Widespread fear of retaliation for speaking up at KPMG

Consultancy firm Principa Advisory has compiled a report on its investigations of KPMG Australia and a retrospective review of the scandal-plagued accounting firm’s culture and whistleblowing system.

It found that across its fieldwork, ethical culture index survey (ECIS) results, and historical KPMG survey data, employees underscored fears that raising issues could result in retaliation of some form, and challenge could result in meaningful professional risk.

Participants in the investigation revealed a persistent perception that speaking up could carry costs, particularly where concerns involve individuals with influence over work, progression, or reputation.

The findings correlate with allegations made by a whistleblower about misconduct at KPMG Australia, including breaches of independence, the misuse of confidential information, and alleged mistreatment of the whistleblower.

During walk-in interviews, Principa said it heard recurring reports of adverse consequences that were perceived to be the result of speaking up. These include impacts on performance processes, reduced access to work, diminished progression opportunities, reputational harm, and deterioration in workplace relationships.

Some participants reported observing colleagues who had become professionally isolated, moved teams, or left roles after raising concerns.

While Principa said it was not able to establish whether retaliation did in fact occur in these cases, the reports by the participants showed that the perception is rife that flagging concerns in the firm could result in subsequent disadvantage.

“These related experiences contributed to wider expectations about the potential cost of speaking up,” the report said.

Employees reported experiencing more informal or discretionary consequences like reduced sponsorship, work allocation, client exposure, influence, reputation, and workplace relationships rather than formal employment actions like dismissal, disciplinary action, remuneration, or promotion decisions.

“This distinction between formal and informal consequences is important because it appears that the anticipated consequences employees fear arise through informal and relationship-based processes rather than easily identifiable employment decisions. This makes it difficult for either the individual or the firm to establish conclusive evidence of retaliation,” the report said.

The report was released by KPMG after it engaged Principa to undertake its independent review on the ethics and culture at KPMG as part of its action plan commitments. It includes a set of recommendations for KPMG to address the concerns and failings addressed in the report.

KPMG Australia CEO John Sams and chairman Michael Ebeid said the firm is publishing the report “as part of our ongoing commitment to transparency and to hold ourselves to account”.

Some qualitative evidence found that some people reported that increasing commercial pressure posed greater difficulty in challenging or escalating concerns, particularly where commercially important clients were involved.

While some accounts described leaders welcoming challenges and ethical or professional considerations as a priority, others said raising concerns carried greater risk if it would delay important engagement or jeopardise revenue.

Reports of cheating, pressure from partners

While KPMG policy states that all project time allocations must be accurately recorded, Principa said they heard recurring feedback about team members under-reporting actual time worked) in relation to internal performance metrics rather than incorrect or inappropriate billing of clients) often due to explicit or implicit pressure from partners or team members, according to the report.

Moreover, there was a perception that partners or others took credit internally for winning client projects to increase their sales metrics when their role may have been smaller than that recorded on the internal client management system.

Alongside this, the report found that there was a genuine lack of clarity on “how to draw and apply red lines” and where the line of acceptable behaviour should lie around the sharing of confidential information.

“Clearly some of this uncertainty is retrospective with the benefit of hindsight and has been triggered by the firm's people reflecting on the whistleblower incident,” the report said.

“However, many participants observed that the unclarity about where redlines lie in relation to internal information sharing had predated current issues.”

Recommendations

The report makes 14 recommendations, including reforming the National Governance Board to enable effective and sufficiently independent oversight and challenge, and undertaking a leadership reset that entails developing a clear ethical vision linked to long-term success of the firm.

It recommended improving organisation-wide processes to learn from near misses and significant failures, including oversight by the board, and reviewing the learning and development architecture to promote principles-based ethical decision-making and exercise of strong professional judgement.

It also recommended improving transparency on consequences for misconduct and lessons learned without compromising confidentiality or procedural fairness.

Sams and Ebeid said KPMG Australia accepts all 26 findings and 14 recommendations contained in the Principia report and would act on all recommendations. He added that the firm would update its action plan to reflect the recommendations.

“The progressive updates we make to our Action Plan will also consider the interdependencies between the findings and suggested improvements across the other third-party reviews completed and underway,” he said.

Sams noted that Principia found that the majority of KPMG employees are “committed to acting with ethics and integrity”.

Indeed, the report said “KPMG people consistently express a desire to do the right thing, and to work in a firm that values and supports ethical integrity. Close relationships and collaborative norms sometimes inhibit candour and critical challenge”.

“KPMG people consistently express a desire to do the right thing, and to work in a firm that values and supports ethical integrity. Close relationships and collaborative norms can sometimes inhibit candour and critical challenge.”

The alleged audit misconduct scandal claimed the scalps of several senior executives including former CEO Andrew Yates and former chairman Martin Sheppard.

Principa spoke to almost 500 KPMG partners and staff for this review, received survey input from nearly 3,400 of its people, reviewed 176 documents, and undertook a review of 14 randomly selected cases from its whistleblower hotline.