CASE 7.

HOPKINS V. PRICE WATERHOUSE

Synopsis

In 1983, Ann Hopkins was nominated for promotion to partner with Price Waterhouse. Hopkins,
a senior manager in the firm at the time, seemed to have excellent credentials for a partnership
position. In fact, of the 88 individuals nominated for partner that year, Hopkins had generated by far
the most client revenues for the firm. Hopkins was also unique in that she was the only female
among the partner candidates. Unfortunately for Hopkins, she was not promoted to partner and was
subsequently told that she had little chance of being promoted in the future. After resigning from the
firm in 1984, Hopkins began to question why she was denied the promotion to partner. Eventually,
she decided to sue Price Waterhouse, claiming that she had been rejected for partnership on the basis
of her gender. After a lengthy trial and several appeals, one of which was ruled on by the Supreme
Court, Hopkins was awarded $400,000 in compensatory damages. Price Waterhouse was also
ordered to offer Hopkins a partnership position, apparently the first time in U.S. history that a court
had handed down such an order.
The principal purpose of this case is to focus attention on several issues facing women entering
the public accounting profession. Probably the most perplexing of these issues is the difficult task of
successfully managing a professional career and having a family. Ann Hopkins, an energetic mother
of three small children during her tenure at Price Waterhouse, achieved a good balance between her
home life and professional work role. Another challenging issue that women public accountants face
is the dominant male culture that pervades many CPA firms. In Hopkins' case, she was apparently
forced to deal with a work environment in which sexual stereotypes dictated how she was expected
to behave. In fact, a court ruled in her civil suit that Price Waterhouse had evaluated her as a
candidate for becoming a female partner with the firm rather than simply a partner. That is, there
was an expectation that female partners and female partner candidates behave in a feminine manner,
which was not Hopkins' style. Hopkins, like many other women in the profession, also had to cope
with the lack of female mentors. Finally, early in her career, Hopkins had been forced by the
nepotism rule of her original employer, Touche Ross, to leave that firm so her husband would have
an opportunity to be promoted to partner.

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Hopkins vs. Price Waterhouse--Key Facts

 Case 7.4 Hopkins v. Price Waterhouse 351

1. Historically, females and minorities have been under-represented in the large international
accounting firms, particularly at the partner level.

2. Early in her career, Ann Hopkins had been forced to resign from Touche Ross because that firm's
nepotism rule precluded her and her husband from both being considered for promotion to partner.

3. Hopkins was the only female among the 88 candidates for partner with Price Waterhouse in the
year that she was nominated for promotion.

4. Hopkins had generated more revenues for Price Waterhouse than any of the other partner
candidates.

5. Hopkins' office managing partner informed her, following the announcement that her nomination
for promotion had been placed on hold, that she should behave more "femininely."

6. The trial in Hopkins' suit against Price Waterhouse revealed that several partners had made sexist
remarks regarding her qualifications for partner.

7. The trial also revealed that prior female candidates for partner had been the target of sexist
remarks by Price Waterhouse partners.

8. Evidence presented during the trial confirmed that Hopkins had deficiencies in her interpersonal
skills but that similar deficiencies had not prevented prior male candidates for partner from being
promoted.

9. The judge hearing Hopkins' suit ruled that she had been evaluated by Price Waterhouse as a
female partner candidate rather than simply as a partner candidate.

10. The judge ruled that the sexual discrimination Hopkins experienced had not been overt but rather
latent in the culture of Price Waterhouse.

11. In 1990, Hopkins was awarded a judgment of $400,000 against Price Waterhouse; the firm was
also ordered to offer Hopkins a partnership position, an offer she accepted.

12. In recent years, an increasing number of women have been promoted to partnership positions
with the major accounting firms; nevertheless, women are still significantly underrepresented within
the partnership ranks of those firms.

Instructional Objectives
352 Case 7.4 Hopkins v. Price Waterhouse

1. To demonstrate the unique challenges that women face in pursuing a public accounting career.

2. To illustrate that discriminatory attitudes against women public accountants may be latent within
the culture of their employing firms.

3. To raise the issue of whether public accounting firms have a responsibility to implement
measures specifically intended to facilitate the career success of their female employees.

4. To provide insight on the partnership promotion process of large accounting firms.

5. To document the historical under-representation of women and minorities in large accounting

firms.

Suggestions for Use

This case can be integrated at practically any point in an auditing course. The most obvious
point at which to discuss this case would be during coverage of the introductory chapter in the
standard auditing text, a chapter that typically provides a broad overview of the public accounting
profession, including the changes it is undergoing and the challenges it faces in the future. However,
rather than discussing this case early in the semester, I typically defer presenting it until
mid-semester. In a sense, I use this case to give my students a brief "break" from the technical
aspects of auditing.
The key purpose of this case is to sensitize both male and female students to the unique
challenges that women public accountants face in their careers. Making both sexes aware of the
subtle but often pervasive nature of sexual discrimination is the first step toward remedying this
problem. As noted in the case, the presiding judge in the Hopkins suit against Price Waterhouse
ruled that the firm’s partners were not aware they were discriminating against females. In fact, Ann
Hopkins, herself, admitted during the trial that she never witnessed any overt discriminatory acts
against her while she was with Price Waterhouse. Of course, subtle or latent discrimination is very
difficult to detect and combat. Hopefully, by making aspiring public accountants aware of this
problem they will be more sensitive to it and recognize the constraints and inequities that it imposes
on women public accountants.
If an instructor wishes to pursue the central issues in this case in more detail, he or she can refer
to a number of articles regarding these issues that have appeared in the Journal of Accountancy in
recent years. Many of these articles are reports by the AICPA task force that is responsible for
monitoring the progress of women in public accounting. Another article that might be of interest is
the following one that I co-authored with Soon-Yong Kwon: "Toward a Better Understanding of the
Underrepresentation of Women and Minorities in Big Eight Firms," Advances in Public Interest
Accounting, Vol. 4 (1991), pp. 47-62.

