In an effort to strengthen corporate governance in the wake of an Australian scandal at its Big Four accounting firm, PwC is requesting that audit authorities worldwide review their stringent guidelines about conflicts of interest in order to let the company to appoint more independent board members.
A Financial Times story claims that the company is attempting to increase the number of outside board members it recruits globally and has committed to appointing an independent chair to manage its Australian operations.
Finding qualified applicants, however, who are not connected to the firm’s audit clients or who are willing to limit their other engagements in order to adhere to independence criteria, is proving to be difficult.
“By adding independent, external voices to our boardroom discussions, it not only makes debate less insular but ultimately enhances the performance of the boards themselves,” PwC global chair Bob Moritz told the Financial Times.
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“Given some of the structural complexities and the varying regulatory requirements on a country-by-country basis, our industry faces some inherent challenges in bringing in a sufficient number of qualified independent candidates,” Moritz added.
The report noted that, unlike public companies that are typically expected to have a board that includes a majority of independent directors, the Big Four firms are structured as a network of locally-owned partnerships with governance arrangements that vary from country to country.
Only some national audit regulators demand any independent board members at all, but those that do typically require them to be unaffiliated with any of a firm’s clients.
Under Moritz, PwC’s global leadership has for the past six years encouraged its local partnerships to increase their use of independent board members.
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The firm also has a governance board at the global level that is responsible for overseeing strategy and major investment decisions, where two seats out of 20 are reserved for outside members — although only one of the two is currently filled.
In September, PwC’s Australian business said it would hire three independent members to its local board, including a new chair, after a damning report into the culture and management of the firm.
The report was commissioned after revelations that a partner had shared tax policy secrets gleaned from his work advising the Australian government.
PwC discussed its plans for improving governance in Australia on a call with audit regulators from around the world on November 27.
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The event, coordinated by the International Forum of Independent Audit Regulators, was a “factual information session”, according to IFIAR executive director Carl Renner.
Negotiations on making it easier to recruit independent board members will have to be conducted with IFIAR members individually, however, Renner said, as regulations are set on a national level.
“One of the things we’re raising with some of the regulators is to look at those rules country by country?” Moritz told the FT.
“PwC is committed to engaging with our stakeholders, including investors, academics, and regulators, to seek ideas that lead to an increased presence of outside voices in our boardrooms,” he added. “We continue to believe this is very doable.”
