EY Lays Out U.S. Governance Overhauls After Failed Split

The proposal comes as the Big Four accounting firm continues to work to untangle the mess left by its decision in April to scrap plans to split auditing and consulting into two different firms. EY spent $600 million and more than a year working on the split.

The U.S. unit, led by Julie Boland, played a key role in the blowup of the split. A handful of U.S. audit partners complained that the consulting business was receiving the majority of its lucrative tax business. The opposition strengthened dissent within the global firm.

The global executive board is preparing to vote on a successor to Carmine Di Sibio, the global chairman and chief executive and architect of the split, in coming weeks. Di Sibio in June said he would retire from the firm the following June, a year earlier than the planned expiration of his term.

A U.S. governance revamp floated last week could help EY appease partners and lessen the myriad challenges Di Sibio’s successor would stand to inherit. After the split failed, an overhaul of the U.S. unit’s structure was expected to be one of the primary short-term changes.

The firm outlined a proposal to set up a U.S. independent committee of five elected partners that would nominate a slate of candidates for a future governing board, which would be tasked with oversight of U.S. firm strategy, risk management and other areas, according to materials from a webcast held for U.S. partners Thursday.

All U.S. partners would vote to choose the members of the nominating committee. The committee would identify three candidates for every open vacancy, on which all U.S. partners would then vote.

The proposed governance framework was presented to U.S. partners as an opportunity to give them more of a say in the firm. It would take “a more inclusive approach to voting, reflecting the voice of all partners," according to the materials.

“​Our focus on modernizing the governance of the EY U.S. firm was started more than two years ago, and is part of the firm’s practice of regularly reviewing current best practices of governance in professional services firms," EY U.S. spokesman Brendan Mullin said.

Members of the independent committee would serve a three-year term, except for the initial group, whose terms would be staggered, the materials showed. That committee would nominate 10 elected partners for the governing board, on which the U.S. managing partner, Boland, would also sit.

The governance board would be one of three separate bodies under the proposed framework. The others would be a management committee carrying out firm strategy and a revised version of the existing U.S. partner principal council that represents the partners and advises the other two bodies. That council would no longer have governance duties under the proposal.

The governing board is meant to represent the U.S. unit and its people as a whole in overseeing areas such as strategy, risk management, audit quality, regulatory compliance and financial results. The board would also evaluate the performance and compensation of the managing partner, the materials showed.

At least six members of the 11-person governing board, including the managing partner, would need to be certified public accountants to comply with regulatory requirements.

The proposal would go into effect pending a partnership vote.

EY’s Americas region, which includes the U.S. unit, booked $23.62 billion in revenue for the year ended June 30, up 12% from the prior-year period. That represents nearly 48% of the $49.35 billion in global revenue EY reported for the year, larger than any other region.

Write to Mark Maurer at mark.maurer@wsj.com and Alexander Saeedy at alexander.saeedy@wsj.com