PwC Advocates for Regulatory Flexibility to Enhance Board Independence Amid Governance Reforms

PwC, a leading member of the Big Four accounting firms, is appealing to global audit regulators to reconsider strict conflict-of-interest rules, aiming to streamline the recruitment of independent board members. This initiative follows a governance shake-up by PwC in response to a scandal involving its Australian business. The firm is committed to installing an independent chair to oversee its Australian operations and is actively seeking to diversify its global board with external members. However, challenges arise in finding experienced candidates who are unconnected to the firm's audit clients or willing to limit other commitments to adhere to independence rules.

Bob Moritz, PwC's global chair, underscores the advantages of integrating independent voices into board discussions, emphasizing the broadening of debates and the resultant improvement in board performance. The unique governance structures of the Big Four, organized as networks of locally-owned partnerships, introduce complexities as governance arrangements vary by country. While certain national audit regulators mandate independent board members, negotiations for easing recruitment hurdles will need to be conducted individually with regulators due to the national-level setting of regulations.

Under Moritz's leadership for the past six years, PwC's global leadership has actively encouraged local partnerships to augment the use of independent board members. The firm also maintains a global-level governance board tasked with overseeing strategy and major decisions, featuring reserved seats for outside members. In September, PwC Australia announced plans to add three independent members, including a new chair, to its local board following a scathing report on the firm's culture and management. The report was commissioned in the wake of revelations about a partner sharing tax policy secrets acquired from advising the Australian government.

PwC presented its governance improvement plans in Australia to audit regulators globally on November 27 during a session coordinated by the International Forum of Independent Audit Regulators. While negotiations for flexibility in recruiting independent board members may need to proceed on a national level, PwC remains committed to engaging with stakeholders, including investors, academics, and regulators, to foster an increased presence of external voices in its boardrooms.

By fLEXI tEAM