Inequality is led by corporations

Is the PwC tax scandal the tip of the corporate led inequality iceberg? Carl Rhodes writes.

Prime Minister Anthony Albanese called it “completely unacceptable”. Federal treasurer Jim Chalmers said he was “furious”. Senator Deborah O’Neill slammed their behaviour as “contemptuous”.

They were all talking about the giant consulting firm PricewaterhouseCoopers (PwC) who took confidential knowledge about government programs to combat corporate tax avoidance programs and sold them to corporate tax dodgers.

The scandal continues to escalate as awe grows at the brazen greed of a company that would sacrifice its integrity for a few extra bucks.

The penalties look to be severe. Rightly so. PwC’s Australian CEO lost the top job. The firm was referred to the Australian Federal Police. There is talk of jail time for the people involved. PwC has been virtually banned from taking on any new federal government contracts.

Aggressive selfishness

While PwC is facing public scrutiny, it is worth asking whether this is an isolated case of bad behaviour, or whether this is a single example of a much bigger problem — not just a problem in the consulting sector, but in the Australian corporate sector more generally?

Is it possible that, at the heart of what happened at PwC, is a widespread approach to business that has translated the profit motive into a valorisation of greed and selfishness? The Acting CEO of PwC, Kristin Stubbins, came close to admitting it in her written apology.

“There was a culture of aggressive marketing in our tax business. Over a period, this aggressive behaviour and drive for growth permeated certain parts of our leadership and allowed for profit to be placed over purpose.”

She got one thing right: the principal goal of business to pursue profit leads people to behave badly and seek personal gain at the expense of others. She got one thing wrong: instead of being an exception to the rule, aggressive profit seeking may well have become a central part of corporate cultures.

At the heart of the problem are the forcefully competitive corporate cultures that will do whatever it takes to maximise their profits, not caring who gets hurt along the way. We see it in PwC’s tax advice sell-off, we see it in the corporations who paid for that advice, and we see it more broadly in the corporate economy.

Winner takes all society

There is a wealth of evidence to support the claim that contemporary corporate attitudes to profit seeking are creating socially harmful outcomes. While corporations are increasingly aligning themselves with progressive social causes in order to pitch themselves a ‘force for good’, even the most virulent corporate do-gooding cannot get away from the fact that, under the liberal democracy, the free market economic system has produced a society that benefits the few rather than the many.

The staggering reality is that despite Australian’s being, on average, the fourth richest people in the world, inequality is getting worse by the year with the spoils of our prosperity accruing to fewer and fewer people.

The top 10% of Australia’s income earners sequester 93% of the benefits from economic growth. More damningly, inequality is significantly worse if you are Indigenous, a woman, a person with a disability, do not have a university degree, or are born outside of Australia.

For people and corporations alike we appear to be heading towards become a winner-takes-all society with business leading the charge. Or maybe we are already there?

The real corporate social responsibilities

There are three main ways that corporations can and should contribute to society. First, they provide meaningful and reliable employment. Second, they produce products and services that people need, Third, they pay taxes that support public services.

But what do we actually get? First, we have increasingly precarious employment, economic equality, an expanding billionaire class and executive salaries that have grown to obscene levels. Second, we have a new era of inflation fuelled by corporate profiteering. Third, we have the type of tax avoidance that PwC have abetted, enabling corporations to wilfully and deliberately avoid paying their fair share.

These are all signs of a broken system that is driven by the same greed and self-interest seen at PwC. If we want to really stop the rot that led to PwC selling out the Australian people for a few pieces of silver, then we need to instigate changes at a systemic level. If anything, just punishing a single firm will distract attention away from the bigger problem. When the whole barrel is rotting, removing one bad apple will make no systemic difference.

What needs to be done?

Beyond prosecuting the dodgy dealings at PwC what is needed is a whole-of-society approach to re-engineering the way we manage the economy and practice business. This needs to be done so that the benefits of our prosperity are shared fairly amongst citizens. An economy that wilfully produces inequality is not worthy of a democratic nation.

Real progress will come from debunking the idea that a liberated corporate economy will benefit everybody. It was years ago that the International Monetary Fund acknowledged that their neoliberal experiment has failed. Will Australia ever listen? The version of corporate capitalism that PwC practices is the engine house of economic inequality. It needs to change.

The PwC crisis is the canary in the mine. It shows that Australia needs a new political will to recreate our economic system and the business culture that informs it. Persecuting an individual perpetrator is necessary, but it is not enough.

We need policies that restructure the economy to ensure the fair distribution of the nation’s wealth amongst its citizens. Progressive taxation is key. So are policies that demand that corporations offer decent, meaningful, well paid and reliable employment.

More than anything corporations need to not just pay the tax they owe, but this has to be understood and enforced as their primary social responsibility. It is here especially that the corporate behaviour PwC exemplifies has let down the nation.

Australia, do we have the courage for real change?

Carl Rhodes is the Dean of UTS Business School, University of Technology Sydney.