PwC in a difficult race to restore its credibility

PwC network global clients and industries leader Kevin Burrowes has been appointed as PwC Australia’s CEO.

Beleaguered accounting firm PwC Australia is in a race against time to restore confidence in the organisation or risk a complete break-up.

The firm this week announced plans to hive off its government consulting business, which contributes some 20 per cent in revenues to its annual $3bn. But it is battling ongoing scrutiny from politicians demanding many more scalps as a result of the tax leak scandal, loss of confidence from private sector clients and increasing uncertainty for remaining staff and partners.

The firm on Wednesday confirmed that 70 partners would be retiring – including taking an early retirement as work declines in a much weaker economy.

The market is awaiting the news of how many names will be made public and removed from the books as a result of the tax leak scandal.

There are also reports that heads of other profitable divisions within the firm are considering their futures, They are reportedly considering whether to leave or look at more structured exit moves like the spin-off of government business to private equity firm Allegro, while thousands of staffers are considering if they have a future in the organisation.

Kristin Stubbins has been replaced as PwC Australia’s acting chief executive. Picture: Jane Dempster

“Some people are leaving while some people are panicking,” one junior staffer, who recently joined the firm, told this columnist on Wednesday.

Thousands of PwC staffers, many of whom are under 30, are having to make the tough decisions on whether to remain and have confidence that the current top management is doing enough to turn the tide and cauterise the bleeding, or whether the saga will drag on and result in the firm losing business.

Those with the most to lose from a departure – mainly those at the partnership level – will be facing difficult decisions about whether to leave money on the table if they exit.

But, as the Credit Suisse sale to UBS has shown, there are hard decisions to be made about whether to be first out the door at a troubled firm, or wait it out with no guarantee of a job at the end of the process.

At the very least, those partners remaining have already been told that total revenues will be 20 per cent less next financial year as a result of the spin-off of government business which will reduce total expected income.

But the reality could be incomes will be down much more than that as the economy slows significantly, deal making and activity falls off and private sector clients decide to take a more critical view of their ties with the firm.

Labor Senator Deborah O'Neill has been pursuing PwC during parliamentary committee hearings.

PwC has been a favourite of governments state and federal to use for consultancies.

Its involvement in both government and private consulting work has had its synergies giving it extensive knowledge of some sectors.

Federal government departments are now taking a closer look at the potential for conflicts of interest in existing contracts with PwC.

As Labor Senator Deborah O’Neill told The Australian, more scrutiny needed to occur in other areas of PwC’s current business with government and not just its past dealings with the Australian Taxation Office which are at the root of its current problem.

She said PwC was currently advising the federal Department of Health and Aged Care on future pricing for residential aged care from July 2024 while also “putting out for work to the private sector” on how to price aged-care services.

“There is inherent conflict of interest,” she said.

This raises another question: how much might the loss of government consulting business affect PwC’s strength in private sector consulting in overlapping areas like health and infrastructure.

O’Neill argues that all partners at PwC benefited from firm-wide activities such as the fees it earned from its multinational tax advice, which means there needs to be much broader acceptance of responsibility for potential conflicts of interest in how the once thriving business has been run.

“At the moment the currency of trust around this whole sector is in freefall,” she said.

“Where will it land; who knows?”

She said there was immediate demand for far greater scrutiny of consulting firms and their ties with government.

She is also determined to see the spotlight put on the role of international arms of PwC in the tax leak scandal.

PwC’s name is on the nose and a concerted effort is being made to resolve that.

PwC’s leadership has its work cut out for it to stem the bleeding.

The incoming chief executive, British-born PwC veteran and currently Singapore-based Kevin Burrowes, can market himself as a cleanskin but he will not get an easy run from politicians who are baying for a lot more PwC blood to be let.

A PwC partner for 19 years, Burrowes has been in Sydney in recent days having informal chats with the leadership team but must still await approval of his visa before he can take the reins.

PwC will hope this is weeks rather than months.

Burrowes is not doing any media at the moment. In the past he has been positively chatty, making regular LinkedIn postings.

His current role has led to him doing “K. Burrowes mini videos” updating staff and contacts on topics of the day. Facing the camera, dressed in Singapore casual, he delivers friendly, avuncular fireside chats about issues such as the importance of trust in business and PwC’s future strategy.

Along the way his observations have included how Singaporeans love their lunches the while hardworking British are forced to grab a soup or a sandwich at their desks, or how important it is for business leaders and companies to be trusted.

Burrowes finished off one of the mini-videos made in Singapore by cheerfully telling his listeners he was going off to lunch.

All indications are that his next assignment will not be anywhere near as pleasant as his time in the island nation.

Whether his experience and approach is enough to prevent the firm from a more serious implosion is far from clear at this point.