecard, aims to reduce costs and improve customer service by reducing “silo behavior” and enabling teams from different countries. work smoothly said the plan.
International integration and staff sharing is particularly important in consulting.
“It’s what all these companies have been trying to break down,” said a former global senior executive from another big four firm. “In a way, it is the holy grail. . . If they are able to deliver it, it is better for customers and it is a competitive advantage. “
The new Western Europe sub-region will replace three smaller sub-regions, with the aim of halving management costs, said the person involved in the planning.
EY declined to comment.
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