Tuesdata: How poor communications turned PwC’s PR disaster into an extinction level event
Welcome to Tuesdata, our weekly analysis for Unmade’s paying members.
Below, we examine the PwC Australia tax leak scandal from a crisis communications perspective. Further down we cover that rarest of things: a day where Southern Cross Austereo was the best performer on the Unmade Index.
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Can PwC survive its tax scandal?
There have been few corporate PR disasters worse than the self-inflicted crisis engulfing consultancy PwC. From one of the most trusted advisory and accounting brands in the country, it is now questionable whether the company will even survive.
The PwC scandal exploded in February when it emerged that the company cynically used confidential information gleaned in consultations with the government about tightening up tax laws to help its multinational clients dodge those new rules.
Given the magnitude of the misbehaviour, the company was in grave danger once information about its activities from 2014 to 2017 began to emerge, via revelations in the Australian Financial Review.
The data makes clear how much trouble PwC is in.
Google Trends show that the public began to take notice when media coverage ramped up once questions began to be asked in Parliament at the end of April.
For a business brand like PwC to become a household name underlines how off course the brand has gone.
It should also be noted that many of the PR monitoring services who usually provide media with data on this type of event declined to participate, citing client conflict. Most provide services to either PwC or to the government, and want to stay as far away from the fallout as possible.
Experts on crisis communications say that PwC’s poor handling of the situation over the last three months has been a text book example of what not to do.
This week it emerged that Sue Cato, one of Australia’s best known and reputably most expensive spinners, has belatedly been called in. As the AFR puts it, Cato’s role will be “to limit more damage to the careers of PwC’s tax partners and do whatever it takes to stop the public from knowing who exactly knew about the scheme to sell out Australian taxpayers on behalf of American tech giants”. She declined Unmade’s invitation to comment.
The existential question is this: Could a change of communications strategy yet alter PWC’s seemingly terminal trajectory? And what are the lessons so far?
First, and most obviously, don’t be the sort of organisation that takes confidential information from your biggest client and weaponises it against them in the first place.
As Clare Gleghorn, managing director of corporate affairs consultancy Bastion Reputation, puts it: “Any organisation facing intense public scrutiny or criticism of its behaviour, practices, or actions, must first fully comprehend why there is such a response in the first place. That is, understanding what exactly has gone wrong, has been unethical, or that failed to meet public, legal, or ethical standards. Reputation should never be the objective, it’s an outcome. Until leaders of an organisation genuinely understand and then fix the core issue, there will always be a trust gap.”
Crisis comms veteran Tim Allerton, managing director of City Public Relations, who has spun for everyone from Kerry Stokes to Justin Hemes and even Kerry Packer, suggests that PwC has moved too slowly, and been seen to only share information when forced to do so.
“They need to have complete transparency at this stage as to who was involved. With this independent report being prepared, the whole report needs to be provided to the public, instead of a summary as they’ve suggested they might do,” Allerton says.
That PwC-commissioned report, due in September, is being led by Former Telstra CEO Ziggy Switkowski, and PwC has since committed to releasing the full document – but only after an outcry at its plan to release only a summary.
Allerton adds that it’s critical for PwC to explain the matter publicly in a ‘very factual, simplistic way’ – implying that corporate doublespeak won’t fly when a scandal has reached this level of national attention.
“PwC was so slow to respond because they thought it’d go away. They thought they could provide a minimal amount of detail and it’d just blow over,” Allerton says.
“They were hoping the story would fade away, instead of accepting the fact this very serious matter could affect their reputation.”
The former chief executive of Ogilvy PR Australia and crisis comms veteran Chris Savage warns against commentating of PwC’s strategy as it’s impossible for those outside to understand all the factors at play. “Unless you’re in the boiler room of the crisis, it’s not legitimate to say what they should or shouldn’t do. Every crisis and circumstance is different,” Savage says.
Sometimes legal caution can get in the way of getting on the front foot with communications. Says Savage: “This has been fast evolving, you don’t know what their legal advice was at the time – and very often, the decisions made in a crisis are based on legal advice. You’re restricted from doing what might be best from a reputation point of view by legal advice and other considerations.”
So what should PwC do next?
Allerton suggests: “A proper press conference where they lay the whole thing out and answer all the questions would be one way to go. Obviously, follow that up with other briefings when the independent report comes out. Rather than just putting out statements, they need to definitely be facing up to journalists and answering all the questions.”
He adds: “Some of [the partners] are still in denial. They need to embrace the fact they’ve been caught and need to be fully transparent about the situation now and the way they plan to fix it.”
PwC has been awarded more than $537 million in Commonwealth contracts in the past two years alone, making up about 20% of its annual revenue.
PR strategist Danica Bunch warns that the scandal will have knock-on effects for the other Big Four consultancies Deloitte, EY and KPMG. “The PwC crisis could create the perception that the Big Four accounting firms share similar issues that put client information at risk. With this view, stakeholders lose confidence in the industry as a whole.”
But can PwC be saved? Allerton pauses before answering: “It can be fixed, but it needs some decisive actions from the top and the partners need to get on board with the rectification program.”
“They need to be proactive about sharing information, and need a proper plan of attack to remedy the situation going forward. This could go on for a couple of years.”
“It’ll be a long way back for them.”
SCA leads the Unmade Index
The green streak continued on the Unmade Index, our measurement of the performance of ASX-listed media and marketing stocks. It rose 1.12% yesterday to land at 645 points.
The three biggest companies on the Index saw favourable movements in their share price. Nine rose 1.80%, Domain 0.85% and Ooh Media 0.40%.
The biggest winner of the day on the Index, however, was Southern Cross Media, which saw a 2.74% rise.
Seven West Media fell 1.25%, while The Market Herald had the wrost day, falling by 3.03%.
That’s all for today. Thanks for supporting us through your membership.
We’ll be back with more tomorrow.
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