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A Positive PwC Plan


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Glenn Barnes @ 2023.05.30 11:49 AM

This is clearly a breach of trust and trading-for-profit off inside information. The matter needs to be treated as a legal issue and prosecuted as such. No amount of structural or regulatory change will stop such behaviour without there being legal consequences.

Michael Williams @ 2023.05.31 11:49 AM
These actions would have far-reaching benefits! Bravo

Jaqui Lane @ 2023.05.31 11:49 AM

A great start. Would suggest point 9 be amended to Break up the Big 4. This has been 'considered' for some years now here and around the world. Time to act.

And, I'd suggest a couple more points.

10. Accounting firms stop the practice of annuity payments to former partners. This creates an inherent conflict of interest as former partners end up on ASX listed boards, the TPB, Financial regulatory boards, the boards of their own professional organisations (which, by the way, have their own code of ethics that are clearly not being adhered to or been called to account on).

11. A time limit on when Public Servants can work for the Big 4 to prevent further corporate capture of government.

The WHOLE system of government/consultants is flawed. 

Spy @ 2023.06.10 8:23 AM

Regulations are necessary for any industry and they all must contain the element of ‘confidentiality’ and ‘trust.  However, PwC has breached its own purpose and values. This requires a reset and a rebuilding of them and the competency framework and criteria surrounding each of them. PwC says ‘our purpose is to build trust in society and solve important problems.’ Its values are: 

  • Act with integrity.
  • Make a difference.
  • Care.
  • Work together.
  • Reimagine the possible.

Therefore, it is not only a rebuilding of how its people work, but how clients perceive they are living by them.

IdeaSpies @ 2023.06.10 8:23 AM
Good point about Purpose and Values. I've added it into the post. Seems it should be different for Audit and Consulting.

ElaineA @ 2023.06.13 12:23 PM

There are a number of issues here:

The "Big 4" was once the "Big 5". Despite continuing and numerous high profile breaches by these firms since 5 became 4, governments around the world seem reluctant to actually change the system to use more mid tier and SME firms. This would be a positive change for everyone - provide incentives to use non Big 4 firms

Another point is that over the past couple of decades, there has been a tendency to hand "political hot potatoes" to large consulting firms. The real expertise in how government operates and the real concern for the community, country, and our future lie in the public service - this is why people work there. In my years working in public policy, the most dedicated, intelligent and professional public policy professionals work in government. As long as there is appropriate and real community/business consultation, let's let the public service do what it does best.

IdeaSpies @ 2023.06.13 6:23 AM

Good points ElaineA. As a result of the GFC there was a similar debate about encouraging more mid-tier and SME audit firms. 

And yes Governments should think twice about handing "political hot potatoes" to larger consulting firms. Our Governance Editor Glenn Barnes has been advocating a better solution- Citizens' Assemblies. 

IdeaSpies @ 2023.06.28 7:12 AM

More examples of conflicts of interest in the Gov using consultants:

Thospionage @ 2023.08.06 2:30 AM

It's time to break up the gigantic sham partnerships used by law firms and accounting firms.

Ordinarily, outside of the professions, partnerships in Australia are limited to twenty general partners per firm, at the maximum. This is a legal requirement under the Corporations Act 2001 (Cth). Beyond 20 general partners, the firm must incorporate and cease practice as a partnership. By regulation, this maximum limit on the number of partners has been increased to 400 for law firms and 1000 for accounting firms. This makes a mockery of the law of partnership. Joint and several liability of partners is only justified by having every partner directly involved in management. In practice, at a firm like PwC, with almost 1000 'partners', all day-to-day management decisions are made by a 'board' or 'committee' of less than a dozen partners. 

Law firms and accounting firms also appoint 'salaried' or 'Clayton's' partners, who are general partners in name only. Salaried partners are not given access to all financial information, and are excluded from key decisions. Rather than be legally registered as a limited partnership, the firms instead set up internal indemnities, whereby all 'partners' are jointly and severally liable, but equity partners indemnity salaried partners. Given that most equity partners do not own property in their own name, these indemnities are likely to be worthless. 

The problem with gigantic 'partnerships' is that they dilute moral responsibility for misconduct, and immunise firms against its consequences. Clayton Utz was famously found to have shredded incriminating evidence on behalf of tobacco clients, yet the firm still exists, and now charges the highest volume of fees to the Commonwealth government of any law firm. A smaller firm would not have survived such disgrace. 

IdeaSpies @ 2023.08.11 6:34 AM

Good to see points we made being taken up and more:

"resources of the Tax Practitioners Board would be beefed up; and that secrecy laws that impeded the investigation into Collins would be removed".

Michael Williams @ 2023.08.17 6:34 AM
Seeking to understand this a bit better and reading through other posts I thought I should share the Principal - Agent problem. This is where the Agent in this case PwC or any of the other of the big four have an advantage in the level of information they can access more so than the Principal (the government). Worse, loyalties seem to be always to the firm over loyalty to the client / principal. Nothing new but interesting I think for the context.

IdeaSpies @ 2023.08.18 6:34 AM
Good point about principal/agent Michael. I was very surprised that Treasury would have practicing tax accountants on a tax advisory board given the conflicts of interest.

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