Does KPMG Discriminate Against Women?

When CFO Innovation recently sat down with Lord Michael Hastings, KPMG International's Global Head of Citizenship and Diversity, one topic of the conversation was gender equality in the Big Four accounting firm.

 
“We’ve had a focus on women’s development and gender progression,” Lord Hastings declared. “We have a global ambition, to be in the range of having 20% of our partners as female. That’s 144 countries.”
 
It’s a laudable goal, though some may question why the bar isn’t set higher given that almost half of the accountancy trainee intake globally are women, according to the Association of Chartered Certified Accountants (ACCA).
 
Last week, however, KPMG’s commitment to diversity came under a cloud in the United States. Donna Kassman, a 17-year veteran in the firm’s New York office, sued KPMG for allegedly subjecting her and other women managers to “a pattern and practice of gender discrimination, and employment policies and practices which have had a continuing, unlawful disparate impact on them and their employment opportunities.”
 
Among other things, her lawyers asked the court to award Kassman and other women managers in KPMG’s US offices “compensatory and punitive damages . . . in excess of 350 million dollars.” That’s already a hefty amount by itself, but the impact to KPMG’s reputation, if the charges are proved true, could be more damaging.
 
KPMG denies practicing gender discrimination. “We believe this lawsuit is entirely without merit,” George Ledwith, a KPMG spokesman, said in a statement. “KPMG is recognized as a leader for its strong commitment to supporting. In fact, among the Big Four accounting firms, KPMG is tied with the highest percentage of women partners.”
 
Still, the emotive themes that Kassman’s lawyers are expertly playing on are finding resonance in the accounting industry’s dismal record in gender diversity. As documented by ACCA, CIMA, AICPA and other professional bodies, women occupy just a fifth of accounting’s senior ranks in the UK and the US.
 
In Singapore, according to a 2009 study by ACCA and executive recruiter Robert Half, 45% of women in finance and accounting do not believe they would reach a senior management position such as a directorship, and only 49% say their organisation has a formal equal opportunities/diversity policy.
 
It seems unlikely that women in Asia would sue a company for gender discrimination, primarily because the culture of litigation is not as strong in the region as it is in the US, for example, and Asian legal systems are not as open to class-action suits. But the publicity around Kassman’s lawsuit may tarnish KPMG’s reputation among women and perhaps that of the accounting profession in general.
 
Blocked promotion
Kassman, 54, tells an emotional story. In her legal filing, the former senior manager (she resigned from KPMG last October) sought to back up her claim by narrating a series of alleged events involving run-ins with male co-workers that she claims reduced her into a person “who could barely eat or sleep, and [who] took the back elevators at work to avoid running into her tormentors.” She said she was “ultimately forced to resign from her position because the work environment at KPMG had become unbearable.”
 
As Kassman tells it, “after several strong performance years and numerous requests for advancement,” she was finally placed in line for promotion to managing director in late 2008. “But rather than support Ms. Kassman, her male colleagues reacted with overt hostility,” she charged in her lawsuit.
 
One male subordinate suddenly complained that he “didn’t like [her] tone,” Kassman alleges. He and another senior manager, also male, supposedly characterized Kassman as “unapproachable” and “too direct,” which are qualities that Kassman says KPMG’s senior leadership actually prizes – in men. 
 
Kassman’s supervisor allegedly acknowledged that the subordinate “might have an issue working with women,” said the lawsuit, but neither he nor the male senior manager were disciplined for “discriminatory conduct.” Instead, KPMG “repeatedly interrogated Ms. Kassman about her behavior, ultimately recommending that she consult a ‘coach’ to resolve these trumped up issues.”
 
Kassman goes on to accuse KPMG of retaliating against her by removing her name from the promotion track to managing director. Instead, the job went to the senior manager who supposedly harassed her, “even though he had a shorter tenure with the Company, fewer years as Senior Manager and less professional experience overall than Ms. Kassman.”
 
Kassman makes other allegations. “From 1993 until 1999, before Ms. Kassman had her children, she was promoted on KPMG’s progressive career track from Associate to Senior Manager,” lawsuit says. “However, after she had her first child in 2003, her advancement abruptly stopped. She was not promoted after she became a Senior Manager and remained in this position for over ten years.”
 
While she was on maternity leave, Kassman claims, KPMG cut her base salary by US$20,000. “KPMG cited no business justification for slashing her salary – and indeed, could not, as Ms. Kassman was a top-notch performer,” the lawsuit contends.
 
“When Ms. Kassman complained about the salary cut and wanted to discuss ways for her to earn back the $20,000 that was taken from her, her male supervisor asserted that she did not need the money because she ‘ha[d] a nice engagement ring.’”
 
Where are the ladies?
It remains to be seen whether the court will find Kassman’s allegations credible. Some of the assertions she makes have a she-said-he-said quality to them, and there may be reasons other than gender behind the blocked promotion and salary cut. The bar seems higher still on her request for class-action status – the lawsuit does not really cite actual events of gender discrimination against other women, just general statements.
 
What it has in abundance are facts and figures sourced from AICPA, women’s equality organisation Catalyst and accounting periodicals about the sorry state of female representation in the top echelons of the profession in the US.
 
Citing Catalyst, Kassman’s suit asserts that in 2009, “women made up 55% of newly hired accounting graduates and 61.8% of all accountants and auditors. But despite constituting half of the workforce at accounting firms for decades, women are only 23% of all partners industry-wide and 18% at KPMG [in the US].”
 
Kassman also claims that “women are conspicuously absent from KPMG’s leadership. Among the 20 members of KPMG’s global executive team, only one, or 5%, is female. Similarly, of the 24 members of the global board, only one, or 4%, is female.”
 
Managing directors at the US firm are predominately male, Kassman further charges. “Even in lower-level management positions such as Manager and Senior Manager, women only do marginally better, representing approximately one in three managers. Nonetheless, across KPMG’s management ranks, the number of female managers never approaches parity with their overall representation at the Company.”
 
Reputational hit
But KPMG is not the only company where women are poorly represented at the top levels. In fact, accounting is hardly the only industry with gender imbalance, whether in the US or Asia. A study on board diversity by Korn/Ferry released in March found that more than 70% of boards in Hong Kong, India, Malaysia, New Zealand and Singapore have no female independent directors. Australia boasts the highest percentage of women on corporate boards, but they account for only 11% of all directors.
 
Even if Kassman wins her case in the US, there should be no legal or financial repercussions on KPMG member firms elsewhere because, like the other Big Four firms, KPMG is a network of independent member firms affiliated to a central body that provides no client services, in this case the Swiss entity KPMG International. Under this structure, a member firm cannot obligate or bind KPMG International or any other member firm to any third party.
 
In other words, the Kassman matter should have little practical effect in Asia, a region where KPMG International’s diversity effort is progressing well, according to Lord Hastings. “In most of our Asian countries, we’ve already exceeded that target [of having women account for 20% of partners],” he says. Compared with other regions, “Asia-Pacific has emerged as our best region for women’s development.”
 
But will KPMG take a reputational hit? It might in the US, especially if the court grants Kassman’s plea for a jury trial and the proceedings are held for all to see. The negative publicity may then ripple out to the rest of the world.
 
The ideal outcome is for KPMG and other accounting firms, regardless of how the court rules, to use the case as added impetus to the task of ensuring real diversity and gender equality in the profession.
 
About the Author
Cesar Bacani is the Editor-in-Chief of CFO Innovation.
 
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