PwC Australia CEO calls for additional sanctions against misconduct
Kevin Burrowes, CEO of PwC Australia, is pushing for the authority to revoke the lifelong retirement payments of former partners if they are discovered to have engaged in misconduct. This move comes after a tax leaks scandal last year, which implicated four PwC partners.
The four partners implicated in the scandal are no longer receiving their retirement payments. Still, Burrowes noted his current lack of power to alter the benefits of errant partners after they depart from the firm.
The initiative aims to foster accountability and ethical conduct within the organisation, ensuring that the firm's retirement benefits are aligned with the integrity and professional standards expected of its members.
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PwC Australia wants greater sanctions against errant partners
Burrowes pointed to a limitation in his capacity to influence or halt retirement payments to former partners, even in cases where their actions might warrant such measures. Currently, the CEO lacks the authority under the partnership agreement to challenge these payments, a situation he openly wishes was different.
“I haven’t got any power within the partnership agreement to challenge them. And that’s the position. Do I wish that that was different? Absolutely,” Burrowes said during one of the concluding sessions of the Senate inquiry into consulting on 9 February.
The issue is particularly relevant given the context of PwC's retirement payment plan, which aims to compensate former partners generously (with an average of $140,000 annually) as a reward for their service, deter them from joining competitors, and foster ongoing loyalty to PwC. However, it's important to note that these payments can be adjusted based on the firm's profitability.
To address this limitation, Burrowes looks forward to appointing PwC's first independent chairman. He hopes this new chairman will consider revising the partnership agreement to allow for such disciplinary actions against former partners when necessary.
The move signals a proactive approach to ensuring the firm's governance structures support accountability and uphold the high ethical standards expected of its leadership and partners. Burrowes highlighted the firm's ongoing efforts to refine its "practices, processes, and culture" following the scandal related to tax leaks.
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Labor Senator Deborah O’Neill questioned the appropriateness of continuing payments to individuals involved in significant misconduct and the message it conveys to the public about PwC's ethical stance.
Burrowes believes it would be inappropriate for individuals who have committed serious offences against the firm or its clients to continue receiving payments. The CEO’s stance suggests his commitment to ethical practices and accountability within PwC.
The change likely to be prospective, not retrospective
However, Burrowes also cautioned that any adjustments to the partnership agreement would likely not affect former partners already receiving retirement payments. The change cannot be implemented retroactively despite the firm’s intent to reinforce ethical integrity and accountability within its operational framework.
In his appearance before the Senate, Burrowes explained the practical challenges of implementing retrospective changes. He believes former partners would unlikely agree to amend the payment process that benefits them, especially regarding their retirement payments.
His proposed reforms, however, highlight a forward-looking approach to addressing misconduct. A prospective change to the policy is seen as a measure to uphold ethical standards within the firm.
“I think any changes will be prospective and not retrospective ... if I were to try and do it retrospectively ... I actually don’t know how I would be able to do it, because they would not vote for that change to the process of paying [the retirement payments],” Burrowes said, as quoted by the AFR.
“So it will apply to people going forward, if we are able to get changes made. If they’ve done wrongdoing, they should not receive their [retirement payments]. But that is something for the future,” he said.
The firm's efforts to reform and address past misconduct have faced scrutiny since the tax leaks scandal broke out. Senators are concerned over the purported reluctance of PwC’s global leadership to disclose the identities of the "dirty six" international partners disciplined concerning the scandal.