It’s not clear when PwC management discovered members of the firm had betrayed the government’s trust.
Certainly, its chief executive should have known about it. Tom Seymour was managing partner tax and legal when the confidentiality breach took place and was appointed CEO of the firm in 2020. He resigned last month after it emerged that he – and many other PwC partners – had received emails about the confidential information.
Whenever the firm discovered what its tax advisers had been up to, they should have taken immediate action. The firm should have launched its own rigorous investigation to discover how wide the problem went and then sacked all of those involved.
Yet it did the opposite.
In 2016, the Australian Tax Office noticed a few multinational companies had “suspiciously and quickly” tried to rearrange their tax affairs in reaction to the new Multinational Anti-Avoidance Law.
The tax office launched an investigation, but was stonewalled by PwC’s false claims of legal professional privilege.
That should have been a signal to PwC to sack the wrongdoers and reform the firm’s culture.
In January this year the government body which licenses tax professionals, the Tax Practitioners Board, suspended the initiator of the leak, Collins, as a tax agent. Collins had left PwC at this stage.
In a public statement, the TPB said he was suspended because he was advising the government on tax and had “made unauthorised disclosures of this confidential law reform information to partners and staff of PwC”.
This was another signal to the firm that it needed to do something about the dishonest partners in its ranks.
And yet it did nothing.
It was only after the scandal came to wide public attention, thanks to dogged reporting by the Australian Financial Review, that PwC made a pretence of reform.
The firm started by launching its own investigation into the scandal, which it planned to keep mostly secret and agreed to release in full only after a public outcry. It stood down nine partners involved in the misuse of the confidential information, but continues to refuse to name them. And that’s a long way short of taking action against the 35 partners who had some knowledge of or involvement in the misuse of the information.
Trust can be lost very quickly by companies and it takes years to win back.
But when a company has breached society’s trust and doesn’t seem genuine in its attempts to remediate the problem or even to understand it, it’s nigh on impossible to win it back.
This is where PwC is.
And this is why PwC’s latest apology falls flat.
“I am fully committed to taking all necessary actions to re-earn the trust of our stakeholders,” wrote recently installed Australian chief executive Kristin Stubbins. “And, as we work through this process, I am committed to being fully transparent.”
The firm admits to “betraying the trust placed in us”, that its behaviour “was completely unacceptable”, that it “allowed for profit to be placed over purpose” and “no amount of words can make it right”.
Without action, this is nothing but words and the government knows it – PwC will struggle to win new lucrative government contracts.
Corporate Australia knows it. Multinational construction company Lendlease had PwC lined up to be its new auditor, but has put a stop to the $8 million arrangement. The move is a sign the contagion has moved beyond the firm’s tax arm and Lendlease will be the first of many corporates to shun the firm.
And the public knows it. PwC will struggle to attract staff. Who now would want to tell friends and relatives they’d taken a job with the consulting giant?
The future of the entire firm in Australia is in doubt.
It is currently a business with 9200 employees and A$2.6 billion in annual revenue.
By this time next year, it will be much smaller. Clients will walk away (on June 2, the AFR reported that the country’s biggest superannuation fund, AustralianSuper, had frozen any new contracts with PwC as a result of the scandal). A lot of partners – particularly the youngest and brightest – will perceive they have no future at the firm and leave.
The firm might try a PR makeover and a name change, but it doesn’t really matter what it might decide to call itself. They will always be known as the firm that used to be PwC, with all that it implies.