Originally published on Forbes.com.
Diane made partner in PwC, which is the largest, most prestigious and most famous public accounting firm in the world. At the Academy Awards, when the presenters say “The envelope please”, they are talking to PwC partners, who supervised the vote count.
PwC’s Boston office has prepared Mitt Romney’s individual return for many years. Diane told me that when she left PwC about 14% of the partners were women. Here is a little more background.
Being A CPA’s CPA
Diane has a really interesting tax practice. She calls herself a “tax maven” or a “tax geek”. Her clients are exclusively other CPAs:
Are you understaffed and overworked? Diane’s project-based tax consulting practice “comes to the rescue.” Diane’s practice is exclusively helping CPA firms; she has no “retail” clients. Typical services include: Tax research Unusual transactions Expansion of a Business Tax audit assistance Reviewing complex tax returns.
Her clients are small to medium size CPA firms. About half of the partners that she deals with have a Big 4 background and would have been accustomed to having a national tax office to call on for knotty problems. You need to get to a pretty significant size before you can have hard core tax geeks on your staff full-time. So she is probably a godsend to her CPA clients.
Diane had to take a break from PwC due to health issues. She decided that the things that she needed to do to stay healthy – get enough sleep, eat right and exercise regularly – (I hope I never get whatever the condition was that she had. How can anybody handle a regimen like that ?) – would be easier if she could make her own hours. She did have to do a bit of retooling in order to serve regional firms effectively.
National Firm Tax Practice Versus Regional Firm Tax Practice
The most important clients of national firms are large corporations, many of them publicly traded. They are almost inevitably C corporations. Not only do they have returns to do and planning , they also require “provision work”. “Provision work” makes tax geeks the ugly stepchildren of the auditors. The relationship between income tax expense on GAAP (generally accepted accounting principles) financial statements and the amount of taxes actually paid by a large corporation seems rather tenuous to the uninitiated.
That’s what provision work is all about. It is a significant piece of revenue for large firm tax practices. Thanks to the Tax Reform Act of 1986, much of the work of regional firms centers on flow-through entities. Since the entity has no tax, there will be no provision (That’s an oversimplification, but let it go at that.)
Also regional firms may have very substantial clients that don’t even have to provide outsiders financial statements. Diane told me that she has only had to do a few provisions for her CPA clients and found them relatively relaxing.
We talked a bit about regional versus national in serving high net worth individuals and families. The biggest difference in tax practice is that national firms will be interacting with corporate tax departments. Everybody on both sides is pretty much part of the Big 4 fraternity. Regional firms will more typically be dealing with the principals, who might not have any accountants at all in their direct employ. Diane really admires her regional CPA clients:
They have to hold their client’s hands and tell them stuff they don’t want to hear.
Your firm has to be pretty substantial to have one or more full time tax geeks. You know. People who actually look stuff up. That is what makes Diane so valuable to her CPA clients. There are real advantages to her. She has close to no overhead. She only has to send out eight bills a month and doe not have collection issues. The downside is that her practice will never create saleable goodwill, since it is totally dependent on her own efforts.
Partnership Taxation
Diane and I are both pretty hardcore tax geeks, so we had a great time talking about 704(b) allocations never being done right by family limited partnerships among other things, but frankly that stuff is not real interesting to normal people. I could not resist asking about the Son of Boss deal period, when Big 4 partnership tax geeks organized what Jack Townsend called a raid on the fisc. You’ve got a $20,000,000 dollar capital gain ? Don’t pay the government 20%, pay a Big 4 firm 3%. She told me that PwC barely dipped its toe into that swamp and got out early. She couldn’t figure out how anybody thought the things really worked anymore than I could.
The Woman Question
Diane and I have both been partners in public accounting firms, but if you are not familiar with the industry, I might be able to illuminate our difference by an historic analogy. It’s like Diane was an officer on General Eisenhower’s staff and I was second in command of a group of partisans in the Balkans.
Partner in PwC is about as good as it gets at least in terms of prestige, so when Diane talks about what it takes for a woman to advance in public accounting, you have to take what she says seriously. She told me I might not like the answer. She said that a lot of women who could have advanced, did not advance because they “didn’t ask for it”.
They held themselves back. They would say that they figured they would have kids someday. Diane would say that’s OK, you dial back, have fewer clients and then ramp up some more when the kids are in school. That is when she mentioned Sheryl Sandberg’s book. Often what she had to say fell on deaf ears.
Of course one of the problems with a career in public accounting is that the qualities that you cultivated to go from high school graduate to seven year veteran have little relationship to the qualities required to move up from there. If this article by Noam Scheiber is accurate, the disconnect is similar, perhaps even more pronounced, in Big Law:
There is an irony that flows from this. Lawyers at an elite firm like Mayer Brown have typically spent their lives amassing intellectual credentials. They are high-school valedictorians and graduates of elite universities, with mantles full of Latin honors. They have made law review at top law schools and clerked for federal judges. When, somewhere between the second and fifth year of their legal careers, they discover that brainpower is only incidental to their professional advancement—that the real key is an aptitude for schmoozing—it can be a rude awakening.
It is also a little ironic that Diane seems to like her current gig as an army of one supporting regional CPAs better than being a PwC partner. Maybe the women she counselled were smarter than she realized.
Diane and I both agree that public accounting remains a great opportunity for both young men and women. If you have a kid in college who is reasonably bright, but perhaps not MIT bright, who needs a little direction, you might want to suggest them looking at it.
Personally, I don’t think public accounting’s “women at the top problem” will be solved by women reading “Lean In” and changing their ways. It will be solved when a few score women directors, senior managers and income partners walk out and start a firm. I’d be willing to bet that Womanpower CPAs would have one of the top 4 spots within a decade and transform the industry.
You can follow me on twitter @peterreillycpas.