The Equal Employment Opportunity Commission has been questioning some of the Big Four accounting firms about their policy of requiring their partners to agree to retire at a specific age.
The general counsel at Deloitte LLP testified about the firm’s experiences during a congressional hearing this week in which lawmakers considered three pieces of legislation aimed at reining in various practices at the EEOC (see Deloitte Defends Partner Retirement Policy). The firm has nearly 3,000 partners in the U.S., all of whom have signed a partnership agreement that requires them to retire at the age of 62. Last year, the EEOC also challenged the mandatory retirement policy at PricewaterhouseCoopers, prompting a letter from the American Institute of CPAs, though the action against PwC was eventually dropped.
But Deloitte LLP is concerned that the EEOC is not only questioning the firm’s retirement policies, but also the firm’s structure as a partnership. The EEOC contends that Deloitte is not a true partnership, and therefore, its mandatory retirement age violates the Age Discrimination in Employment Act. “The EEOC staff has recently challenged the fundamental structure, indeed the very existence, of Deloitte’s business—our decision to organize as a limited liability partnership,” said general counsel William Lloyd in his prepared testimony.
Lloyd pointed out that many of Deloitte’s partners actually opt to retire before the age of 62, with the average age being 58. He noted that when he joined Deloitte, he actually chose to become a director, so he has been able to work past the age of 62.
But the requirement for partners to retire by the time they reach 62 has provided some benefits for Deloitte in terms of diversity, he argued. More of the employees who have been made partners in recent years have been women and minorities, opening up the partnership ranks beyond the white males who have traditionally led most CPA firms.
The accounting profession realizes there is a problem with diversity, not only among partners but in the rank and file as well. The American Institute of CPAs formed a National Commission on Diversity two years ago in an effort to broaden the population at firms to reflect the increasing diversity of the country as a whole, as well as the potential client base. The AICPA and a number of the major firms have also made efforts to encourage more minority students to enroll in accounting courses at high schools, colleges and universities and eventually join the profession.
Part of the mission of the EEOC is to encourage greater hiring of minorities and women, and Deloitte’s general counsel pointed out that the commission’s efforts to discourage mandatory partner retirement policies at firms might run counter to that goal.
"Ironically, Deloitte’s retiring partners are overwhelmingly white males, while the newly admitted partners over the past decade have been significantly more diverse,” said Lloyd. “Eliminating the retirement age would ultimately limit the partnerships available to an increasingly female and minority talent pool.”
To be sure, the EEOC also has to watch out for age discrimination, which has taken on greater importance in the wake of the recession. Many older workers were laid off in the interest of cutting costs at companies that took a hard look at the salaries they were paying to their more experienced employees. Even though the economy has been slowly recovering in recent years and the unemployment rate has been dipping, many older workers are still finding it difficult to get new jobs, as potential employers worry about controlling health care costs and retirement benefits.
Both accounting firms and the EEOC need to balance the need to promote greater diversity at firms while ensuring basic fairness to employees both young and old.
Do you think firms should have mandatory retirement ages for partners?