PwC’s bigger scandal was failure started at the very top

Efforts to send eight partners packing at the big four accounting firm have also uncovered some uncomfortable truths.

PwC has sent eight partners packing following an internal investigation. Picture: NCA NewsWire/Damian Shaw

It was a weekend of long knives inside PwC with eight top partners formally given their marching orders and more are likely to follow at the battered accounting firm. That means more than 50 other partners and staff who were implicated in emails with highly explosive information around a corporate tax avoidance will be breathing a sigh of relief.

So far nearly half of PwC’s top executive team including former chief executive Tom Seymour and former chairman Peter van Dongen are being forced out after being embroiled in a damaging tax scandal that has set off shockwaves right through the big four accounting firm.

It also clears the way for a long-promised cultural overhaul set to get underway under the watch of global PwC partners with Singapore-based PwC partner Kevin Burrowes last week named to take charge of the Australian firm.

Former PwC Australia CEO Tom Seymour is being forced out. Picture: Floss Adams.

Confirmation of partners being cut is a sign of much bigger problems at PwC. Two of the most senior names – Seymour and Van Dongen – were deemed by an internal investigation to have shown a failure of leadership and governance while also falling short on culture and accountability. These are not mid-level managers, these leaders were expected to set the tone for PwC’s 9000 strong staffers and 860 partners.

Efforts to dismiss the two will also test PwC’s secretive partnership agreement, which depending on the official cause for exit could still offer lucrative payments for years to come. Seymour had been at the firm for 21 years, while Van Dongen was also a longstanding member of PwC’s executive board.

The exits of Seymour and Van Dongen as well as former Australian corporate tax partner Wayne Plummer and former head of R&D tax Richard Gregg are still being negotiated under the PwC partnership agreement.

Others among the eight partners cut from PwC over the weekend include the powerful financial services boss Peter Calleja, whose unit oversees hundreds of staff.

These dismissals followed PwC’s in-house investigation into the affair led by an external law firm. This probe was narrowly aimed around immediate damage control looking at who was a party to the sharing and possible misuse of confidential corporate tax proposals obtained by disgraced former PwC partner Peter Collins.

The results of this probe – which has also looked at the nearly 60 names sent or copied in on the confidential information – will be kept under wraps so the broader public will simply have to trust PwC is now doing the right thing. Again this comes after years of stalling inside PwC by the very top leadership. PwC has continued to maintain that the majority of those who received the Collins emails are neither responsible for, nor were knowingly involved in any confidentiality breach. Even so, there has been a collective failure of governance at the firm on a monumental scale where no one was prepared to speak up.

Still to come is a broader probe into accountability and culture led by Ziggy Switkowski. This report is due to be finalised by September and some of this will be made public.

All this comes as the PwC affair has emerged as one of more than 40 referrals to Canberra’s new anti-corruption commission. The referral was made by South Australian Greens Senator Barbara Pocock. While this will make for a great political sideshow – indeed it already has – it is a bridge too far for now. Instead, a federal police investigation currently underway should be first left to run its course.

Telstra’s space age

At the global telco industry’s flagship conference in Barcelona earlier this year, there were two major developments for Telstra.

First was a keynote speech by Vicki Brady, where the new Telstra CEO spoke about the need for much greater collaboration across the industry to get a better outcome for customers. The second was happening outside Brady’s speech at the vast exhibition halls of the Mobile World Congress – the rise of satellite technology.

Telstra’s new CEO Vicki Brady has said telcos need to get used to the idea they can’t control end-to-end network technology. Picture: Luis Ascui/NCA NewsWire

Indeed, excitement around satellites pushed smartphones aside at the Barcelona conference, with the technology seen as the next hottest thing.

Long-regarded as a niche solution far too expensive and clunky to put it out of reach of most customers, new low earth orbit (LEO) satellites and the technology with it are changing the telco game for mobile users, particularly in regional areas.

Now, just months later, Telstra has struck a deal with Elon Musk’s satellite company Starlink (a unit of SpaceX) which will see the Australian telco become the first operator to offer voice plus broadband using LEO satellites for mobile users in regional Australia.

Satellite mobile communications technology has been around for decades, but one of the benefits of LEO satellites – which measure a little more and one metre in length and height – is that they orbit much closer to Earth. This allows them to send and receive signals at a faster rate to conventional but more powerful GEO satellites. Their size too mean that more can be deployed at a lower cost. There are several players now working up the LEO space from Lynk to OneWeb, but the view is once Musk gets involved in a project, despite all of the Tesla billionaire’s emotional baggage, things get moving quickly.

Starlink has come under focus for providing internet to the Ukraine military and residents in war-torn areas of the country which no mobile phone network.

Telstra’s Brady had been eyeing LEO technology as a way to bring satellite coverage for voice and broadband more consistently into Telstra’s network mix under the T25 plan that was developed by both her and former boss Andy Penn.

It is now that LEO satellites offer the potential for high-quality voice and fast data services to residential customers in regional and rural Australia as a possible future replacement for ageing copper-based ADSL technology. It also provides a benefit because it reduces the need to build and maintain a costly mobile tower network across regional Australia.

The technology has moved rapidly even from the point that just two years ago former Telstra boss Penn didn’t regard satellite technology as a suitable replacement for mobile, although he acknowledged that it may ultimately provide greater capacity.

The biggest problems with satellite coverage so far has been the Doppler shift – that is, the satellite or mobile tower is moving rapidly relative to you. While the extended range represents a time delay compared to terrestrial networks.

Instead of being 20km from your tower, you are hundreds of kilometres, but satellite operators are developing the technology to overcome both problems. LEO technology relies on local spectrum, so it also means users don’t need a different handset. They can bring their iPhone to a Samsung to connect to the satellite network.

Telstra is looking at new technology across its network. Picture: NCA NewsWire / Luis Enrique Ascui

Brady, who is approaching one year in the role, said in her Barcelona speech the time had come for network operators to have a different mindset: Greater collaboration was needed to provide a better service for mobile customers. For Telstra this was significant as it meant that the industry needed to get comfortable with not controlling the end-to-end infrastructure. Essentially Telstra needed to stop thinking that it had to own all the infrastructure to provide communication services.

Speaking at the same conference was Lynk co-founder Margo Deckard who described LEO satellite technology as essentially building mobile towers in space.

“Telco partners bring the spectrum and we bring the infrastructure to fill in their coverage gaps, extend their coverage or provide or provide their network resilience when they lose it for whatever reason.”

Lynk is eyeing seamless broadband services on offer around the world by 2025 and OneWeb, another operator, is rolling out wholesale telco services to Australia from next year.

The roll out of LEO satellite technology as a viable alternative could also have big implications for the now stalled Telstra and TPG/Vodafone mobile tower sharing deal. The technology still relies on the allocation of spectrum for use on the ground. Here TPG is spectrum rich but infrastructure poor. This could provide it an option in remote and rural Australia without the need for mobile towers. However, it’s a case of whether TPG’s customers are prepared to wait for the technology to become a reality.

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Originally published as PwC’s bigger scandal was failure started at the very top