Mike Rake, the chairman of KPMG, is likely to be forced to take a pay cut for last year after it emerged that the accounting group axed more than 1,000 jobs and operating profits fell 21% to £212m.
The group's annual report, published yesterday, showed that he was paid £1.7m for the financial year to 2001 but is likely to get something closer to £1.6m for 2002, including his share of the proceeds from the sale of its UK consultancy. The actual amount will be set next year.
During the 2002 financial year, the average pay of KPMG partners fell to £352,000 from £462,000.
Mr Rake, who took over as chairman in October at the start of the latest financial year, said he regretted the decision to cut jobs in the face of a “tough year” that was marked by boardroom and accounting scandals as well as a downturn in business activity. “We delayed as long as we could in the hope that economic activity would rebound before making the decision to reduce our headcount,” Mr Rake said.
The firm, which audits 25% of the companies in the main FTSE 100 index, now employs 8,853 people – down 1,127 – after a £22m redundancy programme in the financial year to September 30.
The number of “members” – formerly known as partners – was also cut by 25 to 593, “primarily through early retirement”.
In Britain, the group became a limited liability partnership during the financial year and sold some of its consulting activities – a move that helped strengthen its balance sheet.
Of the £196m of profit from the sale of its UK consulting services to Atos Origin, £70m has been used to cover liabilities to former members' annuities, with a further £83m being distributed to members of the consultancy.
The firm does not make cash contributions to political parties. But the annual report outlines secondment work it has conducted for the Labour, Conservative and Liberal Democrat parties that amounts to the equivalent of £100,000. The firm also donated £40,000 to Britain in Europe and £10,000 to a euro pamphlet published by the pro-European lobbyist.
KMPG was an auditor of Xerox Corporation, the world's biggest copier company, which is now being investigated in the United States for suspected accounting fraud.