Case 4-7 Sexual Harassment at EY When Karen Ward started at Ernst & Young in 2013, only four senior managers in her division were women. All the partners were men. This was a red flag, but she didn't see it then but soon realized that EY's lack of female leaders was no accident but the result of a hostile environment where women were demeaned, devalued, and isolated. Ward filed a sexual discrimination complaint in late September 2018 against EY at the Equal Employment Opportunity Commission (EEOC), the federal agency that handles civil rights complaints. It was the second sex discrimination complaint filed that year against the firm, the other being Jessica Cassuci, a partner at the firm who had accused fellow partner, John Martinkat, of sexual harassment. This case is discussed in the chapter. Ward claimed she was sexually harassed by her direct supervisor, Michael McNamara, who she said told her he liked her "great big boobs" and "nice ass" and worked to undermine her authority, stealing credit for her work. Ward's complaint and filing with the EEOC started a complex web of retaliation. She said that for years the men in McNamara's circle undermined her work and that even after he was eventually fired, she experienced retaliation from a whole boys' club in his network, eventually losing her job and hundreds of thousands of dollarsat a minimumin potential earnings. Her story shows the limits of the Me Too era. Simply firing or forcing out a sexual harasser often does little to change a company's culture, as she learned. It's also a reminder that, for women, privilege can't always confer protection from sexual discrimination and harassment. EY had repeatedly insisted that her firing had nothing to do with sexual harassment or discrimination. "Throughout her time at the firm, EY took measures to promote and support Karen," the company told the Huffington Post in a statement. "The decision to separate Karen was wholly unrelated to her gender. It was solely related to her inability to meet performance goals." Told in a series of interviews with the Post over the phone and in person at Karen's home, her story was corroborated by 22 contemporaneous e-mails, one letter and meeting notes she sent to EY executives, as well as interviews with two other former EY employees and a close friend in whom she confided in throughout the ordeal. On a business trip early in Ward's EY tenure in 2013, McNamara texted her at 2 a.m. asking if she wanted to get a drink. She turned him down. After that, he started undercutting her authority, Ward said. Around the same time, minutes before she was scheduled to appear on a panel at a sales conference, she said, he told her "to stand at the back with the other gals." He was referring to the administrative assistants who were in attendance. He then took her place on the stage and even used her notes. She flagged the incident to an EY partner in an e-mail reviewed by the Post. McNamara also took credit for her work, she said, by removing her name from paperwork after deals were inked. When Ward alerted other executives about his behavior, she was initially ignored or told to tone down her complaints, she said. One male executive told her to "be careful" because she was "being perceived as a bitch," according to her complaint. Ward claimed that she experienced the kind of insidious sexual textbook harassment that has less to do with sex and more to do with power. Under threat, men in charge, just as she said McNamara did, may use harassmenthostile or inappropriate comments, exclusion, sexual overturesto make a woman feel like an outsider and essentially keep her in her place. In 2015, EY moved her away from McNamara, transferring her out of the real estate group and into the company's investment banking division. At the time it looked like a win for Ward, and EY still sees it that way. She was promoted to partner, and she said she was told the bonuses would be better. But the promotion glow didn't last long. After her move was announced, she got a call from Troy Jones, a sympathetic partner who worked in the same division in EY's Los Angeles office. He was distressed, she said. He thought they were moving her because they didn't like her, she said. She complained too much, he told her in a phone call, according to her complaint. He warned her that she probably wouldn't be getting any deal referrals from her old team, and a key part of the job was the bringing in and sharing business. "There is an issue here because you are a woman," Jones said, according to her complaint. "Women do not succeed here." To complicate matters, a few months after Ward was transferred, McNamara was fired. EY insisted that it wasn't because of Ward and that he was let go for failing to meet revenue targets. But his departure probably made things worse for her. "You got my guy fired," one of his former colleagues told her, according to her complaint. McNamara was gone, in other words, but his friends hadn't forgotten him. What came next, Ward said, was retaliation for speaking up. Jones' warning of a lack of cooperation from the team became a reality. In her new role at EY, she grew increasingly isolated. Real estate deals were mostly getting done by her old group, which purposefully excluded her from the work, according to her EEOC complaint. The Post