New report from the High Pay Centre highlights the extent of multi-million pound pay packages at ‘big 4’ accountancy partnerships and ‘magic circle’ law firms
Our new report shows how an estimated 1,370 top lawyers and accountants were paid over £1 million in the UK last year.
The report, written by Stephen Wilks, Professor Emeritus at Exeter University, analysed profits-per-partner at the ‘magic circle’ of five elite law firms and the ‘big 4’ accountancy partnerships. With Government figures reporting 11,000 people in the UK paying tax on incomes of over £1 million, these nine firms alone account for about 13% of million-pound pay packages in the UK.
The report will draw attention to the pay culture at the ‘big 4’ and the ‘magic circle’. While pay for bankers and corporate executives has been widely condemned in the wake of the financial crisis, lawyers and accountants have largely escaped criticism. The High Pay Centre argue that, because revenues for legal and accountancy firms are very consistent, with employees rarely moving between different firms, the standard defences of high pay do not apply.
High Pay Centre Director Deborah Hargreaves said: The Big 4 and the Magic Circle have very steady incomes so it’s unlikely these vast pay packages are necessary to incentivise staff and increase profits. There is also little evidence of individuals moving between firms, so they are not necessary to attract or retain key employees.
Our findings show that it’s not just the usual suspects of bankers and chief executives – excessive top pay has infected other leading professions too. The result is that the incomes of a tiny elite race away from everyone else, as wages for ordinary workers continue to fall in real terms.
The report also claims that:
- Of the 4,500 equity partners at the firms analysed (2,726 accountants, 1,774 lawyers), average pay in 2013 stood at £700,000 for the accountants and £1,100,000 for lawyers.
- The ‘Big 4’ accountants are responsible for auditing 96% of FTSE 350 companies. 46 FTSE 100 Finance Directors are former employees of one of the Big 4, while five of the fifteen board members of the Financial Reporting Council, responsible for regulating auditing and accounting practices, as well the development and enforcement of the UK Corporate Governance Code, previously worked for the Big 4.
- Lawyers and accountants face a potential conflict of interest. On the one hand, they have a quasi-regulatory role, ensuring that markets can have trust and confidence in accounts and contracts. On the other, the firms they scrutinise are their biggest customers and ultimately generate the multi-million pound pay packages for senior partners.