Monday, 29 May 2023

Open letter from PwC Australia acting chief executive Kristin Stubbins

I want to apologise on behalf of PwC Australia. For sharing confidential government tax policy information and for betraying the trust placed in us.

Specifically, I apologise to the community; to the Australian government for breaching your confidentiality; to our clients for any questions this may have raised about our integrity and trustworthiness; and to the 10,000 hard-working, values-driven PwC Australia partners and staff who have been unfairly impacted.

Although investigations are still underway, we know enough about what went wrong to acknowledge that this situation was completely unacceptable. No amount of words can make it right. But I am fully committed to taking all necessary actions to re-earn the trust of our stakeholders. And, as we work through this process, I am committed to being fully transparent.

Our previously announced investigation, supported by external counsel, is well underway and so I wanted to set out what we know so far, explain the steps we have taken and are committed to take, and address some of the questions that remain about what happened.

What happened

We failed in three ways.

First, there was a clear lack of respect for confidentiality.
A former PwC Australia tax partner, Peter Collins, breached confidentiality in connection with tax consultations with the Department of Treasury and the Board of Tax in which he participated. Contrary to the obligations he undertook with the government, as well as PwC policy and values, he shared information with certain PwC Australia personnel and a limited number of overseas PwC personnel.

Second, PwC Australia did not have adequate processes and governance in place.
There was poor decision making. The breach of confidentiality exposed weaknesses in our culture and processes. What is evident now, is that we failed to conduct an appropriate root cause investigation and thorough assessment of accountability for both the conduct at issue and the culture that allowed the underlying conduct to occur. That was the result of a failure of leadership and governance. This is deeply regrettable and has led us to where we are today.

Third, we had a culture at the time in our tax business that both allowed inappropriate behaviour and has not, until now, always properly held our leaders and those involved to account.
At the time this occurred, there was a culture of aggressive marketing in our tax business. Over a period, this aggressive behavior and drive for growth permeated certain parts of our leadership and allowed for profit to be placed over purpose. Our governance process failed to identify and keep this in check.

What we are doing about it

In 2021, PwC Australia commissioned a review of the effectiveness of our tax governance and internal control framework, which was conducted by former Australian Taxation Office (ATO) official Bruce Quigley. The ATO participated in this review and all recommendations were implemented, including prohibiting market facing partners from participating in confidential tax consultations.

However, it is clear, in hindsight, that PwC Australia did too little too late.

As we have commenced our broad investigation to determine root causes, we have taken the following actions over the last few weeks:

• Tom Seymour stood down as CEO on 8 May 2023;
• Two Executive Board members have stood down from their leadership positions;
• We commenced a comprehensive investigation, with the assistance of external counsel, into who may have shared or misused confidential information in connection with these matters;
• On 15 May 2023, we announced that Dr Ziggy Switkowski AO will lead an independent review of the firm’s governance, accountability and culture; and
• Tony O’Malley, a PwC partner and legal and governance expert, was appointed on 15 May as Chief Risk and Ethics Leader for PwC Australia. He will have responsibility for all aspects of risk and ethics at the firm and will help lead the implementation of the independent review’s findings.

My team and I are committed to taking any and all further action to enhance accountability, governance, and culture. To that end, we are announcing the following additional actions:

Accountability

• PwC Australia has directed 9 partners to go on leave, effective immediately, pending the outcome of our ongoing investigation. This includes members of the firm’s Executive Board and Governance Board.

Governance

• Two independent, non-executive directors will be appointed to PwC Australia’s Governance Board and this process is underway. External board members will bring independent, outside-in perspective and objectivity to the firm’s governance.
• In addition, the Chairs of the Governance Board and its designated risk committee have decided to step down from their respective roles. These decisions are in addition to the leadership actions already announced.
• PwC Australia has commenced a process to ringfence the provision of services to Federal Government Departments and Agencies to enhance our controls to prevent conflicts of interest. We are moving to quickly establish separate governance and oversight arrangements for the business by the end of September. It will cover all services to Federal Government Departments and Agencies, include people, operations and governance within its perimeter and be operationally ringfenced from other businesses within PwC Australia. The business will have a standalone Executive and Governance Board who will have the responsibility to consider the strategic options for the business. This will establish independence and enhance controls relating to confidentiality and conflicts. PwC will consult with the Australian government on these arrangements including timing and process.

Transparency

• After listening to our stakeholders, we will publish Dr Ziggy Switkowski’s report and recommendations, in full, at the conclusion of the Independent Review in September.

Correcting misunderstandings

There is no excuse for breaching confidentiality. However, I want to address two important points.

First, I fully understand and acknowledge the calls for PwC to release the names of the individuals in the emails released by the Senate on 2 May 2023. There has been an assumption by some that all those whose names have been redacted must necessarily be involved in wrongdoing. That is incorrect. Based on our ongoing investigation, we believe that the vast majority of the recipients of these emails are neither responsible for, nor were knowingly involved in any confidentiality breach. We have and will continue to take appropriate action against anyone who is found to have breached confidentiality or failed in their leadership duties.

Secondly, in relation to the breach of confidentiality, our clients were not involved in any wrongdoing and no confidential information was used to enable clients to pay less tax.

Let me close by again apologising for our breach of trust. I have worked at PwC for my whole career, and this has been personally and professionally devastating for me and my colleagues at PwC. I am fully committed to doing everything it takes to make the wrongs of our past right, and to re-earn your trust.

Yours sincerely,

Kristin Stubbins
Acting Chief Executive, PwC Australia