New Zealander Bernard Lagan is the Australian correspondent for the Times, London.
OPINION: Years ago, when I wrote for the Sydney Morning Herald, the rattled chiefs of that publishing empire called in global consultants McKinsey. The emerging internet threatened readers and advertising. The McKinsey chaps hung blank paper on the Herald’s newsroom walls and called for ideas.
The ones they most earnestly scribbled out involved cost-cutting – rather than more adaptive journalism from the paper’s writers, reclassified as “content providers” by our Fairfax publishing chief executive, himself a former McKinsey boss.
He later left with a A$4.5 million payout. Fairfax lost much of its advertising to more agile internet start-ups – eventually shedding 1900 jobs. Before the chief executive walked, I was marched out, having hacked his email because I was worried about where he was leading us. It wasn’t hard, the ex-McKinsey chief’s password was, er, password.
Though I regretted my actions, big-name consultants, I learnt, are capable of lapses.
Cunning maybe – and, as a scandal rocking corporate Australia reveals, some cheat.
PricewaterhouseCoopers (PwC) is among The Big Four of the globe’s largest professional services networks, organisations that peddle accounting, tax advice, legal and other services to corporations.
PwC’s Sydney headquarters are in harbourside offices from where the firm oversees its 800 Australian partners who last year had “target incomes” of between A$340,000 and $3.7 million.
Its Australian website reminds readers: “We are committed to strong governance, oversight and accountability, with a clear tone from the top on the behaviour we expect from our people.”
Here’s the reality: a cache of PwC internal emails released in early May by the Australian parliament shows how the firm cheated itself into millions in fees by advising global tech companies how to sidestep the country’s new multinational tax-avoidance laws.
How did it gain the inside running to be able to offer Apple, Google and Microsoft the tax-avoidance workaround within hours of the multinational tax clampdown?
Because Peter Collins, PwC’s former international tax leader, shared within his firm the secret information he’d been given in confidence about the tax plans while advising the government on tax matters – despite having signed strict confidentiality agreements. He told his colleagues to refer to his revelations about the plans as gossip and rumour.
PwC Australia chief executive Tom Seymour announced early in May he was stepping down, days after admitting he was also linked to the scandal as one of dozens of partners in on the emails.
It’s taken years for the whole story to emerge – thanks in large part to the efforts of a dogged Australian Labor Party senator, Deborah O’Neill, a former high school teacher whose pursuit of PwC is largely responsible for uncovering the emails.
The blowback is huge and may see PwC lose its lucrative government contracts, worth a reported A$537 million in the past two years alone.
There is fresh scrutiny of the consulting industry, which successive governments have used to replace armies of public servants. The previous Morrison government in its last year spent nearly A$21 billion on consultants and outsourced services.
The scandal has also given weight to the London-based economics professor, Mariana Mazzucato, whose views featured in the Listener’s recent cover story (“Bees & honey”, May 13) on consultant spending by Wellington.
In her new book, The Big Con, Mazzucato argues that dumbed-downed governments should slash consultants and instead hire more skilled public servants.
It’s a message not lost on former economics professor Andrew Leigh, now Australia’s Assistant Minister for Treasury. He’s just announced funding for public servants to begin to reclaim their evaluation capacity, saving on consultants.
PwC Australia shows why.
