A group of senior partners at KPMG has urged the firm’s global bosses to suspend the leadership at its United Arab Emirates business, citing nepotism, cronyism and a culture of fear allegedly stoked by the chief executive.
The demands, which include a call for KPMG International to parachute in a temporary chief executive from the firm’s global operations, were set out in an email to some of KPMG International’s top executives.
The email, sent to recipients including KPMG International’s chair Bill Thomas, vice-chair Carl Carande, global general counsel Anne Collins and global head of people Nhlamu Dlomu, states that it represents the views of ten capital partners at KPMG Lower Gulf.
It highlights a series of criticisms of Lower Gulf chief executive Nader Haffar and his leadership team, including his appointment of his brother-in-law as head of clients and markets last year without disclosing their relationship to partners. KPMG Lower Gulf has 3,400 clients, including the Abu Dhabi National Oil Company and sovereign investment funds ADQ and Mubadala.
The partners call on KPMG International to bring in a turnaround team to support the business to address the “massive crisis” brewing in the local firm. KPMG International declined to comment.
In the email, they accuse Mr Haffar of surrounding himself with cronies in key positions and fostering a “fear culture” with many partners afraid they will lose their jobs if they express “dissenting views”. They also call for the suspension of the board, alleging that its independence is being undermined because some Independent directors receive unusually large salaries of $500,000 (€501,000) or more.
KPMG International should establish an Independent committee to assess Haffar’s performance, the email says, and install an acting chief executive from the international organisation.
The partners also highlight concerns about falling profits, which have hit their pay. At the start of Mr Haffar’s tenure as KPMG Lower Gulf chief executive in 2018, average profits per partner were around $800,000, according to the email and current and former partners. This has fallen to a projected $450,000 per partner for 2022. Partner bonuses have not yet been fully paid for 2021 because of “cash flow issues”, the email states.
They blame the decline in profitability on Mr Haffar’s lack of “commercial acumen”, the hiring of expensive senior people who have increased overheads without improving profitability, and expensive PR campaigns aiming to boost the CEO’s image in the region.
Their email also highlights a charitable contribution by KPMG Lower Gulf in April of around $272,000 to the One Billion Meals campaign, an initiative set up by the UAE prime minister’s philanthropic foundation to ease global hunger. A former partner described the donation, which was widely publicised, as an “extraordinary charitable contribution for a firm our size” and “very unusual”, adding: “This did not have a business purpose, this had a Nader purpose.”
KPMG Lower Gulf said it was “very proud of the contribution that the company and over 300 of its employees made to the UAE’s “1 Billion Meals” initiative ... The size of this contribution was in line with many other local and international brands.”
It added: “Over the past five years, and despite the impact of Covid, KPMG Lower Gulf has consistently grown year on year almost doubling its revenue, the number of partners and its employees.”
The email follows a chaotic summer at KPMG Lower Gulf, which announced in July that it would rerun an election for Mr Haffar’s position as chair and chief executive following allegations that the previous process had been a sham. It also said it would hire a law firm to review its governance after the Financial Times reported criticism of its leadership and the removal of partners who had challenged Mr Haffar.
But some partners believe the measures are simply window dressing. The email said that if KPMG International does not step in, “the culprits will be the judges and the jury here”.
KPMG is structured as a network of locally-owned partnerships that pay a fee to KPMG International, which manages the brand and sets global minimum standards.
KPMG Lower Gulf is based in Dubai and has around 60 partners in total, of which roughly 40 are capital partners who own the 1,300-person operation.
The email will increase pressure on KPMG International, which has been accused of ignoring whistleblower complaints. The firm has previously said it takes all reports seriously and takes appropriate action.
The partners declined to identify themselves to the FT because of fear of retaliation from KPMG Lower Gulf but provided copies of internal communications to demonstrate they work at the firm.
A number of current and former partners at KPMG Lower Gulf contacted by the FT said they agreed with the contents of the email. — Copyright The Financial Times Limited 2022