Deloitte to appoint independent directors in governance shake-up

Deloitte Australia will soon search for independent directors as the audit and consulting firm moves to shake up its governance arrangements ahead of a report into the industry.

Outgoing Deloitte Australia chairman Tom Imbesi said the firm will add new independent directors to its board. Picture: Martin Ollman/NCA NewsWire

Deloitte Australia will front-run expected Senate demands to reform its leadership, with the audit and consulting firm to add several new independent directors to its board in a governance shake-up.

The firm told its partners on Thursday it would add the new board roles, with outgoing chair Tom Imbesi revealing the plans to expand Deloitte’s leadership in the wake of the 2024 board elections.

Deloitte’s more than 500 equity partners will go to the vote to decide on the firm’s new leadership in June.

Mr Imbesi said Deloitte would appoint two or three new directors came after a survey of partners “who expressed broad support” for the move.

“Independent board members are permitted by the Deloitte partnership agreement and we believe this is an appropriate time to evolve our firm’s governance in line with the expectations of our partners and external stakeholders,” he said.

The Deloitte chair, who will be replaced in the role by John Greig in May, said the firm’s moves to appoint new independent directors would mark a return to the governance structure.

Deloitte Australia boasted a handful of independent directors a decade ago.

Mr Imbesi told The Australian the move was “encouraged” by the “last 18 months of focus on the profession”, noting it would take the size of the board to as many as 13 directors.

“That’s sharpened our partners and our board’s focus, that we need to stay ahead of the curve and present the best possible governance model,” he said.

“That doesn’t just include independent board directors, but a board that has all the right powers.”

Mr Imbesi said the aim was to bring “a more diverse view” into board meetings.

He said Deloitte moved away from its previous independent directors as the firm “felt it wasn’t necessary”, but he noted the environment had now changed.

“I think there’s an expectation by our external stakeholders and our business that we will continue to evolve our governance practice,” he said.

“We have what we consider the best possible governance processes in place. Introducing independent board members is one step towards evolving those processes.”

Deloitte and the broader professional services sector has faced months of scrutiny as multiple parliamentary probes as well as government inquiries have subjected the industry to public ire.

PwC Australia has been at the forefront of public attention, with the firm facing multiple investigations into its conduct, in the wake of public revelations of its misuse of confidential government documents.

EY Oceania has also faced scrutiny after the firm conducted a review into workplace culture following the death of a staff member.

Mr Imbesi said he expected the Senate inquiries would come up with a number of recommendations and Deloitte was conscious of the likely outcomes in making its early move on the independent directors.

“We are open to increased transparency, we’re on record saying we’d consider a size threshold to partnerships beyond which there is increased disclosures,” he said.

“We’re on record for saying potentially any one over 100 partnerships could qualify as a large partnership and therefore fall into an increased disclosure category.”

Mr Imbesi said Deloitte was open to working with the Senate on what this disclosure “means”.

But Mr Imbesi said Deloitte was not considering an independent chair position for the firm.

“Our partners did come back to us through the recent conversation we’ve had with them and they did not see that as additive,” he said.

Mr Imbesi also said Deloitte would not seek to lock in the independent director positions in the firm’s partnership deed noting the agreement had “flexibility”, given it already allowed the independent roles.

“I don’t believe we will be changing the partnership agreement to enshrine the independent board members,” he said.

“Having said this, I believe that once we introduce independent board members I expect that they will be an ongoing feature of our governance practice.”

Mr Imbesi, who will mark the end of his seven-year term as chair at the end of May, said despite the number of public inquiries that Deloitte has faced, he did not expect the surge of scrutiny in the wake of the PwC scandal.

“Frankly seven years ago I did not see this coming at all,” he said.

“We do have an important role in the capital markets system, so scrutiny in of itself is not new or a concern.

“We should be open and accepting of that scrutiny. The nature of this inquiry prompted obviously by the challenges of PwC leadership around the tax confidentiality breach was one we did not anticipate.”

Originally published as Deloitte to appoint independent directors in governance shake-up