Oscars: The Academy's Long, Cozy Relationship With Its Accountants

In the wake of the best picture fiasco at Sunday's 89th Oscars, the relationship between the Academy of Motion Picture Arts and Sciences and its long-standing accounting firm PwC has soured. And some insiders are whispering that the dealings between the Academy and PwC had grown too cozy over the years. 

Academy president Cheryl Boone Isaacs has said the Academy's relationship with PWC is under review; that the organization will have no further dealings with the two PwC partners, Brian Cullinan and Martha Ruiz, responsible for the best picture foul-up; and, in a note to Academy members she issued Thursday evening, she added "changes will be implemented to ensure this never happens again."

Those changes will certainly mean that envelopes are handled more carefully at future Oscar ceremonies, but could also mean the Academy will reconsider whether to stay in business with PwC.

During the course of their long history together, the two have become very closely intertwined, to the point where in the eyes of some a potential conflict of interest now exists: Andy Horn, who joined the Academy in 2001 and who has served as its CFO since that post was created in 2012, previously worked at PwC, and his wife Heather Hill, currently works at PwC, where she is listed as a partner. 

The Academy also enjoys something of sweetheart deal when it comes to PwC. In a 2015 tax filing, the non-profit Academy listed accounting expenses of just $142,000. In the view of some observers, that figure appears shockingly low given that PwC has said in the past that it devotes 1,700 hours to the annual Oscar voting process and, in addition, also handles other matters for the Academy ranging from tax filings to board of governors voting.

The accounting firm and the Academy have both benefited from the long-running arrangement: over more than eight decades together the Oscars and PwC have become all but synonymous, presenting themselves as the gold standard in their respective fields. And during promotional appearances in the run-up to the Oscars every year, PwC accountants have taken lots of public bows. 

Yet, even while the closeness between the two operations have some insiders voicing concerns, observers also say that very closeness could make it more difficult for the Academy to drop PwC in favor of another accounting firm.

Neither the Academy nor PwC chose to comment for this story.

To put it all in perspective, the long-running relationship between the two dates back to 1934. It's the same year that someone first referred to the Academy Award statuette as "Oscar," the Academy hired PwC — then "Price Waterhouse," later, after a 1998 merger, "PricewaterhouseCoopers" — to oversee voting for the upcoming seventh Oscars. 

Originally, no accountants were involved in the Oscars at all. For the first two Academy Award ceremonies, in 1929 and 1930, nominations were determined by the organization's full membership, but winners were decided by a five-person Central Board of Judges comprised of an actor, a director, a producer, a writer and a technician — several of whom were very close to the heads of the major studios, who had spearheaded the Academy and were financing the award ceremonies. People quickly began to question the integrity of the voting process when a disproportionate number of the early winners were people who had been among the Academy's 36 founders, including Mary Pickford, who won the second best actress Oscar for a poorly received performance in 1929's Coquette. Not only was Pickford an Academy founder, but so, too, was her husband Douglas Fairbanks, who had just ended his term as the organization's first president.

Sensing resistance ahead of the third Oscars, the Academy abandoned its Central Board of Judges and opened up the final round of voting to all its members, but doubts about the legitimacy of the outcomes persisted for the next few years. At the third Oscars, MGM production chief Irving Thalberg's wife Norma Shearer won best actress for a middling performance in The Divorcee, and her brother Douglas Shearer won best sound recording for The Big House. And at the fifth Oscars, both Fredric March, the star of Paramount's Dr. Jekyll and Mr. Hyde, and Wallace Beery, the star of Academy initiator Louis B. Mayer's MGM production The Champ, were declared winners of the best actor Oscar, even though it was revealed that March had received one more vote.

Then, at the sixth Oscars on March 16, 1934, two people who would shape the future of the Academy — Frank Capra and Frank Lloyd — were pitted against each other for best director. When the ceremony arrived at their category, Will Rogers, the evening's host and sole presenter looked at the result and said, "Well, well, well, what do you know! I've watched this young man for a long time. It couldn't happen to a nicer guy. C'mon up and get it, Frank!" Years later, in his classic autobiography The Name Above the Title, Capra recalled that applause broke out at his table (the Oscars was a dinner-dance back then) and he was already halfway to the stage when he realized that the spotlight wasn't on him, but on Lloyd. He later wrote, "That walk back — through applauding V.I.P.s yelling, 'Sit down! Down in front!' Sit down!' as I obstructed their view — was the longest, saddest, most shattering walk in my life."

On Oct. 9 of that same year, Lloyd became the Academy's president, and it was he who retained the services of PwC to orchestrate voting for the Oscars ceremony that would take place on Feb. 27, 1935. On that night, Capra finally won, for his direction of It Happened One Night. (That ceremony's host, Irvin S. Cobb, cheekily announced the result by saying, "C'mon up and get it, Frank!") And the following October, Capra succeeded Lloyd as Academy president, a position he would hold until 1939. Then, in 1939, Capra was succeeded by the producer Walter Wanger, who held the position until 1941. It was during Wanger's tenure that the Academy and PwC first began to use sealed envelopes.

Interest in the Oscars had grown massive over the years, so in the mid-'30s the Academy began to provide newspapermen with the results ahead of the show, under embargo until 11 p.m., so that they could meet their evening deadlines. But, as a result, people began to game the system. In 1937, best actress nominee Gladys George strolled through the press room, learned that she had lost to Luise Rainer and shared that news in the ladies' room with fellow loser Carole Lombard. And in 1940, late arrivals at the ceremony carried in the 8:45 p.m. evening edition of the Los Angeles Times that included the full results. So in 1941, PwC put the results in sealed envelopes, and began hand-delivering the envelopes to the stage, hence the phrase, "And the envelope, please ..."

That worked well enough — until 1964, when Sammy Davis, Jr. came onstage to present back-to-back music awards, read the nominees and requested the envelope for the first of the two categories, but then was handed and announced the contents of the second, resulting in the only near-precedent for Sunday's disaster, albeit in a far less significant category. Davis quickly defused the situation by cracking, "They gave me the wrong envelope? Wait 'til the NAACP hears about this!"

It was 20 years before PwC's envelope hand-offs began taking place in the theater wings, presumably to tighten the runtime of the show. The process went smoothly until Sunday night, when another envelope snafu threw the final moments of the show into chaos, forcing the Academy to take a hard look at its relationship with PwC.