We won’t abandon our causes, despite the critics, says KPMG chair Martin Sheppard
KPMG national chair Martin Sheppard says he is committed to companies being involved in social and political issues.
KPMG will not review its support for constitutional recognition in the voice referendum despite criticism of the big end of town taking a stand on the issue last year.
Nor will the professional services firm step back from involvement in social and political issues such as Israel, domestic violence and education, according to its new national chairman, Martin Sheppard.
In an exclusive interview three months into his new role, Mr Sheppard made it clear he is committed to companies being involved in external issues but conceded this was increasingly difficult because of the calls for organisations to stick to their core business.
“I think it’s really important for corporates, like governments, to be really driven around social justice,” he said. “We all, as Australians, have a role to play. Organisations ought to choose the things that are important to them, that are connected to their business, that they’re passionate about, and they ought to pursue those as an organisation.
“As a firm, we’ve got a really clear path around the things that matter to us.”
He said KPMG had a long history of working with Indigenous people.
“If you go back to the Uluru Statement from the Heart where there was a call for constitutional recognition of Indigenous people, we were part of that process,” he said. “You can’t chop and change on these things. You need to have the resolve to stay on the path that is important to you, your partners and your business. So as a firm we said, we think this is a fulfilment of an obligation that dates back to the Uluru statement, and in that sense, we as a firm were supportive.
“However, we were very clear with all our people that it was a referendum and therefore they had a choice.
“I don’t think we need to step back from our approach – it was very fair and equitable.
“The greater concern for me is that the (failure of the) referendum results in not enough action being taken, because the same issues are there and are alive.”
Mr Sheppard said that senior executive should be involved in issues outside their work: “It’s not enough to stand by … You’ve got to lead in those other domains.”
He said the situation was “greyer” when a senior leader used their position as a platform for something that was a personal concern, “but that’s a judgment that everyone in those roles needs to make … but as a firm, we have things that we’re very committed to. We’re committed to Indigenous, we’re definitely committed to education in lower socio-economic areas, we’ve been very vocal on domestic violence.”
During his term as chair he would “push very hard around social justice causes” where digital enablement was needed, he said.
On the war in Gaza, he said that KPMG and its staff had made a $55,000 donation to the Red Cross for humanitarian aid: “Ours is a contribution to an aid agency, and we do our very best to make sure that agency is bipartisan and helps people in need irrespective of (where they are). We find any form of racism abhorrent, and we’re appalled by the situation in Israel, but we need to look after our people and we’ve provided incredible support to our people. (We have people) who work here who are closely connected (to the issues) and remember, we’re a global firm so we have people in those markets as well.”
On another contentious issue, KPMG allows staff to work on Australia Day and choose another day off. Mr Sheppard said: “We’re absolutely open to our people nominating another day (but) I’m a proud Australian and I want us to celebrate as a nation the great things we achieve. It’s entirely appropriate and helpful to have a day to celebrate our cultural heritage. It’s something that can really galvanise the country but if (it creates) a level of inertia that stops us being able to celebrate in the way we want to, then there are alternatives and we should be open-minded about them.
“I’m not suggesting we change the date, I’m just saying that if (inertia) is starting to diminish what (we can achieve) we ought to be open-minded about how we can improve that.”
Mr Sheppard took up his role at a difficult moment for professional services firms after PwC’s tax scandal last year prompted calls for more regulation and a separation of consulting and auditing in the big four.
But the keen sailor, who has competed in 10 Sydney to Hobart races, is unfazed: “Maybe there’s an element of being belted around in Bass Strait when you’re sort of fighting for survival that makes some of the other things that happen a bit like being beaten over the head with a balloon.
“Challenging jobs are good jobs. Reputations do get challenged and they ought to get challenged. Organisations like ours enjoy a very privileged position and we should not be immune to challenge (but) our client base has been incredibly supportive of us and confidence remains in what we do.”
The firm will not be split: “We have been categorical, domestically and globally, that we believe in the multidisciplinary firm model. Our ability to bring a cross-section of skills to both sides of the business is really important. The notion of separation has been tested (globally last year by EY). The question in my mind is: has it been tested for governance reasons or has it been to try to crystallise value?
“Monetising the value that others have created is not something that I would pursue … we are not going to pursue a separation because the only reason that you would do that in the current environment is to monetise the values of the thing.
“If it is determined by regulators here or around the world that it’s a sensible thing (to separate) of course we would respond, but we are not going to pursue a separation of our firm because the only reason to do that in the current environment would be to monetise the value.”
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‘I think it’s really important for corporates, like governments, to be really driven around social justice’
Martin Sheppard, KPMG national chairman
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Similarly, the partnership structure will continue, despite criticism it can lead to lack of internal scrutiny compared with more hierarchical corporate models.
“When you think about the genesis of the firms, we were required to be partnerships,” Mr Sheppard said. “We could not be incorporated and deliver external audits. So that construct was preordained.
“But we have grown and we’re very large, we ought to have the same burden of transparency (as corporations). Certainly as a firm we’re open to that (and in fact at last year’s Senate inquiry) we said we invited better clarity around what’s expected from the professional firms. We’re absolutely up for that.”
He said KPMG was already transparent through annual reports and audited financial statements to ASIC, APRA and other authorities: “As a firm we’ve measured ourselves in terms of our ESG metrics, and so on. But if the concern is that the organisations themselves are opaque and secretive, then the question that ought to be asked is, in what areas and what are the concerns? We’re regulated by somewhere in the order of 40 bodies but the partnership overall doesn’t have that requirement. If that was one of the desired outcomes of the inquiry, we would certainly comply.”
He said that while the big four firms reported a lot of information, there was no consistent framework and “that would be helpful”.
Mr Sheppard said that KPMG board had been a leader in terms of governance: “We’ve been the only firm that has brought into the firm independent non-executive directors.”
This week, he will announce two more independent directors to bring to three the independent directors on the board and to bring total board numbers to 12.
On economic challenges, Mr Sheppard said Australia’s low productivity was “quite parlous”. “We’re not going to achieve the things all Australians want which is higher wages, better standards of living, unless we can crack that productivity problem,” he said.
We needed to “humanise productivity” by a community-wide conversation: “We can’t be laggards on this – we’ve really got to be at the cutting edge of it. This is a real Australia moment. From a workforce perspective, a government perspective, a corporate perspective, from a consulting firm perspective, we’ve all got a role to play in trying to drive that forward.
“The most important thing we do as a world is going to be the energy transition journey. In Australia, we have one of the highest levels of sunlight across the world other than perhaps the Middle East, we’ve got higher than average wind strength … if you put all those things together, this ought to be a once in a generational opportunity for Australia to shine,” he said.
