The Australian Financial review recently had an article about issues facing KPMG’s mandatory retirement age in Australia.

The reason that this story is coming out because a lawyer for KPMG sent an email that said there was not a defense for KPMG just because the partner who was joining new about the mandatory provision.

In other words, KPMG can’t force a partner to retire. They can just have it as a voluntary provision, but even then it might not be legal in Australia and other locations. The big 4 have faced this controversy many times and will continue to face it. Just like they face class action lawsuits about overtime pay all the time. You see cases where young people file claims that they should be paid overtime because they work so many hours.

Sometimes they win and sometimes they lose. By win, I mean they get settlements.

In Australia, KPMG has a voluntary retirement age of 58. In the United States, the big 4 typically have this number at 60 years old. However partners get around it by being on the global leadership teams. The reason the big 4 have this provision is to motivate young people to stay with the firms. Most partners would never leave if it wasn’t for this provision. Many partners make insane amounts of money and do little work. In their later years, they coast on their big networks and don’t do as much work. They review less and this is why you so many ethical problems in accounting firms.

You need to motivate young people to work, so they need to keep these mandatory retirement ages for partners. I agree that the big 4 need regulation about employees’ rights, but I don’t think this is a bad rule for the big 4.

I think if partners get to stick around longer, you will have more errors at the accounting firms and more corruption.