• Saturday, July 13, 2024
businessday logo

BusinessDay

KPMG and Sir Ronald Leach

businessday-icon

The retired partners of KPMG who are still awaiting their gratuity and pension were in great spirits as the old year (2015) went into voluntary liquidation. Accompanied by our spouses, we had gathered at the Four Seasons Hotel, Avenue de La Menara, Marrakech, Morocco to roll in the New Year. The choice of Marrakech was heavily influenced by the CNN vigorous advertising of the city and the exotic endorsement of Morocco as “The land of snake charmers, acrobatic dancers and money doublers”. If we do manage to double our money, we shall certainly be back here next year. Insha Allah!

A quick roll call confirmed that gem of witticism from Femi Majekodunmi (product of St. Gregory’s College): “We are all here – except those who are not here.” It has gone viral on internet. He is a great guy and an outstanding professional who rose to become president of the Commonwealth Institute of Architects. Fancy running into him and his charming wife Victoria in Marrakesh of all places.

Over several lashings of Tangin (the local delicacy) accompanied with Moroccan wine, we (chartered accountants) came to the conclusion that Sir Ronald Leach who was the senior partner of KPMG from 1975 to 1977 will forever remain an icon of the accountancy profession. According to J. R. Edwards’s book “A History of Financial Accounting”: Sir Ronald Leach, senior partner of Peat Marwick Mitchell & Co (which later became KPMG) and the unfortunate president of the English Institute [now the Institute of Chartered Accountants in England and Wales] at that time (his own words) was besieged by members demanding action from the Council of the Institute to stem the mounting criticism of the profession in the press. The background to it all is that the accountancy profession was engulfed in a slew of scandals which provoked stringent criticism from Edward Stamp in his famous letter to The Times newspaper (dated 11 September 1969).

Here is the Witness Statement of Edwards: “Interestingly, accounting standards were an even later development than true and fair audit opinions. In fact, another of the great and good, Ronald Leach played a major role in starting their development not long before I joined Peats.”

However, Leach was not alone. We also have a testimony from John Carter who was reminiscing about Price Waterhouse in the 1950s and 1960s: “The whole ethos of the firm then was ‘judgment’. The whole approach to the audit was: what is true and fair in my judgment? To hell with the law or whatever. You have to bear in mind that was before accounting standards came into being so in any particular circumstances you faced you had to make your own judgment based on what had happened before in similar situations.”

We are also provided with robust evidence of power shift – by Donald Brittain: “There was consensus that auditors, prior to say 1970, tended to get their way with clients more easily. There was very little input from the client in those days. Auditors were treated with more respect in that the auditor was the sole arbitrator of what was true and fair. There was no negotiation because you had to get it right without fear or favour. In my day, the auditor was a semi-god. I know it sounds daft, but even as a humble clerk you could go and ask for information, and you got it.”

Sir Ronald served as an officer in the Royal Air Force during the Second World War and was based in Egypt. His wartime services are a matter for another day. He was wounded but that did not stop him from achieving great heights in his chosen profession – accountancy. What was remarkable was that even as senior partner of Peat Marwick Mitchell, he insisted on direct supervision of the church for British Air Force Officers – St. Martins In The Fields, Trafalgar Square, London WC2N 4JJ, United Kingdom.

It was exceptionally gracious of him to have handed over the audit of the church to me with instructions that I would report to him directly on completion of the assignment. I was thrown in at the deep end. On my arrival at the church to commence the audit, the chaplain astonished me. There he was seated behind a huge oak desk and he proceeded to deliver his sermon: “Young man, all the income of the church is in the drawer to my right and all the expenses are in the left drawer. Now get on with it. I shall see Sir Ronald in church on Sunday.”

By every yardstick Sir Ronald was a great leader. He was also a great communicator. At one of the firm’s annual Christmas parties, which was held at the Savoy Hotel also in The Strand, London WC1, he summed up his abiding philosophy: “The Air Force taught me the profound lessons of life and leadership. There is no such thing as engine failure or pilot’s error. If you are the pilot (the leader), your first priority is to ensure that you are fully alert and that your aircraft is in excellent working condition.”

He was also a caring leader. He would personally sign the Christmas cards for retired partners and send letters to specially invite them to the firm’s events, especially the annual Christmas party. He never wavered in the firmness of his grip in managing the firm’s business or defining its moral compass in terms of ethics, ethos and discipline. Some of us witnessed it when one of the most senior partners in the firm, Allan Smith, was ambushed by a conman into issuing a clean audit report in respect of an American company whose activities were shrouded in mystery under the pretext that they were “STRICTLY SECRET”. The only people who were privy to the details were the prime minister of Pakistan; the head of the Pakistani Secret Service and the American Ambassador to Pakistan. As fate would have it, all three of them perished in a plane which crashed after suffering missile attack. The totally unforeseen disaster created a huge credibility gap and reputational risk for the firm.

Poor Allan Smith was immediately sent on “Garden Leave”. In effect, he was on suspension. It was the equivalent of being sent to the doghouse. His office was locked up and he was compelled to spend all his time with the firm’s lawyers as they struggled valiantly to clean up the mess. It was an excruciatingly painful order for Allan who had bagged a first-class degree in engineering from Cambridge University before venturing into accountancy. He rose rapidly and became the partner in charge of supervising the firm’s business in Nigeria, Ghana and Sierra Leone. He never fully recovered. Nevertheless, he was a brilliant man. Maybe he was just unlucky.

J.K Randle