Why Didn’t KPMG’s “Speak-Up” Culture Work?
The recent scandal between KPMG and the Australian government centers around the firm’s solicitation of audit clients subsequent to receiving insider information about the bids from other firms to gain audit contracts. KPMG violated independence because of the conflict of interest emanating from ties of firm partners to board members at the prospective clients. The scandal raises many questions about the ethics at KPM: ethical leadership; corporate governance; and the firm’s “speak-up” whistleblowing culture.
What is Decision Drift?
Decision drift refers to the gradual divergence between an individual’s stated intentions and their actual behaviors over time. It differs from “cognitive dissonance,” a phenomenon that often occurs when external pressures or changing circumstances lead to a shift in decision-making, even if the original strategy remains formally intact. Essentially, while a person may have a clear goal or plan, their actions may start to deviate from that plan due to various influences, resulting in a misalignment between intent and execution. Decision drift occurs over a period of time during which decision makers are led adrift by top management that pressure them to overlook ethics. The result is an ‘integrity deficit’ that leads the firm astray.
Integrity deficit refers to how we see ourselves and whether that view is consistent with our actions and beliefs. When there’s a gap between who we think we are and what we actually do, it can lead to feelings of confusion, guilt, and low self-esteem. Much of this occurred at KPMG as decisions were made by top officials, many of whom were ethical people but were led astray by a culture that didn’t support them.
The recent scandal between KPMG and the Australian government is an example of decision drift. It centers around the firm’s solicitation of audit clients subsequent to receiving insider information about the bids from other firms to gain audit contracts. KPMG violated independence because of the conflict of interest emanating from ties of firm partners to board members at the prospective clients.
Writing for Business Day, Toye Sobande says: “Leaders don’t wake up one morning deciding to make poor choices. More often, it is a slow drift, a subtle compromise here, a ‘just this once’ exception there. Months later, you find yourself steering an organization that is no longer guided by its core values but by convenience, urgency, or unspoken pressures.” KPMG did not set out to make unethical decisions but navigated towards them due to competitive and other pressures. As discussed below, the danger wasn’t that they lacked skill; it was that they didn’t realize how far they had drifted.
Revisiting the Scandal
I have previously blogged about the scandal. Since then, I have read a lot about manifestations of the decision drift and integrity deficit. The best way to explain it is by reviewing how whistleblowers were handled by KPMG.
Writing for the Saturday Paper, Jason Koutsoukis points out that KPMG Australia’s two most senior executives had been warned by a powerful parliamentary committee that their handling of whistleblower allegations was under formal scrutiny.
His discussion about the scandal points to the decision drift at KPMG. It starts with the fact that “Federal Labor Senator Deborah O’Neill, who chairs the Joint Committee on Corporations and Financial Services, issued a warning in a letter to KPMG’s chief executive Andrew Yates and chairman Martin Sheppard six days after she used parliamentary privilege to allege the firm had used confidential client information to win audit contracts worth tens of millions of dollars, including those of banking giant Westpac and property group Dexus.”
“Central to the committee’s concerns was whether employees inside KPMG enjoy meaningful protection when and if they choose to blow the whistle on corporate wrongdoing. In a speech to the Senate on March 24, 2026, O’Neill relayed a series of damning allegations made to her by a former senior KPMG executive. She told the Senate each allegation was supported by documentation she had taken a number of detailed steps to verify.”
O’Neill then proceeded to read into the Senate official record the words of the whistleblower, using parliamentary privilege to protect herself and the whistleblower from legal action. “The information disclosed concerned matters that I had reasonable grounds to suspect constituted misconduct or an improper state of affairs or circumstances in relation to a regulated entity. The concerns I intended to raise related to audit independence, misuse of confidential information, tender integrity failures, misleading of Parliament, examination misconduct and governance failures at the senior leadership level.”
At their core, the allegations describe a firm that systematically exploited its privileged access to confidential client information to gain a secret commercial advantage in the competition for some of Australia’s most lucrative audit contracts.
The Case of Lendlease
As Koutsoukis points out, “KPMG exploited its privileged access to confidential client information to gain a secret commercial advantage in the competition for some of Australia’s most lucrative audit contracts. The most serious allegation concerns a KPMG client, Lendlease, one of Australia’s largest property and infrastructure companies. Ultimately, these conflicts of interest undermine the credibility of the entire audit function…”
According to the whistleblower, confidential Lendlease board papers were taken from the company by Eileen Hoggett, KPMG Australia’s chief operating officer, and reportedly next in line to take over as chief executive from Yates, and another senior partner, Paul Rogers, “and were physically secured in Hoggett’s locker” before being circulated within KPMG and allegedly used to support the firm’s pursuit of major audit contracts with companies including Westpac and Dexus.
Critically, the then chair of Lendlease, Michael Ullmer, himself a former KPMG Australia partner and also a current Westpac board member, was allegedly never told that the audit tender had been compromised by the misuse of Lendlease’s confidential materials.
Final Thoughts
It’s important to ask: “Why does drift happen? Sometimes it is the pressure to deliver short-term results at the expense of long-term impact. It also occurs when external forces, stakeholder demands, market considerations, and internal politics overwhelm the organization’s moral compass. Koutsoukis has it right when he points out “there is the deeper truth: decision drift doesn’t just affect organizational outcomes; it erodes trust.” Employees quickly sense when leadership choices feel inconsistent or misaligned. They may not articulate it, but they feel it, and that feeling slowly weakens engagement, accountability, and loyalty.”
Blog posted by Steven Mintz, professor emeritus from Cal Poly San Luis Obispo, on July 28, 2026. Interested parties can contact Steve at smintz@calpoly.edu and visit his personal website at: https://www.stevenmintzethics.com/.