The top 2,600 partners in Andersen are likely to take pay cuts of up to 33 per cent during the next two months as the audit firm fights a steep loss of revenues.
Global leaders of Andersen, the crisis-hit auditor of Enron that is facing federal criminal charges and mass client defections, have told partners that profit distribution is being scaled back. Andersen has 21 partners in Ireland and 400 employees overall.
The cuts are an indication of the scale of the damage inflicted on Andersen by its disastrous association with Enron, the US energy trader that collapsed in December. People close to the firm said its global board had notified partners of Andersen Worldwide, the firm's umbrella governance body, that previously determined distributions of profits would be revised.
Andersen Worldwide's 2,600 members, who comprise the most senior of the firm's 85,000 staff, are to see their remuneration for April and May scaled back by at least 20 per cent, with top partners suffering cuts of 33 per cent.
The cuts are being made to the annual schedule of profit distribution drawn up in September by the firm, which releases few financial details but is understood to have made annual profits of between $1.5 billion and $2 billion during the past few years.
The global board's decision is technically a recommendation rather than a ruling, but changes to guidelines are rarely ignored by the national practices in the Andersen network. Andersen said it did not comment on remuneration, but it is understood other staff worldwide will see no effect on their pay.
The fall in pay at Andersen comes after the departure of a string of leading clients such as Merck, the pharmaceuticals group, Delta Air Lines and Freddie Mac, the housing finance institution.
The firm has been criticised over the quality of its work for Enron and its shredding of documents related to the audit in the weeks before the company's demise. Andersen was this month charged with obstruction of justice over the shredding of the documents linked to Enron, which collapsed after the emergence of huge losses hidden from its accounts.
Andersen this month announced plans for a rescue merger of its practices outside the US with those of KPMG, a rival Big Five accounting firm.
Mr Paul Volcker, the former chairman of the US Federal Reserve who was brought in by Andersen to review its practices, yesterday welcomed its decision to accept his plan to rehabilitate its US operation.
Mr Volcker proposes heading a new seven-man governing board of Andersen, which would make management changes and put in place reforms to working practices. He said Andersen could "make a sufficient case" with the Justice Department.
