In 1978, at the age of 34, Ann Hopkins faced a dilemma that a growing number of professional women are being forced to confront. Hopkins had to make a difficult choice involving her family and her career. Although comfortable with her position at Touche Ross & Company, for which she had worked several years, Hopkins realized that either she or her husband, also a Touche Ross employee, had to leave the firm because of its nepotism rules. Otherwise, neither would be considered for promotion to partner. Hopkins chose to make the personal sacrifi ce. She resigned from Touche Ross and within a few days accepted a position in the consulting division of Price Waterhouse.

Four years later, Hopkins was among the 88 individuals nominated for promotion to partner with Price Waterhouse. Hopkins, a senior manager in the firm’s Washington, D.C., office, was the only woman in that group. Hopkins stood out from the other nominees in another respect. She had generated the most business for Price Waterhouse of all the partner candidates. Over the previous four years, clients obtained by Hopkins had produced $40 million of revenues for the fi rm. Because client development skills generally rank as the most important criterion in partnership promotion decisions, Hopkins appeared to be a shoo-in for promotion.

Strengthening Hopkins’ case even more was the unanimous and strong backing her nomination received from the seven partners in the Washington, D.C., office. The extent of home office support for a candidate’s nomination was another key factor Price Waterhouse considered in evaluating individuals for promotion to partner. Much to her surprise, Hopkins was not awarded a partnership position. Instead, the senior manager was told that she would be considered for promotion the following year. A few months later, Hopkins was surprised again when her office managing partner informed her that she was no longer considered a viable candidate for promotion to partner. The firm’s top executives did invite her to remain with Price Waterhouse in a nonpartner capacity. Disenchanted and somewhat bitter, Hopkins resigned from Price Waterhouse in January 1984 and accepted a position with the World Bank in Washington, D.C. Eventually, nagging uncertainty regarding her failure to make partner caused Hopkins to fi le a civil lawsuit against Price Waterhouse. 

The lawsuit Ann Hopkins fi led against Price Waterhouse drew attention to an issue simmering within the public accounting profession for years. During a 1976 investigation of the profession by a U.S. Senate subcommittee, several parties charged that Big Eight firms’ personnel practices discriminated against females and minorities.1 At one point during its hearings, the Senate subcommittee requested each of the Big Eight firms to disclose the average compensation of their partners and the number of females and nonwhite males in their partner ranks. The Senate subcommittee’s request evoked uncooperative responses from several of the Big Eight fi rms. Exhibit 1 presents two of those responses. Exhibit 2 contains a letter that Senator Lee Metcalf, chairman of the investigative subcommittee, wrote to Ernst & Ernst after that firm questioned the Senate’s authority to investigate the personnel practices of private partnerships. Eventually, six of the Big Eight firms provided the requested information regarding the number of females and minority males among their partners. Collectively, these firms had seven female partners and four partners who were African-American males out of a total of more than 3,500 partners.

The criticism of the Big Eight firms’ personnel practices spawned by the 1976 Senate investigation spurred academic researchers and the business press to begin monitoring the progress of women and minorities within Big Eight fi rms. By the late 1980s, when the Hopkins suit against Price Waterhouse was working its way through the courts, neither group had made significant inroads into the top hierarchy of the Big Eight fi rms. For instance, in 1988, women held approximately 3.5 percent of the partnership positions with Big Eight firms, although those firms had been hiring women in considerable numbers since the mid-1970s. Continued concern regarding the progress of women and minorities within Big Eight firms focused the accounting profession’s attention on Ann Hopkins’ civil suit against Price Waterhouse. Although the Hopkins case provides only anecdotal evidence regarding the personnel practices of large international accounting firms, it is noteworthy for several reasons. First, the case yielded revealing insights into the partnership selection process employed by large accounting fi rms. Second, the case pointed to the need to rid performance appraisal methods of gender-based criteria in all disciplines, including professional fields. Finally, Hopkins v. Price Waterhouse stimulated discussion of measures that professional firms could take to facilitate the career success of their female employees.

Questions 

1. Do public accounting firms have a responsibility to facilitate the career success of female employees? Why or why not? Identify policies accounting firms could implement to increase the retention rate of female employees.

2. In business circles, one frequently hears references to the “old boy network.” Many women in professional firms complain that their gender precludes them from becoming a member of the old boy network within their firm. Define, in your own terms, what is meant by the phrase old boy network. Should professional firms attempt to break down these networks?

3. Suppose that an audit client objects to a given auditor because of his or her gender or race. Identify the alternative courses of action the auditor’s employer should consider taking in such a case. Which of these alternatives do you believe the accounting firm should take? Defend your answer.

4. The nepotism rules of many professional firms pose a major inconvenience for married couples who work for, or would like to work for, those fi rms. Discuss the costs and benefits of these rules in a public accounting setting. In practice, do you believe these rules are equally fair (or unfair) to both sexes?

5. Several of the large public accounting firms asked to provide information to the U.S. Senate during the 1976 investigation of the accounting profession claimed that the request was an invasion of their privacy. Do you agree or disagree with these fi rms’ view? Why? Even if such disclosures are considered an invasion of privacy, are they justifi ed from a public interest perspective?