Is The Fix In On Starting Pay?

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The Wall Street Journal’s Law Blog has become a go-to read for me. As some of you have seen, I have an interest in the intersection between law and accounting. I have found the blog to be written much more freewheelingly than its front page. That is, there’s a lot more latitude given Peter Lattman. The WSJ Editors seems to allow him to speculate, commiserate and postulate much more than they would your normal journalist.

One of the blog’s most popular topics is law firm Associate salaries. The ongoing inflation of first year and subsequent classes of Associates’ salaries and bonuses is a fixation and they seem be getting the scoop constantly from their contacts. There doesn’t seem to be much variation in salaries at the largest law firms and when they change, they change in lockstep, no pun in tended.

Why is it no one calls out the non-competitive, as in potentially collusive overtones of everyone being paid the same, as if by fiat?

So it got me to thinking about first year salaries at the public accounting firms. I have already chronicled my suspicions about the firms in Mexico, based on my experiences working there for KPMG Consulting in the early part of this century. It seemed to me that the guys that ran the firms in Mexico City must have talked about how salaries would be set and insured that they would rarely change. They were set low and stayed low, regardless of the market and remained impermeable to candidates’ negotiations or varying qualifications.

I recently requested support for some research I’m doing for my book. I am interested, from a competitive perspective, in the recruiting process at the universities for first year staff. I have a theory and it seems to be borne out by the anecdotal evidence obtained to date, as well as my own personal experience over the years.

I’ve reprinted a few of the comments I’ve received and I’ll let you decide for yourself. An interesting additional question I’ll be following up on is what part the schools play in perpetuating a fixed salary structure for staff, assuming there is one that is overtly or covertly agreed to by the firms on a regional basis. Inquiring minds want to know…

Keep those cards and letters coming. There is plenty of time to contribute.

Responder A: We were told *explicitly* at (large public West Coast university) that the salaries/bonuses offered by the firms were strictly non negotiable. In LA I even heard that the offers were identical from firm to firm – as if the Big 4 had each sent a representative to a meeting and determined(in a very oligopolistic fashion) what starting salaries were going to be.

Responder B: Financially, all the firms were fairly on par with their starting salaries. PwC, which is the primary recruiter at my school, as well the schools #1 employer of graduates (in all schools, not just business), seemed to offer the highest signing ‘bonus’. Incentives were also fairly similar between the firms, although some stood out in certain areas: KPMG’s 25 vacation days, PwC’s up front coverage of CPA fees and Becker Study materials.

Responder C: There seems to be significant financial competitiveness after offers are given out, as even after I had accepted mine I received notice that my compensation was being increased to better match the market.

Responder D: For example, KPMG emphasized a lot about its benefits since theirs is by far better than others. Deloitte stressed how they are active and young. Deloitte people are really good at following up even after all the events. E&Y had very upscale style of dinner for all candidates. PwC had very personal touch of pre night interview dinner. However, all 3 firms offered same salary except KPMG for entry level auditors.

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  1. […] There is informal, if not formal, collusion on the part of the Big 4 firms, with cooperation of the accounting professors/schools, to fix starting salaries and give the students no chance to negotiate if they have special experience, skills or circumstances. […]

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