Promotion doesn't add up to gender equity at leading accounting firms

August 21, 2022

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Promotion doesn't add up to gender equity at leading accounting firms

Often, instead of making partner, women in public accounting firms appear to be sidelined into less prestigious, less powerful director positions, a study has found.

Examining public audits from the seven largest firms, including Deloitte and KPMG, researchers found that directors signing audit reports for nonprofit entities were twice as likely to be women than men, even though there are fewer female directors.

The analysis of this data, which is accessible because the audit clients are public institutions like nonprofits or universities, provides a window into promotion practices, said the new study’s lead author.

What the researchers say: “Women and men are hired into these public accounting firms at a very equal ratio, but at the partner level, it's disproportionate,” she said. “If we want equity in accounting, then both men and women need to be at the table making decisions.”

Partners and directors can both lead audits of nonprofit entities, but there are considerable differences between the two groups. Partners are the top leaders of their firms. They buy into the firm, hold voting power and help strategically plan how the firm goes forward. It is a high-risk, high-reward position, she added. Directors, while highly skilled and compensated, are salaried employees without voting power.

Both leadership levels lack gender equity, with women making up 32% of directors but just 18% of partners, according to self-reports by large firms in 2016. This “vertical segregation,” where men are clustered at higher levels than women, was also noted in earlier research in 2011 with the director-level dubbed a “pink-collar ghetto.”

The current study shows that division is persisting. The researchers analyzed more than 1500 audit engagements from 2017 Federal Audit Clearinghouse data for the seven largest public accounting firms. They found that among audit signers, directors were more often women, and partners were more often men.

In addition, audit clients paid more for female partners who signed audits versus female directors or even male partners and directors. This study could not determine exactly why that was the case, but the researchers said it is possible that some audit clients with goals for increasing diversity may be specifically asking for women partners to lead their audits, driving up demand for a limited supply.

It is also hard to pinpoint the reasons for the continued gender equity problems in accounting leadership. It could involve unconscious bias, lack of opportunity for women to develop the necessary skills, or women themselves choosing not to take on leadership roles that require long hours away from family.

“The first point of change is awareness,” said the lead author. “Once you identify a problem, the next step is to discuss what opportunities there are to develop equity in the firm.”

For instance, she suggested firms address work-life balance for both men and women versus assuming it is just an issue for one gender, which might help level the playing field. Advocacy and sponsorship are also key to helping women and other underrepresented employees advance into top leadership roles, and once more of them are there, it can help improve diversity overall.

“You can't hire diversity. You have to create an environment that attracts diversity,” she added. “For anybody going into accounting, if they can see themselves as a success story because they can see a partner that looks like them, then, it's more attractive for them to enter that field.”

So, what? Most of the large professional service firms that we work with are aware of the problem and a number of them are taking steps to remedy the situation. Progress is, however, slow.

Dr Bob Murray

Bob Murray, MBA, PhD (Clinical Psychology), is an internationally recognised expert in strategy, leadership, influencing, human motivation and behavioural change.

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