“I Think We Should See Other Clients…”
Ernst & Young’s (EY) leadership is expected to approve splitting its accounting and consulting businesses this week, according to The Wall Street Journal.
A Big Deal: The Big Four accounting firm employs roughly 312,000 people across 140 countries. EY’s global executive committee met on Labor Day to approve the plan for a breakup, which EY’s 13,000 partners will vote on. The split between the businesses will likely be slated for late 2023.
Industry Impact:
- EY’s $45 billion revenue network will be split 60:40 between its consulting business and its auditing services, the latter of which will retain the EY brand.
- The new consulting company is expected to sell a 15% stake to the public to raise $10 billion and borrow an additional $17 billion, and partners will have shares in the company.
- The thinking is that the consulting company, free of independence rules restricting the work accounting firms can do for audit clients, will be able to win billions in new business. However, the company will also have to spend big for a successful rebrand.
The Pandemic Impact on Education
Pandemic learning setbacks from the loss of in-person classes are becoming clear, and organizations are taking steps to recover valuable lost learning, The Wall Street Journal reports.
Why it Matters: Reading level in the third grade has shown to be predictive of future education and earnings, according to The Wall Street Journal, and quadruple the rate of non-proficient third-grade readers fail to graduate high school on time. One reason may be that if a child cannot read at grade level, they will struggle to manage their other subjects as well.
By the Numbers:
- 9-year-olds’ reading scores slid 5 points in the past two years, and math scores fell 7 points – both are historic declines.
- Children learning to read early in the pandemic have the lowest proficiency rates in 20 years.
- The America Rescue Plan set aside $122 billion for public schools with 20% earmarked for learning loss
Learning and Life: Education determines the future of society, and it is vitally important to make up for lost ground. It looks like both the money and motivation are there, but this work requires skilled educators. For most states, it will be a long road back to pre-pandemic levels and even longer to achieve satisfactory proficiency rates.
The IRA and the IRS and the YOU of It All
The Inflation Reduction Act (IRA) includes $80 billion in new funding for the Internal Revenue Service (IRS). Half of that will go towards improving operations and services, and the other half will focus on tax enforcement for the highest-earning taxpayers, writes The Wall Street Journal.
Takes Money to Tax Money: Currently, the IRS is funded at $13 billion for FY 2022; the $80 billion over 10 years is independent and additional to variable annual Congressional allocations. This new funding is framed as an investment to rebuild the long-overlooked agency that has a backlog of some 17 million unprocessed tax returns (they process around 500,000 per week).
All Eyes on QB1, Act II, Scene 303
Russell Wilson, the Denver Bronco’s $245 million quarterback, has brought high hopes and an electric brand to the mile-high city, Axios Denver and The New York Times report.
The Man, The Myth…: Quarterback Russell Wilson skyrocketed to prominence after winning Super Bowl XLVIII with the Seattle Seahawks (defeating the Denver Broncos, no less). Marketers have studied his use of Instagram to reinforce his brand narrative and view him as a standard of sports branding success. However, he arrives in Denver after a contentious exit from Seattle and his brand is, if not tarnished, at least showing cracks.
The Bottom Line: Wilson’s brand is based on relentless positivity. Both terms are essential: winning is central to Wilson’s brand, and you don’t earn the nickname Saint Wilson without some PR planning. It will be interesting to see how the Wilson brand manages the ups and downs of a long season and the beginning of the second act of his career.
Patagonia Takes CSR to New Heights
Patagonia founder Yvon Chouinard is donating his company. Ownership of the company will be transferred to a trust established to address the environmental crisis, The Washington Post reports.
High-Level: Patagonia was founded in 1973 and is valued at around $3 billion. The company has always actively championed environmental causes, especially in the Patagonia region of South America, and has maintained a self-imposed 1% Earth tax to support environmental nonprofits.
New Structure: “Earth is now our only shareholder,” the announcement letter reads.
- 100% of the company’s voting stock will transfer to the Patagonia Purpose Trust, created to guard company values. 100% of nonvoting stock will go to the Holdfast Collective, a nonprofit established to fight the environmental crisis and protect nature.
- All profits not reinvested in the company will be distributed to the Holdfast Collective. This figure is projected to be around $100 million annually.
Far from Greenwashing: Retail industry experts expect the move to reverberate across the industry, setting a new bar for putting your money where your mouth is. Yvon writes: “Instead of extracting value from nature and transforming it into wealth, we are using the wealth Patagonia creates to protect the source… I am dead serious about saving this planet.”