Unions Push Audit Reforms at More Companies
The unions began to study the issue of auditor independence last November before Enron's bankruptcy. They found the ratio of non-audit to audit fees in some companies was as high as 16 to 1. The unions are trying to take credit for winning policy changes through negotiation. But some companies, including Walt Disney and Johnson & Johnson, say they made the policy changes on their own.
Johnson & Johnson changed its policy in January 2002 to prohibit hiring an auditor for consulting. The board's audit committee says the change was independent of the unions' push and "in response to public criticism about the integrity of independent audits." In 2001, according to Bloomberg, Johnson & Johnson paid PricewaterhouseCoopers $9 million for an audit and $57.8 million in consulting fees.
More recently, Bristol-Myers Squibb and FirstEnergy Corp. changed their policies after talks with the unions. According to Bloomberg, Bristol-Myers paid PricewaterhouseCoopers $2.8 million for its 2000 audit and $22.9 million in consulting fees. FirstEnergy, which plans to include details of its new policy in its April proxy statement, paid Arthur Andersen $893,300 for its 2000 audit and $5.3 million in consulting fees.
Still bucking the trend, an Avon spokesman said the proposal would be in the proxy for its May 2 annual meeting. But Avon recommends investors vote against it. In 2000, the world's largest direct seller of cosmetics paid $3 million to PricewaterhouseCoopers for its audit and $8.8 million for consulting.
The unions involved include the International Brotherhood of Electrical Workers, the United Association of Plumbers and Pipefitters, and the Sheet Metal Workers.