July 17, 2018

Compensation studies

Big 4 Auditor Respectfully Requests an Audit of Big 4 “Compensation Studies”

From the mailbag:

Hey Caleb,

So recently I was found out that KPMG will be conducting a compensation study as to whether or not we are in line with “market” and the effects of the results, if any, will be announced mid-January. This came as the result of the follow up on the Mid-America senior council meeting. Apparently the question was raised in this meeting about why KPMG employees weren’t receiving bonuses similar to the other firms [Ed note: We received the following message prior to the announcement of KPMG’s new bonus program that we reported on Friday.]. During the follow-up call it was told that a “compensation study” was being performed.

I always hear all of the Big 4 talking about how they did a compensation study and found out they were in-line with the market but obviously after all of the posts about compensation raises and bonuses nothing seemed to be consistent. My question to you is where are all of these supposed studies done by the Big 4? They say they perform them but do we actually see them? As an auditor I’m inclined to ask where is the supporting documentation? We don’t take our clients word that they have $50 million in the bank we have to agree that to something, so why don’t we get some proof of this study or in your experience with goingconcern have you actually ever seen results of these studies?

Thanks,
Disgruntled Employee

Dear Disgruntled,

We understand your frustration with regards to these so-called compensation studies. To directly answer your question, we have not seen any of these studies nor do we know how the firms commission them. (If you are familiar, get in touch.) The transparency of the process, as you rightly point out, is virtually non-existent. While your call for more information regarding these studies may get some attention and even a brief consideration, don’t expect any “supporting documentation” in the near future. Keeping the compensation sausage recipe secret is advantageous for the firms and since “in-line with the market” is another way of saying, “right in the meaty part of the curve” people have very little room to complain.

Now, if it appears that one firm say, PwC, is compensating employees in a more generous manner than say, KPMG, the only way to conclude that for certain is to speak to a recruiter who talks to employees from both firms. Sure you can mine the comments of posts here or read Bob Half’s salary report to get an idea of what’s what but if you want to know the actual compensation disparity between two firms (especially for your skill set), you’ll have to do a little digging for yourself.

So, do you have the right to be annoyed by the lack of information around these studies? Of course. But don’t expect an in-depth breakdown firm by firm to be presented at your next townhall or webcast.