Despite multiple confidentiality agreements, the information was leaked to other internal business partners within PWC and the information assisted in increasing their client base due to PWC having insider knowledge of the Australian Government’s intentions.

In terms of the Seven Signs of ethical collapse, those that may be present in the PWC scandal are as follows:

Pressure to maintain numbers

Ignoring rational thought in relation to the conflict-of-interest declaration due to the opportunity to use Government information to maintain or promote increase in business

 Fear and Silence

Many people were included in e-mails related to the information, yet no one spoke up or queried whether there was an element of confidentiality. An organisation such as PWC would have substantial knowledge and understanding of conflict of interest and general client confidentiality requirements, yet information was circulated without question.

Weak Boards

If PWC had substantial dealing with the Australian Government, would it not be expected that these are treated with a high level of oversight and governance.  Would the information circulated and potential business gains be subject to PWC board reporting in terms of strategy or emerging law that would eventually be written in as policy and then then become part of PWC’s knowledge base  ? yet no governance was identified.

Culture of Conflict

The breach of information was identified after a number of multinational companies quickly restructured their organisations to enable them to avoid their tax liability , this shows that no one within PWC queried or disclosed any issues , this would indicate that partners of PWC  were complacent with sharing the information, this may be a common culture.

2004 saw HWE double its staff, secure contracts across Australia in WA, NT and QLD, and during a capital raising to secure financing in October to support its major tender win with PT Bumi Resources in Indonesia, the CEO departed, with a profit downgrade and shareholder confidence fell.  From there instability across the group accelerated … in terms of Seven Signs of ethical collapse, at least five can anecdotally be identified with regard to HWE’s operations at the time:

Pressure to maintain the numbers – the need to scale offshore, spread the existing foundations thin with poor planning, reporting and control procedures in place, and put pressure on financing to help support the growth needed.  Once the CEO departed, the recapitalisation plan was suspended and failed.

Fear and silence – perhaps more the later, with siloed operations in each state, lack of integration of newly acquired businesses including the mining and engineering operations of the business, between areas of management, as well as the executive and the Board.  It was even reported by the AFR and Crikey there was management issues “This diversified, far flung structure didn’t have the management sinews in place to enable it to run normally. Senior managers were constantly flying interstate from Sydney trying to resolve issues.” (Crikey 2 Feb 2005).

Young’uns and charismatic leader – management instability after the departure of a likeable CEO, backfilled with an interim consultant and the Board Chair resulted in investors questioning press releases from the Chairman ‘…a touch of Pollyanna about it’ (Crikey 2 Feb 2005) with the announcement of “There has been no material change to our management accounts and profit expectations from operations. However, we have incurred a one-off cost of approximately $6 million relating to bank negotiations and extensions,” (Corporate File 12 Dec 2004). Staff morale eroded further when it was obvious operations could possibly contract in NSW and shift north to NT.

Weak boards – with the business founders located in Darwin and Head Office in NSW, there was distance geographically and distance in financial oversight compounded by management developing the strategy (not the Board) (Australia's Mining Monthly 3 Jan 2006).  HWE was still rebuilding after restructuring in the early 2000’s leading to profit warnings, write-downs, breach of loan covenants resulting in its share price poorly performing due to shareholder distrust. 

Culture of conflicts – when HWE entered into voluntary administration in early 2005, after the untimely passing of the Chairman, Ernst & Young were appointed, but had to withdraw due to a conflict of interest which the Board didn’t foresee, as EY had recently provided auditing and tax work for HWE. It was reported at the time ASIC should investigate this matter. Ultimately, new administrators, McGrath Nicol & Ptrs, were appointed and undertook liquidation proceedings.

HWE was an innovative story of 2 entrepreneurs in 1962 with a ute, an idea for contract engineering, in the top end who built up a substantial mining and civil engineering business. They were well known corporate citizen’s who had various interests from crocodile farms, car dealerships, infrastructure developments of roads and ports, to mining and engineering, and knew the who’s who of Australia including former prime ministers.  But unfortunately, without strong corporate governance and adapting to the legislative landscape, it became a sorry tale of a rapid fall from boom to bust.

ASIC allege that over a 2 year period (2022-2024) Cbus failed to ensure its death benefit and TPD insurance claims (managed on behalf of Cbus by a third party provider) were being processed within 90 days. (In fact, a significant proportion were taking over 12 months to finalise.) It was alleged Cbus failed to act efficiently, honestly and fairly in handling such claims, which constituted offences under the Corporations Act.

