KPMG Australia Publishes Partnership Deed, Unveiling Retirement Bonus and Governance Rules

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Ever wondered what secrets lie behind the closed doors of the big-four consulting giants? KPMG Australia’s groundbreaking move to publish its partnership deed finally reveals the hidden world of retirement bonuses and governance rules, shaking the industry’s traditional practices to the core.

In a significant move, KPMG Australia has publicly disclosed its partnership deed, providing insight into the firm’s inner workings and policies. The released document reveals that retiring partners may be eligible to receive a one-time bonus payment equivalent to a year’s income. This practice has yet to be previously disclosed in the history of the big-four consulting firms.

The partnership agreement, entitled “KPMG Australia Partnership Agreement 2022,” sheds light on various aspects of the firm’s operations, including the rules governing the selection of leaders, profit distribution among partners, protocols for involuntary retirement, and confidentiality obligations.

Transparency and Ethical Obligations

Partners at KPMG Australia are bound by important legal, fiduciary, and ethical obligations to the firm and must adhere to professional rules and standards when providing consulting services. The document emphasises the need for partners to demonstrate their “best skill and endeavour” in carrying out their work.

Commenting on the significance of this disclosure, Greens senator Barbara Pocock remarked, “It is commendable to see KPMG taking this unprecedented step and allowing its partnership deed to be made public. Transparency is crucial, especially when dealing with consulting firms that play a significant role in various sectors of the economy.”

Expulsion Criteria and Governance Structure

The partnership deed also outlines the grounds for expelling partners from the firm. Serious criminal charges, financial misconduct, and breaches of the firm’s values and policies are among the reasons that may lead to partner expulsion.

Additionally, the document elaborates on the governance structure within the firm. Partners are involved in the election of the national chairman, who is responsible for providing leadership, identifying development opportunities for the firm, and representing it nationally and internationally. The national chairman, in turn, appoints the chief executive officer, with the possibility of recommending removal under specific circumstances.

Criticism and Calls for Transparency

Former KPMG partner Brendan Lyon criticised the partnership structures of the big four consulting firms, likening them to “Potemkin villages” that lack transparency and legal accountability. He argued that the positions of board members, presiding officers, and chief executives within these partnerships are more symbolic than the actual corporate structures seen in companies.

Senator Barbara Pocock echoed Lyon’s concerns: “The issue of transparency and accountability in big-four partnerships is a matter of public interest. I appreciate KPMG’s willingness to disclose their partnership deed, and I urge other firms like Deloitte and EY to follow suit.”

Involuntary Retirement and Bonus Payment

According to the partnership agreement, KPMG’s chief executive can initiate “involuntary retirement” for partners. Such retirements can occur due to poor performance, policy violations, or failure to meet strategic or performance objectives.

Partners may be eligible for a one-time bonus payment upon retirement based on their years of service. Partners who have served for 20 years or more are entitled to an average past compensation equivalent to their annual income averaged over the previous five years. 

However, partners who retire at 58 or older with less than 20 years of service receive a proportionately reduced payment. Those younger than 58 with less than ten years of service are not eligible for the one-time payment, while those with 10 to 20 years of service receive a smaller amount, with an increasing formula based on their years of service.

In contrast to rival firms, PwC, KPMG, Deloitte, and EY do not have an ongoing retired partner payment plan. Furthermore, the partnership does not assign any monetary value to goodwill, ensuring that partners do not have individual rights or interests in any friendship.

Confidentiality and Post-Retirement Restrictions

The partnership deed emphasises the importance of maintaining the firm’s private information as a confidential matter. Partners must keep all personal information secret to protect the firm’s financial, property, and reputational interests.

Additionally, partners are subject to a six-month restriction from engaging or involving themselves in any capacity in a competitive business after leaving the firm.

The disclosure of KPMG Australia’s partnership deed marks a significant step towards transparency in the consulting industry. The document sheds light on critical aspects of the firm’s operations and governance, providing valuable insights for stakeholders and the public. 

The move by KPMG Australia may pressure other big-four firms to adopt similar transparency measures, prompting further discussions on the transparency and accountability of partnerships in the consulting sector.

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