RSM shareholders staged a coup to remove his board of directors and block the appointment of his next chief executive officer, following an accounting error and months of fighting with the UK’s seventh auditor.
The action will provide a further blow to the reputation of the intermediate-level consulting and accounting firm, which revealed in January that it had misunderstood the results of nearly £ 10 million in two years. It also marks an unwelcome distraction from his attempts to break the Big Four squeeze – Deloitte, PwC, KPMG and EY – on Britain’s listed audit market.
On Monday, a letter to other shareholders revealed that a group of rebels had filed a motion to oust the board of directors who managed RSM from January to the company’s annual meeting this month. The letter stated that the shareholders would also block the proposed appointment of Jill Jones, CEO in office, as CEO. The group said the board had proxies that allowed them to vote on behalf of 64% of the shareholders.
RSM, which was commissioned to control its first large listed customer Sports Direct late last year, is owned by its current and previous partners. The group of agitators includes Nigel Tristem, a former chief financial officer, and David Gwilliam, a former chief executive officer, according to the Telegraph newspaper, which first reported the coup. Alongside the then general manager of RSM, the duo was removed from the board of directors in January following the accounting scandal.
A person close to RSM said: “The power of attorney is now held for over 70% of the shares and is growing every day.”
The person added that anger against the board was so “serious” that such an “extraordinary move” was taking place despite the impact of the Covid-19 pandemic, which endangered customer commissions across the accounting profession . The person said the controversy was fueled by commercial error and internal policies, including the board of directors “who rigged the CEO selection process.”
RSM said that his election process was “fair, rigorous and transparent” and that the timing of the motion to remove the council was “unfortunate”.
The accounting error related to an error in the reported amounts set aside for professional liability requests – legal actions or regulatory fines. The subsequent restatement had a net profit impact of £ 2.2 million. RSM UK reported a pre-tax profit of £ 5.8 million in the year in April 2018, which was restated in the 2019 accounts with a loss of £ 113,000.
RSM joined the top 10 UK auditing firms in 2013 when Baker Tilly purchased RSM Tenon in a pre-pack administration, renaming the combined RSM group.
Historically, the company has been led by Laurence Longe, Baker Tilly’s former managing partner who resigned as CEO of RSM in 2018 to become president. He was replaced late last year as president. A person close to the company stated that Mr. Longe resigned from the board over the weekend. He did not immediately respond to a request for comment.