Professional services giant EY has nominated heads for its respective consulting and audit wings, should the firm’s partners go ahead with its break-up in the new year. The appointments of Carmine Di Sibio and Julie Boland come before EY’s 13,000 partners.
Despite denying reports it was planning to split its audit and consulting units into two companies in July 2022, in September EY confirmed the firm would indeed be putting the idea to its partnership. The possible move comes as the professional services firm looks to ease regulatory concerns over potential conflicts of interest.
The world’s largest audit and advisory firms – EY, Deloitte, KPMG and PwC – collectively known as the Big Four, have been under regulatory scanner for years now. Regulators in the UK and US in particular have become increasingly concerned that the companies’ advisory services could be undermining their ability to conduct independent reviews – with critics pointing to examples such as the collapse of Carillion as evidence of this.
If ratified, the split of the near $50 billion company would represent the largest shake-up in the professional services space since the 2002 downfall of Arthur Andersen. The firm was part of what was then the Big Five, but became mired in the Enron scandal due to alleged conflicts of interest between its work as auditor and advisor to the firm.
Until EY’s partner vote, EY’s global boss Carmine Di Sibio will continue to run both wings of the company. However, if they back the plan to break up the firm, Di Sibio will helm the spun-out consulting business. Meanwhile, the audit-led business will be headed up by US boss Julie Boland – a former investment banker who only joined EY as a Partner in 2010.
According to Trent van Veen, Head of EY’s Global Governance Council, the appointments were unanimously approved by the body, as well as the firm’s global executive – following a selection process, involving “soundings” from more than 400 partners. The next move will be for the firm to put its break-up plan to country-by-country votes by its partners next year.
Should EY divorce its audit wing from its consulting brand, there are some professionals with concerns. The consulting business would will include the bulk of its tax division – something some sources suggest could leave its traditional accounting business over-exposed. Critics of the move believe the business could see the auditing side suffer, as recent years have seen consulting work become more lucrative – but EY insists the split will make it easier to raise capital to invest and create two more agile companies.
Speaking to a Reuters Breakingviews podcast, Andy Baldwin, Global Managing Partner, recently said EY would be holding roadshows to explain its “compelling case” for splitting. In the wake of it, he expects EY will not be the last Big Four firm to make such a move – even though other members of the quartet have stated they have no plans to copy EY.
“It was an appropriate time to dust down the work we did before. I now feel it is inevitable. We do believe there is a first mover advantage. We also believe the competition at some point in time will also have to respond,” Baldwin said.