A Value Proposition without Dedication

Date: 22/08/2024

Author: Charles Ganbaatar

Price Waterhouse Coopers (PwC) has been facing numerous problems in recent years, such as tax issues, auditing failures, and misuse of confidential government information. PwC Australia has cut more than 300 jobs directly or indirectly caused by recent tax scandal involving the misuse of confidential government information to gain commercial advantage within its accounting sector (Kennedy, 2024). In 2015, Peter Collins, PwC’s international tax chief shared confidential Treasure information with other business partners in hopes of developing strategies to counter the new tax avoidance law, called the Multinational Anti-Avoidance Law (MAAL) (Commonwealth of Australia, 2024). Collins and the leadership team started working on how to commercially exploit the new tax avoidance schemes while they were still in drafts shared confidentially by the Organization for Economic Co-operation and Development (OECD). This move resulted in more than US$ 2.5 million in revenue, as PwC marketed its services and helped 14 US companies to navigate the new tax laws before they were even enacted. PwC Australia could claim that the management was not made aware of the breach of confidential government information until 2021, however it took them two more years to commence investigating the matter what had occurred in 2015. As of June 2024, PwC had another problem, it was facing a fine by a foreign government of at least US$ 138 million for suspicion of missing significant financial irregularities in relation to a property developer Evergrande, who overstated its revenue by more than US$ 790 million over two years through 2020 (Policy Circle Bureau, 2024). It is no surprise that the authorities are likely to impose harsh penalties on the audit firms like PwC, because in the absence of ethical audits; investors can potentially invest in companies with inflated financial performance, lose their money and erode their trust in the financial systems.

In the Finance and Public Administration References Committee’s report, Kevin Burrowes CEO at PwC Australia admitted that PwC’s repeated failure of leadership eroded the firm’s governance and weakened the management’s focus on its professional and ethical standards, such as the management’s ongoing failure to acknowledge what had occurred (Commonwealth of Australia, 2024). According to The Switkowski Review by Dr. Ziggy Switkowski, PwC’s operation is geared to promote revenue over ethics and integrity, which subsequently cause internal compliance failures and misconduct. In the 2023 tax scandal, the actions of PwC partners demonstrated a huge appetite for non-compliance because the financial reward was too great to miss. In other words, for PwC, the costs associated with the non-compliance and unethical decisions made by management are presumably outweighed by the financial rewards. PwC’s ethical failures has raised many questions about its leadership ability, integrity, internal culture, and risk management. The internal management and audit controls appear to have failed miserably; the management behaves as if revenue always comes first, and risk management is relegated later. PwC’s aggressive revenue seeking, and growth agenda are occurring at the expense of the firm’s reputation, values and purpose. Many its business partners seem to be doing the unethical things while others are failing to do the right thing by minimizing the significance of unethical and questionable behaviors.

Here are PwC’s seven shortcomings in relation to its practices, operations and processes:

  • Lack of independence and external representative within its governing body.
  • Excessive power conferred on the CEO and management.
  • Disproportionate focus on revenue growth and market leadership as the strategic imperatives.
  • Decentralized business model without sufficient visibility of the enterprise view.
  • Complexity and fragmentation contributing to ineffective structures and processes.
  • Unclear responsibilities and accountabilities creating gaps and risks.
  • Overly collegial culture inhibiting constructive challenge.

People are beginning to realize the hypocrisies of companies that say one thing and do another, their efforts have amounted to little more than window dressing. They have long forgotten to live their values, take social responsibilities and own up negative consequences of their actions. The failure of PwC to be honest with the public and government is reflective of its failure to genuinely want to change for the better. We are not confident and certainly not convinced that firms like that will ever be willing to improve their practices or reputation while continuing to cover up unethical behavior and conceal information about wrongdoing. Below is an outline of PwC’s own company value proposition. It does not take a rocket scientist to figure out that more dedication is required in its value proposition.

References:

Commonwealth of Australia (2024). Finance and Public Administration References Committee. https://parlinfo.aph.gov.au/parlInfo/download/committees/reportsen/RB000277/toc_pdf/PwCTheCover-upWorsenstheCrime.pdf

Kennedy, R. (2024). The PwC Australia Tax Scandal Explained: An Insider’s Perspective. Accountancy Age. https://www.accountancyage.com/2024/03/26/the-pwc-uk-tax-scandal-explained-an-insiders-perspective/#:~:text=The%20Root%20of%20the%20Scandal&text=The%20shared%20information%20included%20government,particularly%20targeting%20the%20US%20market.

Policy Circle Bureau (2024). Accounting scandal: PwC faces shutdown in China over Evergrande mess. Policy Circle. https://www.policycircle.org/industry/pwc-faces-shutdown-in-china/#:~:text=Despite%20its%20success%2C%20PwC%20has,here%20to%20join%20the%20channel.