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The CEO of one of Australia's major consulting firms has admitted to a Senate committee his position is not worthy of a salary seven times that of the prime minister's.
Key points:
- Deloitte would not tell a Senate committee how many of its partners earn more than $1 million
- Only one of 121 internal misconduct complaints at Deloitte this year was referred to a regulator
- Leading economist Allan Fels says legislation is required for consultancy firms to avoid conflict of interest
Four executives from Deloitte fronted a Monday public hearing into the integrity of consulting firms that provide services to the federal government.
The inquiry was launched in response to what has become known as the "PwC tax scandal", which involved senior partners misusing confidential government information to help big multinational companies avoid paying more tax.
In Deloitte's first appearance before the committee, the top brass were slammed by both senators Deborah O'Neill and Barbara Pocock for being opaque about salaries and employee misconduct.
The committee asked for an anonymised breakdown of how many Deloitte employees earned more than $1 million but chairman Tom Imbesi said that could not be provided due to commercial sensitivities.
"So, providing the number of people in million-dollar bands is something you're not comfortable giving to the Australian public given that last year you took $712 million of public money?" Senator Pocock said.
Eventually, CEO Adam Powick told the hearing the average base salary of a partner at Deloitte was between $500,000 and $600,000.
It has been publicly reported Mr Powick earns around $3.5 million, which Senator O'Neill went on to grill him about.
"Are you really worth seven times the salary of the Australian prime minister?" she asked.
"No," he answered.
"I happen to deeply recognise that I'm incredibly privileged to earn what I do for what I do."
Earlier in the day, Alan Fels, leading economist and former chair of the Australian Competition and Consumer Commission (ACCC), told the inquiry that governments had become too dependent on the major consulting firms, which meant they paid whatever the asking price was.
He said there would be far more value in "lower-paid public servants", noting there had been a total loss of public confidence in the "big four".
The federal government has already committed to slashing its external consultancy spend by $2 billion by using more in-house teams, with seven consultant jobs advertised by the Department of Prime Minister and Cabinet last Friday.
Professor Fels said legislation was needed to force a "break-up" between the auditing and consulting arms of the major firms so information was not compromised.
He said PwC had shown how easy this was when it sold off its government consulting arm to equity firm Allegro last month.
Professor Fels also said an independent regulator was needed because the laws governing the industry were "totally ineffective" and could be "safely disregarded".
Dismissals not made public
The Deloitte executives were also grilled about how they handled staff complaints, with 121 substantiated complaints made this year already.
Of those, 40 per cent related to bullying, 22 per cent to sexual harassment, 12 per cent to discrimination and 10 per cent to the misuse of confidential information, Senator Pocock said.
Deloitte's chief risk officer Sneza Pelusi said only one of those complaints, an alleged case of fraud, was referred to ASIC and the relevant professional body, in this case, the Australian Restructuring Insolvency and Turnaround Association (ARITA).
"What about the other 120?" Senator O'Neill asked.
"Our assessment of the others did not fit within the reportable framework of any of the professional bodies," Ms Pelusi answered.
Ms Pelusi said some partners had been dismissed as a result of complaints but did not say how many.
Senator O'Neill questioned why these dismissals had not been made public, expressing concern the former employees would "stay in the ecosystem" and be hired by another consulting firm or the public sector.
She compared it to the Catholic Church’s practice of moving a priest accused of misconduct from one parish to another.
Mr Powick said some of the misconduct didn't reach a level Deloitte believed was worthy of public disclosure but accepted there were not clear "mechanisms" in place to deal with this situation.
"I do think it needs to be a pretty high bar for public naming and that's something we should work through."
Mr Powick said he would consider Ms O'Neill's requests to provide more information to the committee after she attacked Deloitte for hiding information under the guise of "commercial in confidence".
"You've had the opportunity to come before this committee and put this on the public record … PwC actually did better than you and put evidence out there," she said.
"I urge you to reconsider your submission in the interests of your own reputation and the national interest."
Mr Imbesi told the hearing Deloitte would support a government review on regulation of the sector.
He suggested conflict of interest and confidentiality requirements could be reviewed annually but said Deloitte had no intention to "ring fence" any part of their business operations.