Why Is EY India Not Classified As A Multi-Level Marketing (MLM) Firm, Asks NGO – People Activism Forum
How EY India, having foothold across the country be allowed to function in India as a Limited Liability Partnership (LLP)?
Pradeep Krishan Yadav, Director, People Activism Forum, in a conversation with www.indianpsu.com – has raised serious questions about EY India and asked as to why EY India, is not classified as a multi-level marketing (MLM) organization.
He says “EY is one of the “Big Five” professional services firms, providing auditing, consulting, tax, and advisory services to businesses, governments, and institutions worldwide. However, the concerns being raised suggest that aspects of EY’s business model may appear to share stark characteristics with MLMs, particularly in terms of partner compensation, revenue sharing, and operational structures. How can such a big firm having its foothold across the country engaged with major government departments and big companies, both Indian as well as multi-nationals, be allowed to function in this country as a Limited Liability Partnership (LLP)?”
“Anyone, who can bring in business and has money can join such a firm as a senior partner, set up his or her own team and work according to his/her own will and fancy. The basic feeling of comradery is missing as there is not set of fixed value laid down in the functioning of such a firm. There is no clear top to bottom instruction of any sort and all wings work as separate islands and identities.”
When the likes of EY are not registered as a Private Limited Company (PLC), a business entity that is privately owned and limits the liability of its owners, how can there be a strong business policy, thought process and ethos?, he asks.
He has raised more serious concerns that are listed below :
EY’s Business Model vs MLM
Partnership Structure: EY operates under a global partnership model where individual partners have ownership stakes in their local or regional offices. These partners are responsible for bringing in business, managing clients, and sharing profits. This model is common in professional services firms and differs from the typical MLM setup. In MLMs, individuals usually earn commissions based on personal sales and recruitment of other salespeople. EY partners do not recruit others for the purpose of earning commissions in the MLM sense, but they are responsible for developing business in their areas of expertise.
Revenue Generation: In EY, partners earn revenue through client services (e.g., audits, consulting projects), rather than through recruitment-based commissions. While there may be performance incentives and revenue-sharing among partners, it’s not structured as a direct recruitment-based earnings model, which is a hallmark of MLMs.
Human Resources Concerns: The point about HR practices and governance issues is important. There have been some concerns and controversies globally related to HR policies, partner accountability, and regulatory adherence. If any unethical recruitment or employment practices are taking place, they would likely be addressed under labor laws or professional regulations rather than labeling EY as an MLM. In India, companies are required to follow the Indian Companies Act, and if EY or any similar organization violates these, regulatory action could follow.
MLM-Like Behavior
The comparison to MLM draws attention to the network-based aspect of how EY partners operate and how revenue flows through their independent units. This is distinct from MLM, as EY does not primarily operate on recruitment-based earnings; their income is largely driven by delivering professional services.
Ban in India?
There is no widespread movement or indication that the Indian government is planning to ban EY or any of the Big Five firms based on these operational practices. Regulatory scrutiny on audit firms and consulting practices has been increasing globally, particularly around conflicts of interest, quality of audit, and professional ethics. If any HR or recruitment malpractices are proven, they could trigger legal or regulatory actions under existing employment or corporate laws.
However, concerns about recruitment and HR practices should be highlighted to appropriate authorities if they have led to misconduct or fraud, but these may not directly qualify EY to be compared to an MLM in the traditional sense. The government typically does not regulate firms based solely on their partnership models unless they violate specific legal provisions like fraud, tax evasion, or labour laws.
The complaint by the NGO – People Activism Forum, has been sent to the Union Minister of Commerce and Industry – Piyush Goyal, Ministry of Labour & Employment, Serious Fraud Investigation Office (SFIO) and also to the Disciplinary Directorate of The Institute of Chartered Accountants of India, A copy of the same, which was sent to us is given below for the benefit of the viewers of www.indianpsu.com –
www.indianpsu.com – in a quest to get a reply from EY, to balance out the story, sent an email to Rajiv Memani, Chair, EY Global Growth Markets Council (GMC), EY India Chairman and Regional Managing Partner and also to to Ms. Janet Truncale, EY Global Chair and CEO, but as usual, we did not receive any reply from them.
