Push for scrutiny on ‘ad hoc’ grants as questions swirl about PwC mental health company
“Sahyoun, PwC CEO Kevin Burrowes, and the Board of Taxation are all refusing to say whether Sahyoun is one of those 63-plus people on PwC’s list”
Tax Board run by PwC partner And/or Other Big 6 …
PwC claiming legal privilege – that’s a bit Rich
There have been legal professional privilege missteps at the troubled firm since 2005.
Gallagher to reset consulting after PwC, robo-debt
Spin cycle turns for PwC, Luke Sayers
Joe AstonColumnistHow fortunate we all were to ease into 2023’s colder months warmed by the flames of PwC Australia’s conflagration.
As smoke poured from the firm’s Barangaroo tower, a procession of crisis communications consultants came and just as fast went, their advice disregarded. Andrew Butcher, Andrew Thomas, Alex Cramb, Andrew Maiden and Julia Foley were all identified fleeing the scene. The only one still in there imparting his expertise in corporate reputation is Labor factional bovver boy Stephen Conroy. I mean, that itself is the punchline.
PwC’s global managing director of risk and reputation, Ryan Stanton, was in Australia – in the burning bunker – for the defining weeks of this communications fiasco, and now he’s back for more, returning to Sydney for a further stint to lead PwC Australia’s corporate affairs.
Every multinational giant suffering an Australian-made crisis sends down their New York or London crack team to sideline their hapless local management and subdue the colonial press pack. Most of them run screaming back to the airport. We play for keeps here, baby. We eat our own young.
Ryno certainly has the right pedigree, having toiled for seven years at Rio Tinto, several rungs under the infamous Simone Niven. He even lived in Mongolia running PR for the troubled Oyu Tolgoi copper mine. They say Ulaanbaatar is where he really came into his own.
Of course, Stanton first descended on Australia with PwC’s global general counsel Diana Weissand will have returned on her instructions. With the imprimatur of global chairman Bob Moritz, Weiss holds all the cards, and she fires all the bullets.
Weiss wasn’t here to save PwC Australia. She was here to destroy it if doing so was necessary to spare the firm’s marquee global clients another day’s headlines in the Financial Timesor the Wall Street Journal.
Former CEO Tom Seymour and former chairman Peter van Dongen are being terminated as partners, along with many others. Some of the axed partners were gunned down not for direct involvement or knowledge of the tax practice’s conduct in 2015 and 2016, but for failing to “adequately address the matters” later, while they were under investigation by the Australian Taxation Office and then the Tax Practitioners Board.
Interesting, then, that Weiss deigned to grant PwC Australia’s long-term general counsel Meredith Beattie a dignified retirement. It was Beattie’s job, of course, to keep Weiss abreast of regulatory investigations – and we’re sure she did!
A hallmark of the Luke Sayers/Tommy Seymour era was PwC Australia’s improper application of legal professional privilege to frustrate regulators’ access to information, including the ATO’s access to these tax leaks. It is implausible that Beattie wasn’t heavily involved in this strategy.
And on May 5, on his last legs, Seymour said: “I have reflected on the previous communications I have provided to you on [this matter] and on reflection these have been technical and legalistic in nature.”
Yet not even a skerrick of backwash ever managed to touch the chief lawyer. Incredible.
Sayers, meanwhile, has hired former Bill Shorten staffer Sharon McCrohan to help him with this PwC crisis he has absolutely nothing to do with.
You could imagine Sayers got onto McCrohan via his pal Leon Zwier. After all, it was neon Leon who placed McCrohan in a gig at Afterpay in 2017. That little project left her with 90,000 Afterpay options that when she exercised them in 2020 were worth $5.5 million.
We certainly hope, in this instance, McCrohan has insisted on cash. The grey market for Sayers Capital stock is notoriously thin. The only buyer she’ll ever find is Lindsay Fox in another senior’s moment.
Sayers tenaciously merchandises his friendship with Dan Andrews – because what else are friendships for? – and now we can see he even operates from the premier’s playbook. The brazenness of Sayers’ denial of knowledge and responsibility in the PwC tax leaks that occurred on his watch is pure Andrews.
Sayers needs some advice, to be sure. Someone needs to tell him that having his lips suctioned to the arses of the Melbourne establishment does not make him a member of the Melbourne establishment. He is just another tedious chancer, a rat with a gold tooth. A rabid networker, it’s oft observed, and what sort of human quality is that?
The man either feels no responsibility for the cultural decay of PwC or just doesn’t want to talk about it. What a guy! At least, finally, we can all see the real Luke Sayers.
The best advice to Luke would be to never again give an interview about the qualities of leadership. In time, we all might forget his egregious hustling, his quiet PA investments in Australian Visa Processing and Top Education, the misuse of legal privilege and the aggressive selling culture he presided over – indeed personified!