reviewed e-mails sent by Ward to her supervisor and other higher-ups. She regularly communicated her concerns about being cut off from her colleagues, but her complaints went unheard. In a phone call with her new boss, James Carter, the head of the investment banking division, she complained about the lack of cooperation and wondered aloud, "Could this be because I'm a woman?" she said. He dismissed the idea,she said, and told her to be careful about raising the gender issue. "Don't push that rock up the hill, it will roll back on you and crush you," he told her, according to her complaint. EY claimed in the Post interview that it had no record of Ward complaining of sexual discrimination or gender bias while she was employed at the firm. It insisted that she was promoted and transferred to her new group in order to help her do her job. And that she was fired for failing to meet her revenue goals. The firm shared documents detailing her declining performance during her time in the investment banking group. She failed to close many deals and was repeatedly warned that she needed to turn things around, the documents showed. Ward kept e-mails and documents too. She shared them with the Post, and they paint a more complicated picture. She clearly did complain about mistreatment by her male colleagues, though she never explicitly labeled it sexual harassment or discrimination. EY characterized these complaints as office politics. And she appears to have made significant revenue targets, including a $4.95 million deal the month before she was fired. (EY insisted that she did not play a lead role in that deal and did not deserve full credit for it.) Ward said she tried to make the most of her new role. Without referrals for new business from her colleagues, she hustled, logging extensive travel in search of deals to bring in. But as she started bringing in work on her own, she noticed that Carter asked her to write elaborate memos to justify her deals before he would greenlight them. Her male colleagues didn't have to jump through the same hoops, she said. EY strongly denied this account, saying that Carter would have every incentive to make sure Ward's deals went through so she could bring in money for his group. And throughout this time, she kept speaking upat one point sitting down with an HR representative to complain about getting iced out by her former colleagues, according to notes reviewed by the Post. She tried to stick it out, until August 2017, when Carter called, telling her they were shutting down her group in the banking division. She and her team were fired. He gave her time to wind down her deals.Ward's last day at EY was October 31, 2017. "I thought it would turn around," she said. "Now I see that the rock crushed me." Casucci's claims against EY were settled privately, and the parties are bound by confidentiality requirements, leaving the truth forever unknown to the public. Postscript It appears EY is trying to reverse course on its diversity and inclusiveness policies. In attempting to recruit graduates to the firm, a statement appears on its website by Karyn Twaronite, the EY Global Vice Chair of Diversity & Inclusiveness: "When organizations build a culture that values all dimensions of diversityone that provides equitable opportunities for people to grow, learn, and advanceit creates an environment where everyone thrives and were people can experience a true sense of belonging."27 Later on, EY addresses diversity and inclusiveness with the following statement: "At EY, you'll find a diverse and inclusive culture, where you're embraced and respected for who you are. We want you to feel like you belong here because your uniqueness helps us to stand apart. We believe we can solve the toughest challenges together by valuing our differences and teaming inclusively to build safety and trust. Diverse viewpoints are the catalysts that lead to better questions and better answers. That's when creative ideas flow, igniting innovation and inspiring more effective solutions. We welcome all people, no matter who they are orwhat their background. Each of us is different, and we value and respect all EY people." It's worth mentioning that EY was ranked 25th, ahead of other CPA firms, in Fortune's 100 Best Companies to Work For 2020. A statement by employees illustrates what seems to be the high esteem employees have for EY: "EY provides an incredible opportunity to learn and grow each and every day. Additionally, the culture promotes excellence, creativity, innovation, and teaming which also helps to make it a great place to work." Questions: 1. Comment on diversity and inclusiveness at EY in the case of Karen Ward. Do you think the treatment of Ward by the firm illustrates a problem with the overall culture at the firm or could this be the act of a rogue partner who overstepped his bounds in the way Ward was treated? 2. Given the facts of the case, what violations of the AICPA Code of Professional Conduct are illustrated by the way Ward was treated? Explain. 3. What are the implications of the Karen Ward case, and that of Jessica Cassuci discussed in the chapter, with respect to relationships with the client? 4. Can a CPA firm such as EY can reverse course on its treatment of women and others who might feel marginalized? Please list all sources used