Starting Salary Symphony
You can’t always get what you want, but sometimes you get at least what others with temporarily more power have decided that you need.
Krupo up in the Great White North has some thoughts on my post about Big 4 starting salaries.
He also repeats the oft heard whine that higher tuition and ginormous debt means that graduates deserve higher salaries. Although I’m all for higher salaries, I want them because that’s what good old supply and demand forces dictate, that is, assuming we have free markets. Unfortunately, those more needy or deserving rarely get more for those reasons alone.
As most “young” folks are, Krupo’s very idealistic and can’t imagine that the firms could be even benignly, let alone overtly or covertly, getting together to control starting salaries. Well, I’m cynical enough to believe that anything’s possible when it comes to men wanting to make more money. When a market for resources is as tight as it is today for top accounting graduates, it seems odd that even the most desirable of them can’t negotiate their salaries, starting bonuses, additional vacation, preferred office assignments or other perks. It’s also odd that the schools would ever enable this restraint of trade. For the good of their students, of course… Maybe some students do cut better deals in spite of all the constraints… I have just haven’t heard from any of them yet.
Given the fact that the Big 4 have gotten very good at raising revenues in the form of higher and higher fees for the external audit and Sarbanes-Oxley review, with one firm very rarely breaking ranks to undercut another in a competitive bidding situation… Well, it should come as no surprise that, as accountants, they have also figured out that minimizing the cost of the inputs to production, junior staff, maximizes the profit equation.
Sometimes truth is stranger than fiction.
Go girl! The Big Four (BF) are a oligopoly in the SEC audit market, with 98.6% of the market by client market cap, check out that Herfindahl index, well over 1800. Call out the Federal Trade Commission and Justice Department. The BF are also a monopsony in the factor input market for accounting college grads, with their “paid for” professors touting the BF as places to work. Go girl, I’m with you on this one.
Hi, Ms. McKenna: with current credit market chaos, I do not worry too much about starting salaries, but I do worry about possible layoff at big 4 in New York banking/finance industry. Could you share with us your idea?
Hi Anonymous in NY,
Glad you asked about layoffs. From where I sit, which is very snowy and cold Chicago, the credit crisis only means more work, not less work for the auditors. As long as the Big 4 retain their FS clients, and they each have a few of the big ones, there will be even more work than last year. Additional pressures to look at valuations, risk management and anti-fraud will mean that the need for large armies of staffers will continue. However, if your firm loses their $70 million dollar plus paycheck, either by design or default, and does not pick up another one right away, via the typical auditor musical chairs, then you will definitely see layoffs. For example, if KPMG loses Citibank, but doesn’t rotate into Bear Stearns when Deloitte finally gets kicked out of there or into Goldman because PwC can’t keep up, then you will see big layoffs. If your firm ends up without a place to sit when the music stops, there will most definitely be layoffs. Almost all the firms have already had layoffs due to the growing trend for large companies to do more SOx testing inside. However, these layoffs were attributed to the natural de-selection of poor performers who were “counseled out” of the firm. You were a top grad of a prestigious school a year or two ago, wined and dined and interviewed to death, in particular for your fit with the “culture”. But now, only a year or two later, you are “not a fit” or “not performing up to standards”. Whose mistake, if any, was that? I call bullsh*t. If you’re a first or second year staff who’s already received a raise and a bonus, be careful who you diss going forward. One bad project review or one senior managers who gets the hint that they are expected to fabricate a personality or attitude problem about you and you will be up a creek without a paddle come mid- year or, at the latest, year end review time. In any decently managed office, you’ve already had a mid-year review. But year-end comes quickly. Most firms have their year-end reviews done by April or May for a June 30th year end. They want you out before having to give you another raise and before all the newbies at the lower starting salaries come in, anxious to take their places with bright shining faces…
I have grey hair. I’ve seen plenty. Probably more than 90% of your Big Four partners. Young CPA in NY, request a transfer. Now! Where? Houston or Dallas. Request to work on oil & gas companies and oil field service companies. In a few years, you’ll be CFO of a small SEC registrant oil & gas company with stock options and sitting pretty. Read Fortune, “Manhunt in the Oil Fields”, 6 October 1980. Probably appeared before you were born. Someday kid, you’ll thank me. Get out, now!
“Fabricate a personality problem”. Francine, may I call you that? I’m touched. You sound more like me every day.
You can call me Fran or you can call me Stan, or you can call me Harry, but you doesn’t have to call me M’am.
He is very very great man how so lovely guy and this is my first comment .