The Big 4 and A Living Wage

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There’s an ongoing dialogue related to my Big 4 Blind Items post. 
Specifically, someone added a comment regarding outsourcing/off shoring work by the Big 4 to India and other lower wage countries.  My comment, regarding my experiences while a Managing Director for KPMG Consulting/Bearing Point in Latin America, is there, too.
However, that got me thinking about the obligation of companies when they outsource closer to home.  I’m curious about their commitment to insure those workers are paid a a living wage.  Now, we’re not talking about the Big 4’s professional staff.  As has been well documented here, salaries for even entry level employees are very high by cafeteria worker standards, however contrived they might be to reduce the ability of these employees to negotiate in true free market fashion.
I had a long talk with a representative from the group that is supporting cafeteria workers at the Aramark-run cafeteria in the PwC headquarters on Madison Avenue in their struggle to consider union representation.  We discussed various approaches that could be used to exert more pressure on PwC leadership to encourage Aramark and their client Goldman Sachs, who has a significant investment in Aramark, to negotiate on good faith with this group.
One suggestion I had was to look at the US PwC Ethics and Code of Conduct Policy and to determine whether it mentions an obligation for PwC clients and vendors to live up to the same standards.  It’s not as unusual as you might imagine.
In fact, with a little research, I found this:
KPMG report that since becoming a Living Wage Employer the turnover of cleaning staff has reduced by 50%. A recent survey found that better employment conditions lead to a better motivated workforce. “I used to wake up in the night and feel sick thinking about work”, said one cleaner. Now that pay has improved “I feel proud to work in the hospital”. 

A Living Wage Employer recognises the responsibility it has for all the people it employs (directly or indirectly) and makes sure they are paid a Living Wage with fair employment conditions.

This means making sure that all staff, including contracted support staff, are:

1. Paid at least the Living Wage

2. Eligible for at least 20 days paid holiday a year plus bank holidays.

3. Eligible for at least 10 days full sick pay per year.

4. Allowed free access to a trade union.

The Living Wage Employers:

PricewaterhouseCoopers
BioRegional
Macquarie
Barclays
Westway Development Trust
KPMG
Greater London Authority
The Big Issue
IPPR
ACEVO
Child Poverty Action Group
Queen Mary University of London

And this:
Stockton firm introduces living wage
A STOCKTON-BASED housing group claims to have become the first North-east business of its kind to adopt the “living wage”, designed to lift those in work off benefits.

Staff at North Star Housing Group will see their minimum wage of £5.52 per hour boosted by 13%, while contractors will be required to guarantee a living wage for all their employees as part of the tendering process.
The living wage was originally introduced by London Mayor Ken Livingstone to ensure Londoners were not paid at a rate that kept them in or near poverty. Since 2001 a limited number of high profile companies, including Barclays and PriceWaterhouse Coopers, have adopted the policy for all low-paid staff, including cleaners and security guards…

This past Tuesday, Dennis Nally, Chairman of PwC US, spoke at Penn State University. A catering cook who works for Aramark in PwC’s headquarter office came to Penn State to talk to him about the situation. She has been personally preparing his lunches for the last two years, and they had never met face-to-face until Tuesday. She explained that she and her co-workers have been asking Aramark, since November, to remain neutral during a fair process to decide about union representation. She said that Aramark has responded by threatening and intimidating workers, and that many of her co-workers are afraid of losing her jobs. Because the situation has become critical, she asked Mr. Nally to use his power as the client to intervene on behalf of the workers.

Mr. Nally responded that PwC has been “dialoguing” with Aramark about the situation, and that he would certainly mention the conversation he had with her once he returns to the New York office. He said also that he is concerned about the situation, just as much as he would be if these were PricewaterhouseCoopers employees.

After the event, the Dean of Smeal Business College actually asked him about Aramark and the labor problems it’s bringing to the firm. I am trying to obtain the video and will post it as soon as it becomes available.

So PwC, are you really a Global Firm? 

Act like one and be consistent in your approaches to contracted employees. Step up and let your client, Goldman Sachs know that they are embarrassing you by not encouraging Aramark management to negotiate in good faith. Stop allowing Aramark to perpetuate a two-tier wage and benefits program amongst their various Aramark sites in the New York metro area.  

 

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5 replies
  1. Content
    Content says:

    I think it should be mentioned in all of this that PwC does not own 300 Madison, CIBC does, PwC leases the space. it stands to reason then that Aramark’s contract is with CIBC. Furthermore, PwC acts as Goldman Sachs audiotr and I’m sure it would be an independence violation of they began to tell Goldman or its subsidiaries how to negotiate contracts. Since this an issue that you feel very strongly about, perhaps you could purchase Goldman Sachs stock and act as the appropriate party for bringing about the change you wish to see, the Goldman Sachs shareholders.

  2. Francine McKenna
    Francine McKenna says:

    @Content – A few comments to respond.

    I believe the cafeteria is exclusively for PwC, who occupies the vast majority of the space in that building. I have been there many times. I also believe Aramark is PwC’s vendor in this contract. If I am wrong, and you know for sure, please let me know. I don’t believe the cafeteria is public or run by the owners of the building. I think Mr. Nally’s comments at Penn State confirm the fact that this situation looks bad for PwC, regardless of the details.

    The independence issue is already there, if Aramark is PwC’s vendor. Section 602.02.b of the Codification of Financial Reporting (“the Codification”), states that materiality is not a consideration in the case of a direct financial interest.”

    Further, “direct and material indirect business relationships, other than as a consumer in the normal course of business, with a client … will adversely affect the accountant’s independence with respect to that client. Such a mutuality or identity of interests with the client would cause the accountant to lose the appearance of objectivity and impartiality in the performance of his audit because the advancement of his interest would, to some extent, be dependent upon the client.”

    PwC has to manage their involvement in this contract to make sure they are not getting any better deal from Aramark in exchange for lower fees to Goldman Sachs, for example. But as their auditor, they can point out that this ongoing labor dispute and any negative consequences may impact the risk profile of Aramark and its investor, Goldman Sachs. There is also reputational and litigation risk, potentially. These are within the purview of PwC to discuss with Goldman Sachs as their auditor. KPMG is Aramark’s auditor. Perhaps we should also be trying to get them to understand the issue.

    Finally, you have mistaken my interest in this subject as a deeply personal one rather than as strong interest because I think it is extremely relevant to the theme of this blog – the business of the Big 4. I would never buy stock in Goldman Sachs and try to influence the situation as an activist investor.

    Notwithstanding the fact that some folks think I am becoming Evelyn Y. Davis, there are much better candidates for influencing Goldman Sachs both financially and politically. And I want to continue to write about Goldman Sachs. They are too rich a subject. Owning their stock would compromise my independence.

  3. Anonymous
    Anonymous says:

    I saw the title “The Big 4 and a Living Wage” and some wishful thinking led me to believe that this post would discuss how Big 4 Auditor salaries (while considered ‘high’ for students directly out of college) particularly in New York and other big cities barely qualify as a Living Wage for working professionals.

    Big4AuditorNY

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  1. re: The Auditors » Blog Archive » Laboring In The Big 4 – A Labor Day Special Report says:
    February 24, 2010 at 12:05 pm

    […] to fair pay, the Big 4 has to worry about whether they’re paying their own staff as well as their vendors fairly. And based on the lawsuits and labor problems, they’re not doing a very good job of […]

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