Suggested Solutions to Case Questions

1. This is a question that typically generates quite different responses from students. Generally, the
majority of students suggests that public accounting firms have an obligation to adopt policies
designed to help women overcome the barriers to success that they have historically faced in the
public accounting profession. However, my experience has also been that a certain proportion of
male students will mention the phrase "reverse discrimination" when they respond to this question.
 Case 7.4 Hopkins v. Price Waterhouse 353

These individuals typically suggest that accounting firms should be fair to all employees but do not
have a responsibility to "bend over backwards" to accommodate the special needs of any one group
of employees. [I would caution instructors to deal with this issue with a great deal of sensitivity
since it often evokes emotional responses from both female and male students.]
Following is a list of measures, identified by former students of mine, that accounting firms
could consider implementing to facilitate the career success of women public accountants (and
minority public accountants as well).

a. Accounting firms could make greater use of females and minorities in their recruiting
processes.
b. The large offices of public accounting firms could adopt a policy of having at least
one female and/or minority involved in their personnel function. Females and
minorities would likely be more comfortable in discussing sensitive issues related to
job discrimination with such an individual.
c. Accounting firms could develop a formal mentoring system for their female and
minority employees.
d. The executive offices of accounting firms could review their promotion and
performance appraisal policies and procedures to make sure that they are gender and
color "blind."
e. "Sensitivity" seminars could be developed for partners and employees to make them
aware of the subtle discrimination that females and minorities often face within their
firms.
f. Accounting firms could give female employees an opportunity to adopt flexible work
schedules to help them meet the dual responsibilities of their professional and family
roles.

2. The "old boy network" is a phrase generally used in reference to a small clique of key
decision-makers within an organization. As the term implies, typically all of the members of such
groups are male. In most cases, this phrase has pejorative connotations. For instance, members of
an old boy network are often perceived as protecting and furthering their own economic
self-interests and those of their colleagues at the expense of individuals outside their clique.
Should professional firms attempt to break down old boy networks? Certainly, it does not appear
proper or advantageous for professional firms to encourage the formation and continuation of such
cliques since their existence can be very disruptive and counter-productive to an organization's
operations. For example, women public accountants are often not included in the informal "power"
groups that form within an accounting firm. As a result, they do not benefit from the often very
significant influence that these groups can impose on a firm's or practice office's personnel decisions.
At the very least, accounting firms should ensure that personnel-related and other key operating
decisions are not made "behind closed doors" by self-interested cliques. Instead, these decisions
should be made in an open forum in which all appropriate individuals are allowed to participate fully
and fairly in the decision-making process.

3. The key criterion in assigning auditors to audit engagements should be the personnel needs of
each specific engagement. For instance, one engagement may need an individual with significant
EDP auditing experience, another engagement may require an individual with knowledge of
sophisticated cash management systems, etc. Certainly, client management has the right to complain
regarding the assignment of a particular individual to an audit engagement if that complaint is
354 Case 7.4 Hopkins v. Price Waterhouse

predicated on the individual's lack of technical competence, poor interpersonal skills, or other skills
deficiencies. On the other hand, a client complaint in this context predicated upon the race, gender,
physical limitations, or other personal traits of an auditor are nearly always unjustified. If client
management objects to a given auditor being assigned to their company's audit team for an
unjustified reason, the individuals responsible for staffing decisions within the given practice office
should politely but firmly inform client management that its request is unreasonable. If the client
persists, the audit firm should consider resigning from the engagement. Hopefully, over the long
run, accounting firms will be rewarded for such a commitment to high ideals and ethical norms by
their local business community.
[Note: As a point of information, Case 7.3, “Bud Carriker, Audit Senior,” focuses on the key
issue raised by this question.]

4. Nepotism rules have been adopted in many settings, not just professional firms. Historically, the
principal purpose of such rules has been to ensure that the leadership positions within an
organization are "earned" rather than "bequeathed." That is, organizations adopting such rules
believe that competence should be the key factor in the determination of which individuals are given
leadership positions and other organizational rewards. As a general rule, the key benefit of such a
policy is that an organization has a better chance to thrive and prosper over time because the most
qualified individuals are the ones promoted and, consequently, the ones who generally remain with
the organization. The key disadvantage of nepotism rules is that qualified individuals may not be
allowed to assume leadership positions in an organization because they happen to be related to
another individual in that organization.
In most employment contexts, nepotism rules have historically been more disadvantageous for
females than males. If a married couple is employed by an organization, the husband is more likely
to have a longer tenure with the employer (because he is typically older than his wife).
Consequently, the wife is generally perceived as having a smaller "investment" in the employer and
thus is the spouse who is more likely to resign when the nepotism policy of the firm is invoked.
[Quite often, married couples can work together at professional firms until they reach the partner
level. At that point, however, only one of the individuals will typically be considered for promotion
to partner.]