Ex-KPMG auditor fined for third time in four years for ‘serious breaches’
PwC partners approve its ‘Luke Sayers amendments’
The consulting giant’s generous pension
scheme will be toughened up and its
CEO selection process broadened.
Hannah WoottonColumnistAlmost three years after the PwC tax leaks scandal story broke (and more than a decade since the misconduct), and the firm’s partners have finally signed off on changes so it doesn’t happen again. Or, if it does, to increase the threat of pain for those involved.
They’ve voted to change the partnership agreement that had previously all-but-guaranteed partners get their generous retirement payments after leaving the firm. Now if they’re found to have been involved in wrongdoing that drags PwC’s reputation and bottom line into the gutter (and not just that related to the tax leaks either, but rather any serious misconduct), they can have their pension terminated.
Former PwC partners can now be cut off from the firm’s coffers if they bring it into serious disrepute.
As one former PwC partner said to us, the changes approved this week could be called “The Luke SayersAmendments”. Or in footy speak, its own “no dickheads policy” – even if it was coach Paul Roos at the Sydney Swans who instituted that particular rule, rather than Sayers’ beloved Carlton.
Under the “post-termination payments” scheme, former partners get annual income out of PwC’s continuing profits, scaled on seniority and tenure. It’s not chump change either: payments previously averaged $140,000 annually, but some reached $1 million.
Current partners grumble about the program because it means they have to share profits with those long gone. It also means some of those allegedly involved in the tax leaks saga are still getting paid by the firm.
Not to mention conflict of interest concerns as many former partners take on positions at current or potential clients of PwC (though there are separate arrangements to mitigate this for those on the boards of audit clients).
Deloitte, EY and KPMG all ended their equivalent retirement payment program decades ago. PwC isn’t going that far. But it’s at least doing away with the incontrovertible nature of ex-partners’ rights to the scheme.
Details of what that specifically looks like will be released next Monday. But it will essentially mean any ex-partners found to have engaged in “serious misconduct” can have their payments cut in the same way their pay or role may have been while working there.
Wider pool of CEO candidates
Most importantly: it’s retrospective. PwC confirmed in 2023 it was no longer making payments to at least three of the ex-partners most involved in the tax leaks scandal: Peter Collins, Neil Fuller and Michael Bersten.
But, it could cover others implicated in the fallout by their role in management, such as former CEOs like Sayers and his successor Tom Seymour. On Sayers’ part, at least, he’s always resolutely denied any knowledge of or involvement in the scandal, despite running the firm at the time. Seymour has also denied any wrongdoing.
The changes will also mean PwC’s governance board will be allowed “to consider a wider pool of potential candidates” for the CEO job.
Currently, partners vote on candidates shortlisted by the governance board. There have been concerns this has been driven more by popularity or who promises the greatest profits (a core part of Seymour’s pitch in 2020).
Partners who were around in Sayers’ time (2012 to 2020) also privately believe the changes are meant to prevent another appointment process like his. He was voted in as CEO as the sole nominee remaining at the time of the ballot, after a presidential-like campaign partly focused on remediating past concerns about his judgment.
We hear more than 90 per cent of partners signed off on the changes, far surpassing the two-thirds needed for it to pass. A PwC spokeswoman said they reflect its “strategy of being a well-managed firm, with robust governance and responsible business practices”.
Although basic maths suggests there may be more than aspirational good governance that was driving partners’ votes. There are now more ex-partners getting paid on the retirement scheme than those working for PwC. Many of those current partners are also getting paid less than their predecessors thanks to a lower revenue caused by the scandal.
It doesn’t take a professional bean counter to know the fewer ex-partners claiming that pension, the more money is left for those doing the work.
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Hannah Wootton is a Rear Window columnist, based in Melbourne. Connect with Hannah on Twitter. Email Hannah at hannah.wootton@afr.com
