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Opposition from its US division has derailed a scheme to divide the firm, but an email to partners says the goal remains.
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EY scraps plans to split, but recommits to the idea
13 April 2023
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EY has scrapped plans to split the company after opposition from its US branch and its future now looks uncertain after it emailed partners last night saying it remains committed to the idea.
Project Everest, which planned to divide EY into separate audit and consulting arms, met an unmoveable force in its US executive committee that derailed the move, according to a Financial Times report.
The report said US opposition, which centred on the viability of an audit-only arm, had generated months of internal dissent and finally stopped the project in its tracks.
However, EY dispatched a memo overnight to all 13,000 global partners – who were due to vote on the plan later this year – citing a “shared vision” that separating EY would bring value to partners and clients, and recommitting to the plan.
“The global executive (GE) remains committed to moving forward with creating two world-class organisations that further advance audit quality, independence and client choice. However, after much diligence we are stopping work on Project Everest,” it said.
“A core tenet of Project Everest has been that we have businesses that need to be operated differently to reach their full potential. Winning in a rapidly evolving market and better preparing ourselves for a future transaction will require us to adapt our governance, operating model, cost structures, capital investments, and go-to-market approach. Globally, we are committed to changes that allow all of our businesses to thrive.
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“As a result, we will begin taking actions based on what we have learned from the work done over the past year – actions that will both benefit our businesses today and better prepare us for a new transaction.”
Internal opposition to the project was just one issue confronting the firm after a series of scandals that have resulted in fines and bans.
Early this month, EY’s German branch has been given specific limits on the work it can undertake after its failure to uncover fraud at failed payments company Wirecard. It was also fined €500,000.
Last year, that fine was dwarfed by the $US100 million penalty imposed by the US Securities and Exchange Commission after it uncovered years of exam cheating involving hundreds of staff.
In its email to partners, EY said it would “continue to focus on EY clients, people, and businesses – providing exceptional client service and driving long-term value for all our stakeholders”.
“We have an outstanding organisation that has been performing exceptionally well as we enter the final quarter of FY23. The strength and resilience of EY is a testament to the work you do every day with clients and people.”
“We always knew Project Everest would be a challenging journey and during this time all of you have been in the market with clients creating continued positive momentum for EY.”
However, it failed to detail a way forward for the plan.
“There are many opportunities in front of us as a global organisation. We are united in creating long-term value for EY people, clients and society. This unifying goal creates a significant runway for us to move forward together,” it said.
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