Andrew Greenwood is a former Judge of the Federal Court of Australia 2005-2022. He was brought in to conduct a probity and governance audit of Scyne Advisory after its separation from PwC and to estabish the organising principles in these areas.
In post-PwC era,
ethics means duty comes before temptation
From children’s books to corporate life, leaders
must mean what they say, and say what they mean. Always.
Andrew
Greenwood Former Federal Court judge
Aug 13, 2024
In 1940 Theodor Seuss Geisel (otherwise known as Dr
Seuss) created his famous archetypal hero Horton the elephant. By using the
device of the ridiculous, he taught millions of children a fundamental ethical
principle.
Horton had a conscience. He was tricked by a lazy bird, Mayzie, to sit on
her egg until she returned.
PwC failed to keep the confidences it had promised to uphold. Dion Georgopoulos
Despite terrible storms and a succession of events any one of which might
have caused Horton to abandon his promise, his refusal to yield at each event
is captured in the moral refrain: “I meant what I said, and I said what I
meant; An elephant’s faithful, one hundred per cent”.
When individuals say integrity matters and their organisations adopt
governance standards rooted in an ethical framework, the lived experience of
those dealing with the organisation and its people ought to be: “They meant
what they said, and they said what they meant, they’re faithful to their values
100 per cent”.
Sadly, that’s not the experience of many. In September 2020 Westpac agreed
to a $1.3 billion penalty for 19.5 million breaches of the anti-money
laundering legislation.
In 2014 the Commonwealth Bank agreed to a $700 million penalty for 53,750
breaches of the same legislation. Just recently, ANZ chief executive Shayne
Elliott has issued a personal apology for misleading the Australian Office of
Financial Management (AOFM) about the bank’s bond trading activity, which seems
to have been overstated by $50 billion.
The AOFM funds the federal government’s debt program on behalf of the
Australian people. Not only is the AOFM a major client of the bank, but acting
for the AOFM involves delivering a public good and serving a public purpose.
There is no room for misleading the client.
Nor is it acceptable to say, in effect, nothing
to see here, it was someone else who buckled; I’m as shocked as anyone.
Apart from that, ASIC is investigating whether ANZ’s trading in a $14
billion sale of treasury bonds last April involved contraventions of the
Corporations Act, a matter contested by the bank. Qantas has now exorcised
the devil by admitting to misconduct between May 2021 and August last year
– which affected flights until May this year – and agreeing to a remediation
payment of $20 million and a penalty of $100 million.
In April this year the BBC issued a statement saying Huw Edwards, the iconic
British news anchor, had left the corporation due to “medical advice”, which
may not have reflected the corporation’s actual knowledge of charges against
him of “making indecent pictures of children”.
In June Engineers
Australia cancelled a presentation by engineer Rob Parker on nuclear energy
in part, at least, in response to an email from Simon Holmes a Court ridiculing
the organisation’s engagement in the presentation. The odd thing is that Engineers
Australia told the registrants “this event was cancelled due to the speaker
being unwell”. Parker says he was not unwell, and he had not been contacted,
and thus the statement was untrue.
PwC and principles
Then we come to the catastrophe that engulfed PwC. The history of those
events is set out in clear
forensic well-written detail in the recent sequence of articles in The Australian Financial Review
by Edmund Tadros.
It is sufficient to note here the fundamental matter of principle. When an
organisation assumes confidentiality and fiduciary obligations to a client –
especially a public sector department or agency acting to promote the best
interests of the Australian people – it must act with total fidelity to those
duties.
Whatever the temptation may be to yield or act otherwise, the conscience,
culture and integrity of the organisation must reflect a commitment to those
values and every individual in the organisation must embrace them.
If an organisation believes in these fundamental values, it must say what it
means, mean what it says and be faithful to the values one 100 per cent.
Also, when failures occur, it is no exculpation to say: I’m sorry that
happened; or that I take full responsibility for what occurred. Nor is it
acceptable to say, in effect, nothing to see here, it
was someone else who buckled; I’m as shocked as anyone.
Fixing mistakes
Importantly, when organisations have made a mistake, they must fess up
quickly and together with the client, solve the problem. Woe betide any
organisation that seeks to obfuscate an integrity failure.
Because all organisations are made up of human beings with frailties, unlike
Horton’s unwavering resilience, the governance and supervisory mechanisms,
coupled with the incentive mechanisms, need to be properly aligned.
By that I mean, a firm providing consulting services to an organisation
should never be also conducting the audit of the financial accounts of that
organisation.
That removes the temptation confronting the auditors to not call into
question the advice of the consultants.
Consulting to public sector agencies should be entirely separated from
consulting to the private sector. There are clear practical ways of sensibly
doing that – which I would be happy to explain, calmly.
PwC failed in part, at least, in its confidentiality obligations because of
this problem.
Finally, notwithstanding the shrieking – and misstatements about underlying
facts in some commentary – adopting a corporate model, independent directors
and an independent chair, a CEO hired and fired by the board, a strong probity
and governance sub-committee of the board and corporate regulatory oversight of
a corporate structure is critical.
The other powerful idea in children’s literature is the device of the
crocodile that has swallowed a clock and constantly haunts Captain Hook.
Although the child reader does not realise the significance of the device,
the idea J. M. Barrie
is trying to embed in the child’s mind is that, like Hook, we are all stalked
by devouring time.
Because we are all stalked by devouring time, there is no time to waste.
These changes need to be made sooner rather than later.
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