EY has shelved a crucial vote on breaking itself up after a backlash from partners dealt a blow to radical plans to separate the Big Four firm's consulting and accountancy arms.
The firm’s leadership sidelined plans to put the break-up proposal to a vote after a meeting of US partners on Wednesday, The Telegraph understands. Its UK partners will be updated on Thursday.
The voting rules were set to vary by country, but in the UK, the firm is required to persuade 75pc of partners to back the plan.
The firm's senior leadership has repeatedly pushed the vote back but was expected to ballot partners in April or May.
The decision marks a climbdown by EY’s senior leadership, which strongly encouraged other partners to back the split.
A spokesman for EY said: "As part of our deliberation and due diligence in connection with the proposed transaction, we are engaging in a dialogue with the largest EY country member firms to determine the final shape of the transaction.
"This transaction is complex and will be the roadmap for the re-shaping the profession, so it is important we get this right. We remain committed to the strategic rationale that underpins Project Everest and believe that a deal can and should be done."
The plan would allow EY to publicly list its advisory division or sell a partial stake in the 312,000-strong firm in a move that would result in huge payouts for partners, echoing the floats of Goldman Sachs and Accenture in 1999 and 2001 respectively.
EY proposed the split amid severe pressure from regulators worldwide over concerns around conflicts of interest at the Big Four firms.
EY, Deloitte, KPMG and PwC have been heavily rebuked by regulators in the UK and US over a perceived lack of independence in their audit divisions because of the fees they also earn from advisory work.
In the UK, the Big Four have already been forced to start ringfencing their audit and consulting arms in a bid to reduce conflicts of interest following major corporate collapses at the likes of Carillion and BHS.
The Financial Reporting Council has given the firms a deadline of 2024 to operationally split their audit arms from the rest of their advisory businesses.
A decision on the move has already been held up for months due to disagreements over how billions of dollars of liabilities should be split regulatory issues in certain countries, including China.
Last year, The Telegraph revealed that senior staff at EY were seeking to defect to rival firms in a sign of growing internal strife over its proposed break-up.
In July, EY held a briefing on the proposed split for its UK partners at the five-star Royal Lancaster hotel near Hyde Park in west London.
Hywel Ball, chairman of EY UK, said in September that views expressed in that meeting showed that partners were “proud” that EY was the first Big Four firm to try a split, adding: “We’ll redefine the profession in the coming years."
At the time, he said: “We believe the creation of two strong, independent businesses would help us to better meet the needs of our clients; create compelling careers for our people; and serve the public interest by providing greater choice in the market and a global response to regulatory concerns.”
The Big Four are also facing regulatory pressure in the US. In March, the Securities and Exchange Commission launched a probe into conflicts of interest at the major audit firms that could undermine their ability to conduct independent reviews of company accounts.
Deloitte, KPMG and PwC have all said they have no plans to engineer a similar split of their advisory and audit arms.
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2023-03-08 20:01:00Z
CBMiWmh0dHBzOi8vd3d3LnRlbGVncmFwaC5jby51ay9idXNpbmVzcy8yMDIzLzAzLzA4L2V5LXNoZWx2ZXMtY3J1Y2lhbC1icmVhay11cC12b3RlLWJhY2tsYXNoL9IBAA
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