The shift moves away from the traditional model where partnership was effectively a lifelong position. Previously, KPMG and EY promoted employees for life. Instead of only urging underperforming partners to switch firms or retire, the companies have in some cases moved them to lower-ranked positions such as 'salaried partners'.
Salaried partners retain the title but lose the right to be equity partners in the firm. Equity partners are owners and share in the profits, so fewer people in this group can increase profit per partner. The measure reflects an increased focus on profitability and performance-based compensation within the large audit firms, according to the Financial Times.
The development is part of a broader trend in partnership models, where investment banks and law firms are also increasingly adjusting who gets to share in the profits. It is unclear how many senior partners have been affected by this change at KPMG and EY, and what specific performance criteria trigger a demotion to salaried partner.