News: Client-loss scare: Big Four send legal notices to ex-partners

Talent Management

Client-loss scare: Big Four send legal notices to ex-partners

Rise in poaching and attrition sees the Big Four trying to legally bar their executives from taking clients along when they join rivals.
Client-loss scare: Big Four send legal notices to ex-partners

According to a recent news report, in the wake of high attrition and regular poaching, the Big Four – Deloitte, PwC, EY and KPMG – are shooting off legal notices to partners and senior executives that are joining their competition. It says that the alarm bells are ringing loud and clear as in the last one year nearly 800 senior executives have switched loyalties and joined a competitor.

The notices are meant to prevent senior executives (and entire teams sometimes) from taking their clients when they move to a rival organisation. The partners of these firms are also said to be receiving similar notices. The report quotes one such partner who received the notice, “The legal notice states that the partner should stop working with any client he used to work earlier with... Not just that, the partner must also not work with any company that is client of the old firm, even if he/she has never worked on a project.”

The tipping point for this is considered to be when some 20 partners and 300 executives left KPMG to join Deloitte last year. Some of the same partners and executives who left KPMG have reportedly been served the notices. EY and PwC too have notified partners who quit them to join rivals.

The report further says that major consultants like Grant Thornton and BDO have seen such disruptions as well, and legally notifying employees who have quit the company was never the norm. However, with an increase in the number and frequency of poaching and attrition, organisations have started sending legal notices more often as well. More importantly, the firms sometimes warn partners of withholding their capital money (a part of the partner’s salary over the years paid on exiting). Another partner who has been subjected to this treatment is quoted in the report “I was asked to not work for any client that my earlier firm has ever worked with; this was absurd, so I refused to comply. They have held back my capital money, which is about Rs 1.5 crore, for more than a year now.”

However, not many are known to go down that road. This could possibly be because, as the report says, the new firm generally compensates the partners for the capital money. A PwC spokesperson has been officially quoted in the report, “PwC maintains strict confidentiality of its clients' information and imposes suitable obligations on both current and former partners as well as staff... Whilst we are not aware of any infractions in this regard, suitable action is taken for any breach or apprehended breach of this obligation.” Ketan Dalal, managing partner at Katalyst Advisors blames macroeconomic and profession-specific reasons for a rise in the number of cases of poaching and partners switching to rivals in the report.

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Topics: Talent Management

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