does your firm need an independent executive committee member?

7 benefits of an outside perspective.

by domenick j. esposito
8 steps to great

managing partners and other senior management at small and mid-sized cpa firms are known for their entrepreneurial spirit, independent thinking and their desire to call their own shots. at the same time, firm leadership recognizes that they have developed their leadership and management skills from the school of hard knocks and their experiences at firms a good number of them joined directly upon graduation from college.

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while these skills are critically important, they are, in fact, limiting as they draw upon a very narrow knowledge base and don’t draw upon a much broader universe of knowledge that is out there. how often do you hear “i wonder how other firms do this or do that?”

because of the challenges (disruptors such as google and amazon, dearth of quality talent, shrinking margins, succession, struggles of staying independent, etc., etc., etc.) in today’s accounting profession, a number of managing partners are now considering the possibility of adding an independent member to their executive committee (probably non-voting). the goal is to strengthen their team so that the firm can strengthen their overall performance.

“the team with the best players wins.”

– jack welch

before we take a deep dive into the benefits of an independent executive committee member, let’s refresh our memories about an executive committee’s responsibilities.

above all, an executive committee has a fiduciary responsibility and is required to look after the greater good of the firm and its partners. its decisions are binding upon the firm. the executive committee:

provides managing partner and senior management oversight and makes sure that the firm’s leadership is keeping the best interests of the firm in mind
determines goals, performance reviews and compensation of the managing partner
evaluates overall financial performance and approves the firm’s strategic plan and annual budget
oversees partner matters including admissions, terminations and disciplinary actions
ensures sound risk management

if for no other reason than qualified “outsiders” bring different experiences that will inevitably strengthen the firm, an independent executive committee member invariably brings specific value to a small or mid-sized cpa firm in the following ways:

it’s no secret that many firms are weak on strategic thinking, strong processes and partner accountability. helping to identify the future direction of the firm, how to get there and holding partners accountable is probably one of the greatest contributions an independent executive committee member can make. the role is much more than a mere sounding board. it can take on active involvement in critical thinking.
many firms make decisions based on what worked in the past and aren’t accustomed to thinking out of the box. new paradigms, different than a firm’s current dna, can be eye-opening and invigorating to an executive committee.
often a managing partner and senior management do not recognize that the existing partner group lacks the innate ability and expertise to take a firm to the next level. independent members, who don’t have biases or other influences that may taint partner evaluations, can quickly spot talent deficiencies and figure out the course of action to remedy situations.
succession at small and mid-sized cpa firms is more often than not a major challenge. many firms ignore senior succession matters until their backs are up against the wall. if talent isn’t developed internally, leadership succession can be a very difficult process to manage through without collateral damage. an independent member doesn’t bring emotional baggage to key succession issues and, as a result, usually can see a clear path forward a lot easier than insiders.
often, an independent member brings important business expertise that may be lacking from within a firm. fresh, impartial viewpoints with different perspectives are gained from working with other firms facing similar challenges.
an independent member can bring resolution of competing interests among the firm’s partners.
an “outsider” usually demonstrates to the partners a sense of credibility and a seriousness of mind when it comes to the future viability of a firm.

bringing on an independent member to your executive committee has considerable merit and should be given some serious thought and discussion at your firm. if you do, consider the following:

adding an independent executive committee member requires buy-in by the other executive committee members and, therefore, requires a gradual process. we suggest your firm starts with a single, non-voting independent executive committee member, and when it sees the fruits, consider adding one or two additional members over the course of the next year or two.
the managing partner and other executive committee members require time to learn how to work with the independent executive committee member. if a firm isn’t truly looking to improve the overall effectiveness of the executive committee, please don’t add an independent member for window dressing.
the independent board member needs time to learn how to work with the executive committee and the firm’s senior management. this requires a commitment of time to build trust with the firm’s partners.
there needs to be mutual respect among all members who understand that they are part of a process. at times, not everyone on the executive committee will agree on a course of action. having said that, once a decision is made, all executive committee members should own it. if not, the process will be undermined.
establish clear ground rules. when you invite someone from outside the firm to join the executive committee, communicate that you are seeking open and honest advice and guidance that is to be given in the best interests of the firm. seek someone who understands that being an independent executive committee member requires a unique “nose in, hands out” skill that provides oversight and advice but does not translate into running the firm. at the end of any particular dialogue or undertaking, ultimate decisions are made by the partners on the executive committee.

