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Earning power

One way to solve the problem of merging PEP figures with non-equity partner (NEP) figures to ascertain financial performance of the firm would be for the market to acknowledge that non-equity partners are not in any meaningful way actually partners and should simpy be removed from the tables. That is to say we should no longer count NEPs as anything more than associates, ie employees. After all, they do not truly recieve a profit allocation, but a salary....so why be in these tables? It's just the use and abuse of the term 'partner' that leads to all this NEP confusion. The fact is NEPs are not partners. It was a gimmick dreamt up in the 1970s that has now got so out of hand that to be an NEP really means very little. If you don't have equal voting rights to an equity partner, are not involved in making decisions like an equity partner, and can be sacked just like an associate can be, then you are not really a partner.

7-Sep-2009

10:05 am