AARON PATRICK: KPMG’s corporate virtue signalling hid poor business culture

The abusive phone call came through when I was about to arrive at home after a day’s work. A top executive at the giant financial services firm KPMG had rung to express his anger over an article that revealed KPMG asked job applicants sensitive questions about their sexuality.

“Please select the identity below that best describes your gender,” KPMG had asked in an online job application form. “Do you have a trans or other gender diverse experience or history (including but not limited to Brotherboy/Sistergirl, Third Gender)? Do you have an Intersex variation?”

After a minute or two of verbal aggression that conveyed the message “how dare you write this about us”, the executive ended the call after briefly hearing out my mild-mannered defence of truthful reporting.

Although the conversation took place four years ago, KPMG’s approach to scrutiny is relevant today. The firm stands accused of a gross breach of trust, including misusing clients’ information, trying to fire a whistleblower who revealed the abuse and pretending it investigated the initial complaint when it didn’t.

While all the facts are not clear, many people might wonder: could the companies that try hardest to prove themselves virtuous be the ones with the most to hide?

Well paid

Many people might think of KPMG and its competitors as sleepy accounting firms. But they have turned themselves into lucrative partnerships with deep connections to the business elite and the senior ranks of the public service.

The average KPMG partner was paid $715,000 last year, almost seven times the Australian average wage. Many of the firm’s 9000 employees are more like management consultants or investment bankers than accountants.

Which is why financial services firms invest heavily in promoting themselves as morally superior organisations. In contemporary business culture, being seen as a corporate advocate for climate change policies, racial and sexual diversity, Indigenous rights and the environment — all causes championed by KPMG — can help win contracts just as much as providing professional service at a fair price.

As KPMG has discovered, decades of careful brand promotion can be undone by an egregious lie.

The firm has upheld three accusations made by an employee, whose name is not public, that it used confidential information from Lendlease and Optus to try to win contracts. Up to 35 other allegations are being investigated by a law firm and several regulators.

More clients, including Macquarie Group and Westpac Bank, may go public and condemn KPMG, according to a KPMG source.

More embarrassment

Just like lawyers, accountants and auditors are expected to respect their clients’ secrets. KPMG failed this basic morality test. Making the situation worse, KPMG executives made the whistleblower feel so upset that, after exhausting every internal option, he shared his complaints with a Labor senator, who turned unverified allegations into one of the worst moments in the firm’s history.

On Friday, most of the people involved, including lawyers, regulators, board members and KPMG chairman Martin Sheppard, appeared before a Senate inquiry to answer questions about what happened.

The most important person, the whistleblower, was not present, but the appearance of 38 other witnesses added to the sense of drama.

“These were not minor employment matters,” the now-former employee said in a letter to the committee.

“They involved conduct capable of affecting listed entities, audit processes, and confidence in the firm itself.”

The hearing provided further embarrassment for KPMG.

When chief executive Andrew Yates and audit managing partner Julian McPherson quit on May 29, taking responsibility for the whistleblower’s treatment, KPMG conceded that it did not handle the complaint seriously.

That may have been because the whistleblower’s planned relocation to Australia wasn’t going ahead, raising administrative problems.

When he continued to complain, a law firm was hired “to review the internal investigation,” KPMG said in the May 29 resignations press release.

“The external legal review supported the internal investigation.”

Back in 2024, when the complaints were made, the whistleblower was also told the law firm, Ashurst, “commenced an external investigation into your concerns”.

On Friday, Ashurst partner Jane Harvey was asked if that statement was true. “No, that was not correct,” she said.

Ashurst was hired to review a dispute over the whistleblower’s aborted move to Australia — not his complaint about confidentiality breaches.

So what could have been a dry dispute about auditing ethics that would have struggled to emerge from the business pages has morphed into a televised public scandal about public deception and whistleblower maltreatment.

One of KPMG’s slogans is “Exceptional client outcomes through work that matters”. Maybe if the firm spent less time pretending to be morally superior — and abusing critics — and concentrated on producing good accountants, auditors and financial advisers, it might have avoided the destruction of its reputation.