Back away slowly and melt into the crowd – or better yet, just stay right where he is, hiding under the table.
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KPMG reveals partnership deed, in a big four first
KPMG Australia has taken the unprecedented step of allowing its partnership deed to be published, revealing partners can be given a one-time bonus payment worth up to a year’s income when they retire.
The firm provided the “KPMG Australia Partnership Agreement 2022” to the Senate committee that is examining consulting, without requesting the document be made private. Its publication by the committee on Friday marks the first time in the local history of the big-four consulting firms that this usually tightly held material has been released publicly.
Greens senator Barbara Pocock criticised leaders of Deloitte and EY earlier in the week for failing to provide similar documents to the committee when asked. PwC, which triggered the inquiry with its tax leaks scandal, has provided its agreement but asked the committee to keep it confidential. KPMG’s move will put pressure on Deloitte and EY to follow suit.
Representatives from Deloitte and EY defended their decision during public committee hearings on Monday and Tuesday.
Deloitte Australia chairman Tom Imbesi told the inquiry the firm had not provided its partnership agreement because it was “commercially sensitive”; EY’s David Larocca said he did not want “competitors to see” the details of its deed.
KPMG’s 42-page document outlines the rules governing how the partnership selects its leaders, distributes profits to partners, forces them into “involuntary retirement”, and their confidentiality obligations. The firm has yet to provide any partner pay information.
Ethical obligations
The agreement states partners have “important legal, fiduciary and ethical obligations to each other and the firm” to abide by its values, and use their “best skill and endeavour” when carrying out their work.
Partners must also “comply with all applicable professional rules and standards governing the conduct of the professional services the firm provides”.
KPMG partners are obliged to “comply with any reasonable direction of the national chair or the CEO”, “proactively give to the other partners full information and truthful explanations of all matters relating to, or which may impact upon, the affairs of the firm” and “not undertake any activity which is detrimental to, or could put at risk, the financial, property or reputational interests of the firm”.
Partners can also be expelled for a range of reasons, including being charged with a serious criminal offence, failing to pay tax for a year or more and being found guilty of a variety of crimes.
The document also details how partners share profits – and potential losses – from the firm’s operation.
It also describes how the firm’s partners elect the national chairman, who is responsible for “(a) providing leadership to the firm; (b) identifying development opportunities for the firm (c) promoting and representing the firm both nationally and internationally; and (d) maintaining the high public profile of the firm”.
The chairman appoints the chief executive officer and can also, under certain circumstances, recommend to the board that the chief executive be removed.
‘Potemkin village’
On Monday, former KPMG partner Brendan Lyon criticised the big four over their partnership structures. He said their partnership agreements act as a “Potemkin village”, or facade, to hide their lack of transparency and legal accountability.
”The big four simulate real corporate governance structures,” he told the Senate inquiry. “They [have] positions described as board member, chairman and chief executive et cetera. But they are partnerships, not corporations, meaning these positions are illusory and not the real structures in real corporations.”
This was in contrast to companies, which are “separate legal entities from their owners and provide protection for people in business by capping legal liability to the value of their investment in that company”.
Partnerships such as KPMG do not have to disclose their finances to the corporate regulator. Mr Lyon, who turned whistleblower against KMPG after leaving the firm, said board members within a big-four partnership had none of the duties of a corporate board member. He had also said he would provide a copy of his former partnership arrangement to the committee after he had consulted his lawyer.
The document outlines how KPMG’s chief executive can ask partners to leave, called an “involuntary retirement”, for reasons including poor performance, violating the firm’s policies, or being unable to continue in the role due to health reasons.
“Partner may be asked by the CEO, with the approval of the national board, to retire from the Partnership if ... (a) the partner’s performance is not expected to meet the current or future strategic or performance objectives of the firm ... the partner is unwilling or unable to redress the areas where their performance, contribution or conduct has been assessed as unsatisfactory; and/or ... the partner has breached any of the firm’s ... values or policies in a way which is material and/or sustained.”
No goodwill
The document outlines the complicated way KPMG partners can receive a bonus payment when they depart the firm. KPMG, Deloitte and EY do not have an ongoing retired partner payment plan like rival PwC.
KPMG partners of 20 years’ or more standing receive an average one-time payment of their annual income averaged over the previous five years. This payment is reduced proportionately if the partner is 58 or older and been in the position for less than 20 years. A partner younger than 58 who retires with less than 10 years in the position is not eligible for the one-time payment.
A partner younger than 58 who has been in the position for between 10 and 20 years will get a smaller amount, worth the average of at least three months’ pay. A formula increases this amount the closer the service has been to 20 years. Importantly, this group of partners is eligible for the one-time payment only if they are “not joining a competitor”.
