PwC India top deck rejig hints at management discord

Vivek (CA ) (2368 Points)

10 December 2009  

PwC India top deck rejig hints at management discord
10 Dec 2009, 0132 hrs IST, MV Ramsurya, ET Bureau

MUMBAI: The appointment of Gautam Banerjee as chairman of PriceWaterhouseCoopers India, replacing Ramesh Ranjan before the end of his term, has
brought to the fore differences between Indian partners and the foreign parent, especially in global audit firms that have grown in India by merging local accounting firms.

These differences among partners are mainly because operating and governance practices prevalent overseas are considerably different from what is practised in an Indian accounting firm, said people familiar with the development.

On Monday, PwC India announced the appointment of Mr Banerjee to the top post, after outgoing chairman Ramesh Ranjan said he wanted others to lead the firm in a challenging year. PwC has run into trouble for its alleged involvement in the Satyam fraud.

Two of its auditors, both based in Hyderabad, have been arrested by the CBI and are currently behind bars. PwC India also made other key appointments including that of Peter Harvey as deputy chairman, said people connected with the matter.

Mr Harvey, who is currently a senior client relationship partner and a global industry leader, is expected to take up the deputy chairman’s post next month. This is the first time that a deputy chairman has been appointed. These moves are understood to be aimed at increasing the global parent’s control over what is India’s largest accounting firm. India is a key market for PwC and also its the fastest growing region, with revenues of over Rs 1,000 crore.

Mr Ranjan’s appointment in 2007 was widely seen in the Indian accounting sector as a victory for Indian partners, who typically had differences of opinion on operational norms with the parent company. Mr Ranjan won in a closely-fought election battle, defeating Deepak Kapoor, who had been nominated by the PwC global team. The heads of Indian accounting firms run by partners have traditionally been chosen through an election.

But Mr Banerjee’s recent elevation to the top job of PwC was not through the ballot box. A senior PwC official said that partners unanimously agreed to Mr Banerjee’s candidature because the firm wanted to avoid the distraction of an election during a difficult period for the firm While Mr Ranjan could not be contacted for this story, a PwC spokesperson ruled out reports of any differences.

“Election of our chairman is an example of the democratic outlook within PwC. The outcome of any election is dependant on those casting their ballot. India is an important market for PwC and the PwC global network is committed to supporting and developing it. In fact, the recent appointment of Gautam Banerjee as our chairman will bring to the India firm six years of his valuable experience as executive chairman of the Singapore firm.”

Indian accounting firms, which have long standing relationship with family-owned businesses built over a long period, have recently had differences of perception with foreign audit firms that are strengthening their presence in India.

Such differences came to the fore after global audit firms, including PwC, and others such as, Deloitte, Ernst & Young and KPMG, took over large local accounting firms to grow their presence in India. In April 2008, Dileep Choksi, vice-chairman and one of the founding partners of Deloitte India, quit the firm without citing reasons.

It was understood that he exited due to differences with the firm’s global executives. Similarly, exits of some senior executives in KPMG and Ernst & Young, in the recent past, have also been attributed to the differences with the global parent.

The differences could be on risk perception, persons familiar with the matter said. Indian firms, which earlier enjoyed autonomy, apprehended losing that after merger with global firms. Also the pace of growth also involved hard decisions which compounded the differences.

According to Suresh Surana, founder of accounting firm RSM Astute, difficulty in alignment between Indian units and global companies is not uncommon. “It’s one of the challenges that one comes across in such mergers,” he added.

The appointment of Mr Banerjee as chairman of PwC India, without following the firm’s established norm of having elections, also indicate that it could likely be a damage control exercise, post-Satyam scam.

According to Uttam Agarwal, president of the Institute of Chartered Accountants of India, the regulatory body for all auditors, the appointment of Mr Banerjee doesn’t fall under the institute’s ambit as ICAI’s scope only includes members of the institute.