The scandal engulfing PwC in Australia has the potential to destroy the Australian business.

It is reported, and PwC has all but admitted the facts, that PwC took confidential data from its client, the Australian Tax Office, and shared that with other clients as a means of gaining advantage to avoid tax. The shock and horror in the Australian business community and political sector has been understandable.

Could there have been such a breach of client confidentiality, moral standards, ethics and possibly the law in recent memory by any other business in Australia?

The tawdry affair goes back to 2016. It has taken seven years to emerge into the public sphere.

PwC’s website says this in the About Us section:

That could be the most subtle display of irony yet seen on a corporate website. It was certainly an unexpected way to solve a client’s problem – use confidential data from the Tax Office and figure out how to avoid tax. Unexpected to the rest of us, that is, but not unexpected to the senior leadership of PwC. Having spent decades in and around professional service firms, I know a bit about how they operate. To my mind, there is no chance that this behaviour was limited to a few ‘bad apples’ and no chance that the senior leaders did not know what was going on – it can only have been deliberate action, done with intent. The senior leaders would have known about this.

Clients will not readily tolerate continued association with PwC after this scandal. As contracts are up for renewal, PwC may not even be invited to re-tender. Business will be very tough to find.

The losers are firstly the Australian taxpayers, to the extent tax was genuinely reduced through nefarious means. Secondly, middle ranking PwC staff are losers. The older PwC executives will disappear into retirement. They have made their money. The young ones will easily find new jobs with other firms. For middle level PwC staff, they can’t retire, but nor is it easy to find a new broadly equivalent role at a new firm. They will have spent 10 to 15 years building their credentials, building client relationships, carving out an area of expertise and earning good money. They may be able to find new roles but it will be slower than for the juniors. The hard work they have put in to building a career at PwC will have been shredded. They will be an angry lot, with justification.

This also raises the question of international contagion. PwC is a bit like a federation. The Australian arm, if it adversely affects the reputation and business of PwC businesses in the rest of the world, may find itself unpopular with the other members of the federation. ‘Cauterise the wound quickly’ could be the attitude of senior leaders elsewhere in the world.

Scandals in professional service firms are interesting when compared against scandals in other businesses. This is because professional service firms have no capital other than reputation. Surviving a scandal is more difficult than for many other businesses. There is no inventory, no patent, no special technology that cannot be replicated, no assets to salvage. The monthly costs are salaries, bonuses and office rent and they are paid for by last month’s invoices. Clients can change suppliers with surprising ease given sufficient motivation. I think we are seeing a lot of motivation right now. If that translates to action, the business is suddenly no more.