The partnership does not assign monetary value to goodwill, meaning partners have no “individual right or interest in any goodwill; and ... in all calculations for any reason, the goodwill is to be considered and assessed as being of no value”.
The partners are also obliged to keep all of the firm’s private information secret.
Partners are also restricted from working for a competitive for six months once they leave.
“[A] Partner who ceases to be a Partner of the Partnership may not for a period of six months from the date upon which the Partner ceased to be a Partner, without the express prior approval of the National Board in its absolute discretion and on such terms as it may consider appropriate, be engaged or involved in any capacity in any Competitive Business,” the arrangement states.
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Why we should stop demonising consultants
Canberra’s jihad against consultants has turned ideological, with a McCarthy-like vendetta against outside expertise.
Tom BurtonGovernment editorCall me a contrarian, but Canberra’s jihad against consultants has turned into an ideological battle over outsourcing and apparent calls for the public sector to have its monopoly over advice to ministers reinstalled.
A fight between Labor and Greens senators to impale first PwC, and now the big consulting houses, has become a McCarthy-like vendetta, as senators express indignation at how well consultants are paid, and allege – largely unspecified – conflicts of interest.
There were clear consulting conflicts when KPMG got caught on both sides of a bruising bureaucratic battle to better manage transport assets in NSW. A key risk of doing business with government agencies, good consulting firms intensely watch and manage, often through trusted personal relationships.
There is no doubt PwC should be held responsible for monetising its egregious Treasury confidentiality breach. But despite months of hearings, there has been little evidence to support the notion that somehow big consulting has been the source of the collapse of the Westminster government as we know it.
Spending on consulting was less than 1 per cent of federal outlays, according to a Finance audit in 2021-22 of department spending. Roger Stonehouse
Outrage that a leader of a business that generates about $2.5 billion in revenues and employs more than 13,000 staff earns $3.5 million a year, captured headlines.
But as others have noted, comparing Deloitte chief executive Adam Powick’s pay with the prime minister’s paltry $564,000 salary missed the point. The PM’s includes several benefits that go with the job, not least the harbourside shack Anthony Albanese enjoys whenever he returns to Sydney.
And let’s not forget the fully indexed defined superannuation benefit some long-serving public officials such as Albanese are entitled to. And any dependent partner when he dies.
Ignored has been any attempt to place a value on what external subject experts bring to government.
The federal government has always had a relatively lean public service, and experts are regularly tapped to give advice, especially in rapidly emerging areas such as generative artificial intelligence where there is a dearth of policy expertise.
Similarly, outsiders can often identify problems government officials are either unwilling or unable to see. Clear-eyed advice from the Boston Consulting Group in 2014 about the need to get in early and restructure Australia Post could have saved the taxpayer the millions of dollars that will be needed to prop up its ailing network.
Governments in the main share similar problems, but for various reasons struggle to learn from each other. The big consulting houses provide a deep global resource of case studies and knowledge that agencies can tap, be it digital currency or autonomous cars regulation.
As retiring public service chief Peter Woolcott has noted, much of the issue with external advice is around the public service being a more savvy procurer of advice. This is in part a reference to avoiding cost blowouts and duplication, but also the inability of the public sector to capture the lessons from its consulting engagements.
The big consulting houses have built impressive libraries of knowledge that they can apply to the next problem. The public sector would do well to understand and emulate how this is done.
The data from a recent Finance audit strongly suggests much of the “consulting” problem sits within defence, where the large (mostly) US vendors have a stranglehold on the system. There are many reasons for that, and the push to gain greater sovereignty and control over key strategic areas of defence may start to wind back this heavy dependency.
The audit found $1.3 billion of the consultant and contractor spend in 2021-22 was on technology management, equal to almost a quarter of all consulting and contractor spending.
Outside the biggest agencies, the federal government has largely resisted building its own internal development and project management capacity, leaving it captured by the system integrators, tech vendors and big consulting groups that have filled the void.
The audit revealed a so-called federal shadow workforce of 54,000, but only 954 workers, or 1.7 per cent, were attributable to consultants. Most of the shadow workforce was for outside services such as catering, cleaning and security.
Total spending on consultants came to $563 million, a fraction of well less than 1 per cent of the budgeted $660 billion of federal outlays for 2021-22, (circa 0.1 per cent).
There are clearly regulatory issues around auditing, and ensuring that it is ring-fenced from other activities. But more time spent understanding how to get the best value from outsiders, be they professional advisers such as engineers, academics, technologists or even consultants, would be more fruitful than endless demonising of experts who are not public servants.
The author has family members who are consultants with the big four.
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