i have personal experience with being an independent board member at two professional service firms that are very similar in size and scope to small and mid-sized cpa firms. in both situations, these firms have had outsiders on their executive committee for many years. today, one of these firms has a total of four outsiders and the other has a total of two.

the fee for each “outsider” is relatively inexpensive ($25,000 to $50,000). directors’ insurance to protect against financial risks is also required. in both cases, these firms continue to believe that they derive tangible benefits from independent “outsiders” and that these benefits have clearly exceeded costs.

personally speaking, i have seen firsthand the benefits and fruits of independent members. at the same time, i am learning from these experiences and they help shape my effectiveness as we move forward together. i strongly encourage small and mid-sized cpa firms to give independent executive committee members serious consideration.

posted on april 27, 2017

dom esposito

about the author

domenick j. esposito was the ceo of grant thornton, vice-chair of bdo, and national growth director at cohnreznick.

he is the author of "8 steps to great: the eight essential strategies driving success at the world's largest cpa firms. and how to apply the lessons at firms of all sizes," published by 卡塔尔世界杯常规比赛时间.

a life in public accounting

in 2016, esposito, then a former ceo of bdo, moved from a 46-year career in public accounting into the next phase of his professional life – consulting to cpa firms, launching a boutique advisory firm, esposito ceo2ceo, that provides advice to ceos, managing partners and other senior partners of cpa firms focused on the mid-market throughout the u.s.

with the launch, esposito authored “8 steps to great," a guide for ceos, managing partners, and other senior partners on how to move their firm to the next level.

cohnreznick national growth director

esposito was one of the most qualified individuals in the country to advise cpa firms on growth and profitability. through 2015, he was national practice & growth director and an executive board member of cohnreznick, llp, a mid-market sustainable brand and the tenth-largest cpa firm in the united states. he oversaw cohnreznick’s go-to-market industry specialization and consulting and advisory service lines. he was also intimately involved in the firm’s mergers and acquisitions and strategic and tactical activities for its public company and capital markets initiatives. dom joined the predecessor firm of j.h. cohn in 2002 as the chief operating officer and executive board member.

dom was also an independent director of ethan allen interiors inc. for several years (through 2014), dom was a member of the nasdaq listing and qualifications committee to the organization’s board of directors. he formerly served as the leader of the new york state society of cpas committee for large and medium-sized firms practice management. he also was an adjunct accounting professor at c.w. post/long island university.

bdo and grant thornton

through october 2002, dom was vice chairman at bdo, a mid-market sustainable brand and the seventh-largest international accounting and consulting firm in the u.s., with almost 50 offices and 3,400 employees. during his brief time with bdo, he was responsible for the alliance distribution network (at the time consisting of over 80 cpa firms, 10 law firms, and 25 consulting firms). he was also responsible for attracting and servicing a number of clients.

from 1979 through 2001, dom was with grant thornton, another mid-market sustainable brand and the sixth-largest international accounting and consulting firm in the u.s., with over 50 offices and 4,500 employees. he joined grant as an audit manager, became a partner in 1981, led the long island office from 1984 to 1986, became assistant managing partner of the new york office in 1986, and from 1988 to 1999, led the new york office. in 1999, esposito became a regional managing partner and for two years, through 2001, was the firm’s chief executive officer.

cpa, partner, mba, leader, influencer, media celebrity

between 1996 and 1998, and while he was ceo, esposito was on the partner board and was also on the board of grant thornton international – the worldwide umbrella organization. in these capacities, he developed strong experience in strategic thinking and execution, international relationships, corporate governance, partnership matters, branding, expense control, client relationships, and new business development.

as ceo, he took grant thornton to record earnings, consummated the largest line-of-business sale in the firm’s history, developed a major joint venture with axa financial, and made the largest practice acquisition in the firm’s history. from 1969 to 1979, esposito was with price waterhouse (now pwc), servicing ibm when he was promoted to manager in 1976.

dom was a cpa, has been quoted in national and local media, and has appeared on radio and cable tv.

esposito also testified before the securities and exchange commission.

he received his m.b.a. from st. john’s university and his b.s. from ferris state university. accountingtoday, one of the leading trade journals for the accounting profession, named esposito one of the most influential people in the profession for two consecutive years.

he passed away in 2021 at the age of 74.

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