Competition for firm partnerships is No. 1 issue for minority accountants

by Stuart Kahan

Women know all about the glass ceiling. They look up and see their male counterparts in better positions and earning more money. However, there is another barrier, the opaque ceiling, and it reflects minorities looking up and seeing nothing above them. In the world of accounting, that ceiling has been in place for a long time, but cracks are now forming.

“This is not a discrimination issue like in the past,” said Bert Mitchell, founder, chairman and chief executive of Mitchell & Titus, the largest minority-controlled CPA and management consulting firm in the U.S. Founded in 1974, it ranks among the top U.S. CPA firms. “It is the issue of competing de­mands for the best candidates.”

Mitchell explained that firms today have become extremely proactive and actually compete for minority talent. “There is a huge demand for talent in the accounting profession, no matter what color, race or creed. Firms are looking for mature CPAs and there is a similar demand in other sectors. For the most part, we’re competing with government, regulatory authorities and industry.”

William Schechter of Watson Rice, one of the nation’s largest and oldest culturally and ethnically diverse CPA firms, concurred, noting that racially diverse firms are relatively few, but that no exclusionary policies or bigotry are presently in evidence. “The outlook for greater diversity, based on some of the field’s best and brightest, is promising.”

In short, discriminatory practices don’t appear to be the No. 1 factor any more. The belief is that the opaque ceiling is cracking, with specific help from the large firms. However, those chips in the armor, to some, are still much too small.

John Milligan is the managing principal of Milligan & Co., the largest minority-owned firm in Pennsylvania and one of the largest minority-owned CPA firms in the U.S. He was with Pricewaterhouse­Coopers for nine years in their Philadelphia office as manager in the emerging business department.

Milligan doesn’t believe that things have changed that much over the years with the Big Four. “In fact, when I was at Coopers, there was not a single African-American partner in any of the Big Eight here in Philadelphia, and only later did Coopers make one a partner.”

He does feel, though, that things are beginning to change, and he sees this below the Big Four level, where more and more minority CPAs are coming to the front. His feeling is that the influx of superb minor­ity-owned CPA accounting and consulting firms will simply add to the thrust forward, eventually pushing upwards into the Big Four.

Teaming with the top guns

Last December, Ernst & Young and Mitchell & Titus announced an alliance that would enable the two firms to work together on client engagements, as well as collaborate on staff training, marketing, re­cruiting and diversity efforts.

“We pursued the alliance specifically because Ernst & Young shares our passion for quality and integrity in client engagements, and has a mutual commitment to diversity,” said Mitchell. “We are like-minded firms and this alliance will create a dual approach to meeting client needs that we think will be difficult to match.”

He also pointed out that his firm has long been a supply chain for the Big Four. “We constantly get raided for our talented people.”

John Ferraro, vice chair at E&Y, noted that his company is committed to being a champion for diversity in the accounting profession. E&Y has been named one of the top 50 divers­ity employers by Black Collegian Magazine, and has been named one of the 100 Best Companies to Work For by Fortune for five years in a row.

Mitchell tempered what is happening in his firm with the general climate today. “We’re no place near where we should be. We started so late anyway in getting minority partnership representation in firms. There has been some progress but we still have a long way to go.”

KPMG is another firm in the vanguard of changing the status quo, by working together with minorities, both in colleges and as graduates. Bernie Milano, president of the KPMG Foundation, said that research showed that many African-American and Hispanic young people are conditioned to believe that they cannot excel in quantitative areas, such as finance and accounting, and that family, church and media influences tend to steer them into other fields, such as teaching and social work. The firm is looking to change that concept dramatically by employing a number of minorities and then moving them up the ladder quickly.

At Watson Rice, managing partner Raymond Jones and his predecessor, Bennie Hadnott, have been working with the National Association of Black Accountants in a program aimed at attracting African-Americans to the profession.

In fact, Schechter said that foundations supported by the Big Four are actively seeking to do the same thing, although with a qualification. “Despite those efforts and unmistakable advancements by minority communities across the U.S., the African-American proportion of CPAs nationwide has been stuck at 1 percent to 2 percent [of roughly 400,000] for more than 30 years.”

He claimed that one reason for this is that families with first- and second-generation college graduates have had few role models in accounting. “Another likely reason is that television has never, it seems, presented CPAs of any background as positive, well-rounded role models.”

Frightening statistics

According to Theresa Hammond, associate professor of accounting at Boston College, there are more than 400,000 CPAs in the U.S. compared to 700,000 physicians and 900,000 lawyers.

Until the late 1960s, the big CPA firms refused to hire African-Americans, recounted Hammond in her book, “A White-Collar Profession.” She pointed out that the Big Four and other major firms do not report the representation of various groups at various levels in their firms.

However, the AICPA surveyed firms and provided aggregate data from 1976-1989, 1994, 1995 and 1996. Approximately 8 percent of accounting graduates are African-American, but only about 3 percent of major-firm hires are African-American. In fact, at less than 1 percent, CPAs have the lowest representation of African-Americans of any of the major professions.

At the partnership level, the findings are even more dismal. Approximately one in 1,000 partners (in firms with more than 25 professionals) are African-Americans, said Elizabeth Chambliss, author of “Miles to Go 2000.”

Darryl Matthews Sr., executive director of NABA, agreed that, unfortunately, detailed data on partnerships is not available from the major public accounting firms. “Nonetheless, a 1996 study by the AICPA found that only 0.1 percent — one in 1,000 — of partners in major CPA firms are African-American.”

Where are the others?

But to widen those cracks in the ceiling will require a little more help. According to the latest U.S. Census, Hispanics are now the nation’s largest minor­ity group, and the number of prosperous Hispanic households — those with incomes of at least $100,000 — rose an astonishing 137 percent be­tween 1990 and 2000.

With the purchasing power of this group rapidly increasing, it is expected that more and more financial planners will be needed to step up and make sure that the bounty does not remain under the mattress but goes into the economy. As a result, there is a huge and growing market for financial services to help Hispanics establish themselves. However, according to the Financial Planners Association, of all the certified financial planners that belong to the organization, only 1 percent to 2 percent even speak Spanish.

Perceptions must change

From the black perspective, a part of the problem is how black accountants view their professional acceptance and how corporate America views them. A 2001 survey of NABA members conducted by Texas Southern University revealed that, “Although black accountants opine that they have the technical training and the abil­ity to provide a quality service to clients, they perceive that corporate America considers their ability to deliver a quality product as inferior.”

However, even over the past two years following the release of that study, things are changing. There is certainly a concerted effort to bring blacks on par with their white colleagues, and alliances such as those fostered by KPMG and E&Y are certainly steps in that direction.

Firms relish the chance to diversify because it makes business sense in an increasingly multicultural society. According to Shelly Freeman, president of HROI, in Kansas City, Mo., “Savvy businesses understand now that the marketplace is diverse and that their clientele and customer base is probably diverse, as well. They can reach out better if they have people representative of that marketplace working for them.”

What to do?

NABA’s Matthews said that one of his association’s goals this year is to research this very topic and develop tactics and strategies to assist its members reach and excel at the partner level, “especially in the ‘Final Four’ and other large firms.”

Hammond noted that, historically, CPA firms react to pressure from only two sources: clients and the federal government (either from the Securities Exchange Commission or Congress). In contrast, the medical and legal professions respond to a wider set of interest groups.

She recommended that Congress request that the Big Four provide detailed information annually on the progress of African-Americans, Latinos, Native Americans and women in their firms. “The pervasive refusal to hire that characterized the first two-thirds of this century may have dissipated, but it has been replaced with disinterest.”

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