KPMG conversion to reveal pounds 750,000 pay packet

COLIN SHARMAN, the senior partner of KPMG, will be revealed to have a total annual pay package of more than pounds 750,000 as a result of the accountancy firm's decision to publish full annual accounts next January, say profession insiders. His senior colleagues will be shown to earn about pounds 500,000.

The disclosures will flow from the firm's decision - confirmed last week - to incorporate its audit arm as a protection against spiralling litigation associated with corporate collapses. Essentially, KPMG Audit will be a limited company that will audit the the firm's approximately 400 publicly quoted and 300 other regulated clients, leaving the rest of its business to be carried out by the partnership as before.

Though some observers doubt whether it will work, the idea is to prevent partners who work in the most vulnerable area of the practice from being personally bankrupted by the actions of others. However, it will still be possible to sue the company, which will have a pounds 50m equity base wholly owned by the partnership, and each of its 300 individual directors.

Mr Sharman said that suggestions that he might receive as much as pounds lm a year were "a little on the high side". He is confident the firm can override any criticism of the pay levels when details of his and his colleagues' earnings are revealed.

Acknowledging that there was "a job to be done" in explaining that the total includes pension contributions and partnership profit shares as well as executive rewards, he said the firm had "benchmarked" its pay against that in industry and commerce. "Over the last 15 years, the pay of partners has remained pretty static, whereas the way in which executives are remunerated has accelerated." As evidence of this, and the fear of law suits, he points to the greater numbers of partners leaving firms such as KPMG for jobs in industry or financial services.

KPMG is Britain's second-biggest accountancy firm with 600 partners, 9,000 staff and total revenues of about pounds 560m. It has stressed that it is breaking the mould of professional services firms with the move. Mr Sharman sees it as one step in renewing public confidence in the audit concept, which has been tarnished by the recent spate of corporate collapses.

A further result of incorporation will be the introduction of non-executive directors. It is believed that KPMG may use them to help maintain standards of ethics. "Public confidence is a key issue," he said. When the "litigation spiral" began, he added, the firms reacted by adding a quality review at the end of the audit process. Not surprisingly, this did not work because they had not learned from manufacturing, which had started to build quality review into the whole process. KPMG had begun to do that and was set upon a second aim of providing "really good value for what we do".

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