PwC governance board chair John Green tells staff to knuckle down, fix culture
John Green addressed staff and partners at PwC – in two separate groups – as part of a listening tour, where he drew a line in the sand under the firm’s woes
PwC announced former lawyer and Macquarie Group banker John M Green as independent chair of its governance board last month, and after starting in the role in September, he’s been pounding the pavement.
Green recently addressed staff and partners at PwC – in two separate groups – as part of a listening tour, where he also seemed to be drawing a line in the sand under the firm’s damaging tax scandal.
Several attendees of the sessions relayed that Green told them now was not a time for them to sit and feel sorry for themselves, staff and partners needed to knuckle down and stay committed to lifting PwC out of its current position. Green stressed that he believed PwC was still a good firm, but it needed to lift its governance standards and improve culture.
It seems the message was if the firm could fix those issues, it could emerge from the all-enveloping tax scandal as a stronger entity.
Whichever way you look at it, though, it’s a long road ahead for PwC given the damage inflicted on the brand.
Green’s appointment came alongside plans for law firm Webb Henderson and former judge Tom Bathurst to run a review of the PwC’s “commitments to change”.
The scandal relates to allegations of misuse of confidential government information by PwC’s former head of international tax, Peter Collins, who was found to have shared briefings obtained from a private consulting process.
Green’s message to PwC staff and partners also included an anecdote from his time at a domestic law firm, when he recounted a rival was navigating a tumultuous time and reputational damage. He said his boss at the time told his team that it wasn’t a time to be complacent or throw stones, as the under-pressure firm still had good people and could emerge from its woes as a better and stronger organisation.
Green didn’t identify the firm in question, but he may have been referring to a string of disastrous events at Allen Allen & Hemsley during the nineties that tarnished the firm’s reputation. Among those was a scandal that emerged in 1991, when Allens detailed questionable financial deals in confidential letters that were leaked to the media.
Not long after, there was a damaging fallout when an Allens lawyer took $US8.7m ($13m) that belonged to the Nauru Phosphate Royalties Trust and lost it, through a complex series of transactions.
Green also endured a scandal at Macquarie when one of its most senior deal bankers, Simon Hannes, was arrested and charged with insider trading. He told this columnist in the book The Millionaires’ Factory that staff at the time thought it was “a life-threatening moment” for the organisation.
“Our entire business was dealing in confidential information and maintaining trust, so to have it alleged that one of our most senior people was not just abusing the trust, but doing it illegally, was shocking,” Green said in the book. Hannes was found guilty by two different juries and ended up serving jail time over the spurious options trading.
Despite Green’s pep talk, PwC’s local employees will be mindful that the hits keep on coming at the firm, and not just in Australia.
Just days ago, Chinese regulators slapped PwC’s mainland China division with a six-month suspension and a fine linked to the firm’s audit of failed developer China Evergrande Group.
The three independent members of PwC’s 10-person governance board have a lot riding on the task ahead. Joining Green as independents on the board are Australian Unity chair Lisa Chung and former Commonwealth Bank general counsel Carmel Mulhern.
Rattling the tin
Digital player Alex Bank has Barrenjoey Capital Partners working with it to assess strategic options, including raising capital and laying the groundwork for a potential initial public offering at some point over the next few years.
This column understands Barrenjoey is assisting Alex Bank with a capital raising that is seeking to bring in a large investor or two at a valuation of $80m. It is unclear if a current investor is vending shares or if the lender is issuing new shares, as it did in August last year at 83c a share.
Alex Bank already counts New Zealand’s Heartland Group and the Tozer family office among its investors.
But underscoring how tough it is for smaller banks in the current climate, a capital raising in May last year put a $130m pre-money valuation on Alex Bank.
The appointment of Barrenjoey is interesting given the firm was one of four investment banks that worked on Judo Capital’s ASX-listing. The others were Citigroup, Goldman Sachs and Credit Suisse.
More than two years ago, Alex Bank had drafted in Jarden Australia to advise on its capital program. That relationship appears to have ended, with Barrenjoey clearly now front and centre for the lender.
Clinton Capital Partners – a long-standing adviser to Alex Bank since it was established in 2018. – remains in the advisory tent, too.
Business lender Judo has been navigating a tougher operating climate, leading to an increased focus on expense management, including the cutting of headcount across the bank. It flagged a reduction in staff numbers in May as part of a broader restructure. The lender is also thought to be closely reassessing the composition of parts of the loan book, with a focus on boosting the profitability of specific exposures.
The latest Australian Prudential Regulation Authority data shows Alex Bank had a loan book of $62m as at July 31. Deposits amounted to $61m.
A release by Alex Bank in 2023 showed that as at June 30 last year, it had lent more than $74m in personal loans to date, as settlements climbed.
It’s been a hard slog for the lender, even after APRA granted Alex Bank a fully-fledged banking licence in late 2022.
More broadly, the nation’s digital banks have been plagued by operational and scale issues, which led Volt to return deposits and cease being a bank about two years ago. That followed the demise of its digital counterpart Xinja.
Other digital players :86 400 and Up were acquired by National Australia Bank, and Bendigo and Adelaide Bank, respectively.
Alex Bank has – to its credit – looked to keep coming up with ways to attract new customers.
In June, it rolled out a partnership with Qantas Frequent Flyer so that members could earn points on their banking products, starting with the firm’s term deposit.
Alex Bank also has relationships with mortgage broking aggregators including AFG and Loan Market, covering personal loans and asset finance.