EY’s retired US partners may get cut of proceeds from spin-off

EY has told retired US partners it is considering giving them a cut of the proceeds from a spin-off of its consulting arm, after complaints that the firm’s leadership is cashing in on a business built by previous generations.

An email sent on Thursday to retired partners of the Big Four accounting firm, seen by the Financial Times, said US executives were considering a request to boost pension payouts or hand the retirees shares in the new consulting business.

EY has also agreed to pay for legal counsel to advise retired partners in the US during the process, according to Thursday’s email, which came from a committee of former partners picked by the firm to represent retirees’ interests.

Retired US partners have weighed in on the negotiations over how to divide proceeds from the deal with just weeks to go before EY’s 13,000 current partners around the world are due to be given details of their own individual financial packages.

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Audit partners have been promised cash windfalls that are a multiple of their annual pay, while consultants will receive an allocation of shares in the new company.

Voting on the deal is expected to begin in April.

US retirees are being given special consideration because EY’s US firm has an unfunded $7.5 billion pension liability.

EY plans to put some of the proceeds from an initial public offering and debt sale by the consulting business into a trust to fund that liability – something leaders say will provide extra financial security to the pensions – but the retirees are asking for more.

“The committee had previously asked EY to consider allowing retirees to participate in the proposed transaction based upon the value created by retirees when they were partners and principals in the firm,” the email said. “Our recommendation is still being considered by EY leadership.”

EY declined to comment.

Retired partners no longer have a stake in EY US and will not have a vote on the split, although they form a large creditor group.

They have previously raised concerns about the plan to split EY in two, saying they worried about the financial strength and growth prospects of the standalone audit firm that will ultimately stand behind the pension obligations.

Leaders of the other Big Four firms have come out against spinning off their own consulting arms.

Punit Renjen, who retired as Deloitte’s global chief executive at the end of 2022, said the firm “will not monetise our collective life’s work or that of the generations that preceded us”.

– Copyright The Financial Times Limited 2023