Accounting News Roundup: Should Lawyers Run Big 4 Firms? | 08.25.17

Come on, people. Not in your eyes.

Should lawyers run Big 4 firms?

Now, before you start throwing tomatoes, hear me out. This Harvard Business Review article shares the results of a study that found that lawyer CEOs have a knack for something you’d already assume they have a knack for:

[L]awyer-run firms experienced 16% to 74% less litigation, depending on the litigation type. Employment civil rights, antitrust, and securities lawsuits were reduced the most, while contract saw the smallest (but still significant) reduction with a lawyer CEO. The results were economically meaningful, since the reduction was several fewer suits per year in some cases.

The authors made two conclusions:

First, CEOs with legal expertise are effective at managing litigation risk by, in part, setting more risk-averse firm policies. Second, these actions enhance value only when firms operate in an environment with high litigation risk or high compliance requirements.

The Big 4 seem to be constantly entangled in litigation of one kind or another. And you’d be hard pressed to find a group of people more risk-averse than accountants. However, it just so happens that the group of people who could give accountants a run for their money in risk aversion are lawyers.

In a way, I guess you have to think about what mega accounting firms are. Are they fiercely competitive businesses trying to challenge the status quo and innovate professional services? Or are they monoliths within a system that are constantly walking on eggshells with their clients to avoid doing something massively wrong that causes them to implode into a pile of dust?

When you think about it that way, you might assume that lawyers are already running Big 4 firms behind the scenes. But of course, a lawyer is already running EY — he also happens to have MBA — so at least one firm seems to recognize the advantages, even if it seems a little sacrilegious.

Mergers

Moss Adams is acquiring Denver-based Hein & Associates with the deal closing on November 1. Moss Adams CEO Chris Schmidt “[does] not expect layoffs,” adding 300 employees to the firm’s roster in Dallas, Denver, Houston and Irvine, California.

Lotto winnings

“Hospital worker claims record $758.7 million Powerball. Here’s her estimated tax bill” is the headline at CNBC but who gives a damn, she’s a millionaire hundreds of times over. Does it really matter what the tax bill is?

The obsession with the amount of taxes huge lottery winners have to pay seems to feed the hunger that Americans have for hating taxes. But in this case, it’s completely nonsensical because the winners didn’t earn this money through anything more than dumb luck. I’m looking forward to returning to this discussion for the next big jackpot.

Previously, on Going Concern…

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Also, we opened the Deloitte compensation thread. And in Open Items: ITS or Federal PE?

In other news:

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