The leadership of KPMG's United Arab Emirates division has been called into question due to allegations of nepotism, cronyism, and a culture of fear allegedly fostered by the chief executive, according to a group of senior partners at the company.
The requests were outlined in an email sent to several of KPMG International's senior executives, and they include a request that KPMG International parachute in a temporary chief executive from the company's worldwide operations.
The email claims to reflect the opinions of ten capital partners at KPMG Lower Gulf and was sent to recipients that included KPMG International chair Bill Thomas, vice-chair Carl Carande, global general counsel Anne Collins, and global head of people Nhlamu Dlomu.
It draws attention to a number of accusations leveled at Lower Gulf CEO Nader Haffar and his executive team, including the fact that they hired his brother-in-law last year without telling partners about their connection. The Abu Dhabi National Oil Company, as well as the sovereign investment funds ADQ and Mubadala, are among the 3,400 clients of KPMG Lower Gulf.
The partners request that KPMG International send an intervention team to help the company deal with the "massive crisis" that is growing within the local firm. KPMG International opted not to respond.
In the email, they accuse Haffar of surrounding himself with friends in influential positions and creating a "fear culture" where many partners are hesitant to express "dissenting views" for fear of losing their jobs. They further demand the board be suspended, claiming that the board's independence is being compromised by several independent directors' extremely high compensation of $500,000 or more.
The memo advises KPMG International to appoint an acting chief executive from the global organization and create an impartial committee to evaluate Haffar's performance.
The partners also raise worries about declining profitability, which have reduced their compensation. According to the email and current and former partners, average profits per partner were over $800,000 at the beginning of Haffar's stint as KPMG Lower Gulf chief executive in 2018. For 2022, this is expected to drop to $450,000 per couple. According to the email, partner incentives for 2021 have not yet been paid in full due to "cash flow issues."
They put the responsibility for the fall in profitability on Haffar's lack of "commercial acumen," the appointment of high-priced senior staff who raised overheads without boosting profitability, and costly PR initiatives intended to improve the CEO's reputation in the area.
Their email also highlighted KPMG Lower Gulf's April donation of over $272,000 to the One Billion Meals campaign, a project started by the philanthropic foundation of the UAE prime minister to combat world hunger. An ex-partner called the payment, which was widely reported, a "extraordinary charitable contribution for a firm our size" and "very unusual," adding that it was made with the intent of supporting Nader rather than furthering economic interests.
KPMG Lower Gulf expressed its pride in the contribution that the business and more than 300 of its employees contributed to the UAE's "1 Billion Meals" project.
"The size of this contribution was in line with many other local and international brands."
"Over the past five years, and despite the impact of Covid, KPMG Lower Gulf has consistently grown year on year almost doubling its revenue, the number of partners and its employees," the statement continued.
The email comes after a turbulent summer at KPMG Lower Gulf, where in July it was revealed that a new election would be held for Haffar's post as chair and chief executive due to claims that the first one had been a fraud. Following criticism of its leadership and the dismissal of partners who had questioned Haffar in the Financial Times, it also announced that it would employ a legal firm to investigate its governance.
Some partners, though, think the policies are only window dressing. If KPMG International did not intervene, "the culprits will be the judges and the jury here," the email said.
KPMG International, which oversees the brand and establishes international minimum standards, is funded through a network of locally owned partnerships.
With its headquarters in Dubai, KPMG Lower Gulf has around 60 partners in total, of which about 40 are capital partners who control the 1,300-person company.
The email will put more on on KPMG International, who has been charged with disregarded whistleblower complaints. The company has already declared that it considers all allegations seriously and acts appropriately.
Because they feared reprisal from KPMG Lower Gulf, the partners chose not to identify themselves to the Financial Times, but they did submit copies of internal conversations to show that they are employees of the company.
The FT got in touch with many current and past partners at KPMG Lower Gulf, and they all expressed agreement with the email's contents.
By fLEXI tEAM