Ethics and governance in the European Financial centers

PwC Luxembourg last week published a surprising press release focusing on the growth but with keyword missing : ethics, deontology.

In the press release PwC emphasizes the involvement in CSR (Corporate Social Responsibility) but the keyword stakeholder is quoted neither in the core text of the press release nor in the core text of the 2007 Annual Review Luxembourg (it is in the note to the editor in a standardised text but for the client's stakeholders).

Who are the addressees of an audit report? Who must have confidence?

According to PwC Luxembourg : the clients (see title of the press release : "Our clients’ confidence is the cornerstone of our profession”).

But they forget that the actual addressees of an audit report are the investors, the market ... In other words the stakeholders that do not have the commercial relationship with the auditor.

Stakeholders’ confidence is the cornerstone of the audit profession.

The title of the press release focusing on clients who pay for the audit unfortunately demonstrates that the basics of CSR are not understood : being involved in socially responsible efforts is a good thing but this is definitely not enough.

Let's read some definitions of CSR :

"There is one and only one social responsibility of business-to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud." (Milton Friedman, Friedman (1962). Capitalism and Freedom. University of Chicago Press. ISBN 0-226-26421-1.)

"Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large" (WBCSD (2000). Corporate Social Responsibility: Making good business sense. World Business Council for Sustainable Development. ISBN 2-94-024007-8)

A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis (...) An important aspect of CSR is how enterprises interact with their internal and external stakeholders (employees, customers, neighbours, non-governmental organisations, public authorities, etc.) " (Commission Green Paper 2001 “Promoting a European Framework for Corporate Social Responsibility”, COM(2001)366 Final)




See press release
Annual Review

We have seen in a previous article that PricewaterhouseCoopers has released its fourth Global Economic Crime Survey, based on interviews with more than 5,400 senior executives in more than 40 countries.

PwC in two major centers of tree contributed to the study : PwC UK and PwC Switzerland.

PwC Luxembourg did not contribute. Their name is missing in the main report and they did not publish a country report. More interesting, their website does not seem to quote the Global survey.

This raises a couple of questions :
- Does that mean that economic crime does not exist in Luxembourg? Of sure definitely no.
- how auditors that hide so a sensitive topic may be reliable? Does that mean that they never face economic crimes in the framework of their assignments? Of sure definitely no.

Once more this is perfect illustration that in Luxembourg issues are either hidden or denied. Including by the leader.

This is not serious.


Switzerland

The United Kingdom

Many financial centres, both onshore and offshore, are making progress in improving transparency and international co-operation to counter offshore tax evasion, but some still fall short of international standards that have been developed over the last seven years, according to OECD assessments.

Significant restrictions on access to bank information for tax purposes remain in three OECD countries (Austria, Luxembourg and Switzerland) and in a number of offshore financial centres (e.g Cyprus, Liechtenstein, Panama and Singapore). Moreover, a number of offshore financial centres that committed to implement standards on transparency and the effective exchange of information standards developed by the OECD’s Global Forum on Taxation have failed to do so.


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