Former CEO says he was concerned about conflicts of interest and audit quality
The former chief executive of PwC Australia, Luke Sayers, has told a Senate inquiry that he had proposed to break up the firm’s business in 2018 to address the conflicts of interest and the declining audit quality, but his plan was rejected by the global management of PwC.
Sayers, who led the firm from 2012 to 2020, said he had initiated a project called “Project Kookaburra”, which aimed to sell off the entire consulting business of PwC Australia and focus on its audit services. He said he was influenced by the banking royal commission at the time, which exposed the misconduct and poor governance of the financial sector.
“As the chief executive officer of PwC Australia, I had significant concerns about the conflicts of interest inherent in a large professional services firm and said so,” Sayers said in his opening statement to the inquiry. “In the final two years of my tenure, I strove to mitigate the risks associated with that and deliver fundamental structural reform. But I was unsuccessful.”
Sayers flew to New York to pitch his plan but was turned down
Sayers said he and his team had spent about 12 months working on the proposal to divest the consulting business, which accounted for about half of the firm’s revenue. He said he had flown to New York to discuss the plan with PwC’s global chairman, Robert Moritz, but it was not deemed “pragmatic” by the global executive.
“The decision was taken by global, that whilst understanding the complexity and the risks and so on and so forth, it was not pragmatic to sell a piece of global consulting here in Australia and not divest that elsewhere in other jurisdictions around the world,” Sayers said.
He said he was disappointed by the outcome, but he respected the decision and continued to work for the firm until his retirement in 2020.
PwC Australia faced a reputation crisis after misusing confidential Treasury information
The Senate inquiry into audit quality was launched in 2019 after a series of scandals involving the big four accounting firms: PwC, Deloitte, EY and KPMG. The inquiry has been examining the potential conflicts of interest arising from their provision of both audit and non-audit services to their clients, as well as their influence on public policy and regulation.
PwC Australia has been under scrutiny for its misuse of confidential Treasury information during its lobbying activities for multinational clients. The firm obtained sensitive tax modelling data from a former Treasury official who joined PwC as a partner in 2016. The firm then used the data to argue against proposed changes to tax laws that would affect its clients.
The Treasury secretary, Steven Kennedy, described the breach as “disgraceful” and “unacceptable”. He said the Treasury had referred the matter to the Australian Federal Police and had taken legal action against PwC to recover the data.
Sayers apologised for the breach and said he was unaware of it until it was exposed by media reports in 2021. He said he had commissioned an independent investigation into the incident and had implemented remedial actions.
PwC Australia eventually sold its government consulting business for $1
Despite its failure to split its business, PwC Australia managed to sell its government consulting business to a private equity firm, Allegro Funds, for just $1 in 2021. The deal was prompted by a loss of trust and reputation among government agencies, which refused to award contracts to PwC after the Treasury scandal.
The government consulting business had about 350 staff and generated about $100 million in annual revenue. Sayers said he had negotiated the sale with Allegro Funds before his departure from PwC. He said he believed it was in the best interest of both parties and would allow PwC to focus on its core services.
The culture and practices of PwC Australia during Sayer’s tenure as chief executive have been criticised by senators running the inquiry. The inquiry chair, Deborah O’Neill, said she was appalled by the firm’s behaviour and called it “crap”.
On Thursday, Sayers offered another apology. “The breaches of confidence and the failure to properly identify and address them happened on my watch and I sincerely apologise,” Sayers said.