The signs of ethical collapse I can identify are:

1) Pressure to maintain the numbers - Cbus management ignored and then downplayed the significance of the data pointing to ageing claims for many months. Cbus pushed back on their third party provider and refused to take accountability for the delays and the resulting impact of those delays on their members and their families. As far as they were concerned, the problem was not with them.

2) Fear and silence - it's possible that the senior management responsible for negotiating the 3rd party agreement (finalised in 2021) were now oversighting it, and they did not want to raise red flags so early on in the new arrangement. To do so implied that they had agreed insufficient resourcing or other inadequate arrangements. As a result, the issues were downplayed even when they were finally reported to the regulator. Throughout, Cbus maintained it was the responsibility of the 3rd party provider to fix the issues.

3) Weak board - When management finally reported the delays to the Risk Committee, and presumably then to the Board, no urgency was signaled. It also appears the directors accepted the management view without much challenge. The directors appeared to lack any understanding of Cbus' regulatory and legal obligations and ignored the potential reputational implications for the business of large-scale claims handling failures.

4) Goodness atoning for poor behaviour - Cbus is one of Australia's largest superannuation companies with more than $100 billion under management (as at 27 January 2025) and 920,000 members. Its focus is clearly on delivering "the best possible retirement outcomes for members'' and strong investment outcomes. It could be argued that Cbus viewed the insurance part of the business as of lesser significance or importance, and that their strong Fund performance atoned for the poor claims handling processes that (only) impacted 10,000 of its members.

Yet under the Cbus Code of Conduct, they were required to "act with care and diligence in all aspects of your work, to ensure that we are acting in the best financial interests of members and are complying with all relevant legislative and regulatory requirements, Cbus policies and procedures".

With regard to the elements of ethical collapse, here are some specific examples:

1) Pressure to Maintain Numbers: The company was under pressure to deliver on their promises to investors. To maintain the illusion of success, the company exaggerated test accuracy, manipulated data and even used third party machines for testing instead of their own innovative device.

2) Fear and Silence: Employees who asked too many questions or raised concerns were met with intimidation, legal threats or were terminated. Some employees were even followed by private investigators.

3) Iconic Leaders: Holmes was portrayed as a visionary leader and was even dubbed 'the next Steve Jobs'. She was surrounded by young employees who believed in her mission and lacked the experience to challenge leadership.

4) Weak Boards: Whilst the board had high profile figures, it lacked personnel with medical or scientific backgrounds, so company decisions were left unchecked.

5) Culture of Conflicts: Loyalty was valued over transparency. Many employee groups were kept segregated from each other. Investors and the board were kept in the dark about issues.

6) Innovation: The idea behind the technology was revolutionary. If successful it would have been a disruptor for the industry.

7) Goodness: The technology had the potential to improve healthcare accessibility. This drive was used internally to justify cutting corners, ignoring regulations, and misleading investors.

Key stakeholders included investors who relied on the fund’s ethical claims, ASIC as the regulator responsible for market integrity, Vanguard’s leadership and compliance teams, and the broader financial services industry. The consequences were significant: a record $12.9 million penalty, reputational damage, and heightened scrutiny of ESG investment products across Australia.

Several of Jennings’ Seven Signs of Ethical Collapse were evident in this case.

Pressure to maintain numbers was clear, as Vanguard sought to compete in the rapidly expanding ESG investment market, creating incentives to overstate the fund’s ethical credentials.

Weak board oversight contributed to the failure, with governance processes insufficient to ensure the accuracy of ESG disclosures.

Conflicts of interest were present, as commercial motivations to attract ethically minded investors conflicted with transparent reporting.

The case also reflected “innovation like no other”, where complex ESG screening processes created opacity that masked inconsistencies between marketing and actual holdings.

“Goodness in some areas atones for evil in others” was evident, as Vanguard’s strong global reputation may have created complacency, allowing misleading practices to go unchallenged.

For the organization, the fallout ended with an immense reputational ruin, a historic $777.8 million penalty to the U.S. Department of Justice in 2022, and a landmark 2026 French criminal court ruling finding the corporation guilty of financing terrorism, which saw former top executives sentenced to multi-year prison terms.

Several early warning signs of ethical collapse were present and brought this disaster:

• Pressure to Maintain the Numbers: The focus was on protecting the company's $680 million investment in the Syrian plant and securing local market share against cheaper Turkish imports. Executives treated financing a terrorist regime as an operational cost in their books to avoid write-offs and ensure the factory continued producing revenue, illustrating a result at all costs mentality where financial targets eclipsed basic human rights and legal boundaries.

