Consulting firm conflicts of interest difficult to curtail

Key takeaways:

• Australian regulatory responses to consulting firm conflicts of interest remain muted compared to international standards.
• To ensure independence, Australian remuneration committees must proactively address these conflicts, using established frameworks for identifying and mitigating potential issues with professional service providers.

Broad-based, multi-business line consulting firm conflicts of interest have again been in the headlines this past month.  Yet, Australian response remains muted relative to other countries which regulate for:

• Operational separation of audit from consulting, including executive remuneration consulting (e.g. UK);
• Service prohibitions, barring audit firms from giving other advice to a company (e.g. US, EU); or
• Rules mandating strict independence standards and conflict-of-interest disclosures, such as US stock exchange listing requirements for board compensation committee advisors.

The muted Australian regulatory response behoves Australian boards and remuneration committees to assure themselves that conflicts of interest are managed. To that end, we alert readers to prior articles where we provide guidance.

See:

8 July 2024 – Addressing conflicts of interest in consulting firms: Read HERE

9 June 2023 – Professional services firms and governing conflicts of interest: Read HERE

27 November 2018 – Conflicts of interest, independent advice and a board checklist: Read HERE