PwC has ‘lost social licence to self-regulate’: Senator Pocock
The self-regulatory actions PwC plans to adopt in response to the tax leaks scandal have no teeth and will not see a significant shift in behaviour, Senator Pocock has said in a Senate Inquiry today.
The adoption of a raft of self-regulatory actions recommended in the Switkowski Report by PwC does not constitute a significant shift in regulatory framework for the big four firm and “does not have teeth” Senator Barbara Pocock has told PwC in a Senate hearing.
PwC executives were questioned about PwC’s response to addressing ethical misconduct within the firm in an appearance before the Senate, Finance and Public Administration References Committee this morning.
Ms Pocock stated that the recommendations put forward by Dr Ziggy Switkowski following his review essentially offer a series of self-regulations as the way forward for PwC which would enable the firm to continue to govern itself “far from the prying eyes of the Corporations Act”.
The Senator noted that in response to the recommendations from the report, PwC has committed appointing three non-executive independent directors, plans to publish audited financial statements and applying the ASX Corporate Governance Principles and Recommendations.
“They are motherhood statements about how good governance should look. But isn’t it the case that as things stand, there are no regulatory consequences if you don’t do any of these things, they do not have teeth, they do not constitute a significant shift in your regulatory framework,” said Ms Pocock.
“You are offering further self-regulation, which we as a Senate and the Australian public no longer trust you to apply.
“You have lost your social licence to self-regulate and the self-regulations you offer are completely inadequate to the challenges and the disaster that you presented to the Australian people.”
Ms Pocock said that the established regulatory frameworks had failed in response to the misconduct at the firm, with PwC essentially existing in a “regulatory haven”.
“You do not have the duties of directors and officers under the Corporations Act, including the duty to exercise reasonable care and diligence and the duty not to improperly use information to gain an advantage. You avoid criminal liability and civil penalty liability for unlawful conduct, including offences under the Criminal Code and the Competition and Consumer Act and the Privacy Act and ASIC cannot make an independent investigation as I understand it into your conduct,” she said.
“These are all major regulatory gaps which create regulatory havens for you. None of the propositions you put to us deal with those regulatory gaps.”
PwC chief risk and ethics leader Jan McCahey said the firm would be open to the government strengthening the regulatory framework in any way it decides is appropriate.
“We know that the Treasury has a review underway, and we will cooperate very closely with Treasury to share whatever information they would like and to make sure that we uphold the regulatory framework that is put in place, we've already shared our comments in relation to that with some individuals,” said Ms McCahey.
“The PJC is in the midst of considering some of those issues as well. And we have our response to to that committee and I'm looking forward to having some further discussions.”
Speaking at the same hearing, Senator Deborah O’Neill questioned the independence of the Switkowski Report, describing it as an “internal review” rather than “independent review” with PwC setting the terms of reference for the review.
“Dr Switkowski was paid to do this job by PwC, it is an internal review that has been made public and the terms of reference have never been made public. On page 10 of the report Dr Switkowski describes the limitations that were placed on him,” said Ms O’Neill.
She also noted that the review did not include interviews with several former PwC partners who were not available as a result of retirement or exit from the partnership during the course of the review.
“The term CEO on no fewer than 71 occasions, but doesn't actually name any of the CEOs who are responsible for any of the matters that are well aired,” she added.
“I urge you to resist trying to frame this as an independent report. It is an internal document, commissioned by PwC, paid for by PwC, with significant limitations, that tells a story captured at a particular moment of time.”
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