• Fear and silence: local Syrian employees repeatedly raised flags about the immense dangers they faced, including kidnappings at checkpoints and the encroaching ISIS front line. Despite these warnings, corporate management ignored their pleas and insisted they continue commuting to and working at the factory. And when ISIS finally advanced directly on the plant in September 2014, corporate management evacuated the remaining European staff and management but failed to arrange a safe evacuation plan for the local Syrian workers. The workers were left to flee into the desert on their own under heavy gunfire. The pervasive corporate culture of dismissing internal alarms ensured that the human risk was silenced until it was too late.

• Young 'Unseasoned' Executives and a Bigger-Than-Life CEO: at the time, Lafarge was led by a powerful leadership circle that was deeply insulated from the realities on the ground but highly aggressive in its global expansion strategy. Local intermediaries and younger field managers in Syria were tasked with navigating the highly volatile logistics of paying bribes and negotiating with terrorist factions. These field coordinators operated in a corporate vacuum where top-level leadership demanded results (keeping the plant running) without asking too many questions. Because the senior leadership was so powerful and detached, lower-level managers felt they had no choice but to carry out these illicit operations, trusting that the higher-ups knew what they were doing.

• Conflicts of Interest Overlooked: Lafarge found itself torn between two directly opposing forces: a) the Financial Incentive: the company had invested roughly $680 million in the Jalabiya cement plant. Writing it off or shutting it down would mean a massive financial blow to the corporation and its executives and b) the Duty of Care: as an employer, Lafarge had a fundamental legal and moral obligation to protect the lives and safety of its workforce. Instead of resolving this conflict ethically, Lafarge chose to prioritize the money and completely overlooked its duty of care. Lafarge recognized the danger in the region, which is why they safely evacuated all of their foreign expatriate managers early on. However, because they needed the plant to keep churning out cement to protect their financial investment, they refused to let the local Syrian workers stop working. They used their financial leverage over these local workers (who desperately needed their income in a war zone) to keep them on the front lines. And to keep production going, Lafarge used intermediaries to pay off ISIS and other militant groups for protection certificates and safe passage through checkpoints. Lafarge was literally funding the very terrorists who posed a direct threat to their own employees, just to ensure their raw materials could get to the factory.

• A Culture of Innovation Like No Other: Lafarge viewed its presence in Syria not just as a business, but as a triumph of industrial perseverance. They took immense pride in keeping a massive infrastructure project alive in a war zone when other multinationals had fled. This hubris led executives to believe they could manage relationships with terrorist organizations like ISIS as if they were standard political stakeholders or local suppliers. Instead of recognizing the legal and moral line they were crossing by financing terrorism, they treated the situation as a complex, highly innovative logistical challenge that only a company of Lafarge’s calibre could successfully navigate, making them special.

• Goodness in Some Areas Atoning for Evil in Others: Lafarge heavily relied on its public profile as a highly progressive, socially responsible multinational. Executives rationalized the illicit payments by framing the preservation of the plant as a charitable act that maintained local jobs and supported the regional Syrian economy. This social responsibility narrative acted as an internal moral cushion, allowing the organization to justify its complicity with war criminals under the guise of corporate utilitarianism.

Several of the seven signs of ethical collapse were evident. Pressure to maintain numbers was present through the focus on production schedules and commercial performance. Fear and silence emerged when employee and whistleblower concerns about safety and quality were reportedly ignored or inadequately addressed, discouraging further challenge. A weak board of directors was reflected in concerns that governance mechanisms did not provide sufficient oversight of safety risks and quality-control issues. Conflicts of interest arose between Boeing's commercial objectives and its responsibility to prioritise passenger safety. Boeing's longstanding reputation as an innovative and highly successful aerospace company also contributed to a belief that it could manage risks effectively, reflecting the "innovation like no other company" warning sign. Finally, the company's history of engineering excellence and positive contributions to aviation may have led some stakeholders to place excessive trust in leadership and overlook emerging cultural and governance issues.

The consequences were severe, including the loss of 346 lives, worldwide grounding of the 737 MAX fleet, significant financial and regulatory penalties, and lasting reputational damage. The case demonstrates how fear and silence can prevent critical information from reaching decision-makers, allowing risks to remain hidden until they develop into major ethical, operational, and governance failures.