Oscars flub engulfs PwC in controversy
‘Human error’ could impact firm’s reputation as an awards monitor
The now-infamous Oscars flub engulfed PricewaterhouseCoopers in crisis Monday, threatening to undermine the auditing giant’s reputation as the Academy Awards awards ceremony monitor amid jokes and ridicule by so- cial media users and others.
The firm, popularly referred to as PwC, apologized after award presenters Sunday night incorrectly announced La La Land as 2016 Best Picture winner. The mistake triggered an off-stage scramble that spilled onto the stage and led to an embarrassing reversal in which Moonlight was correctly crowned champion.
Next comes a business scramble as the New York City-based company with $35.9 billion in 2016 revenue seeks to avoid a permanent blow to its reputation. Corporate experts predicted Monday that short-term damage is likely inevitable but said the long-range business outlook hasn’t necessarily dimmed.
“At the end of the day we made a human error,” Tim Ryan, U.S. chairman and senior partner of PWC told USA TODAY on Monday. “We made a mistake. What happened was, our partner on the left side of the stage, Brian Cullinan ... handed the wrong envelope to (actor) Warren Beatty. And the second we realized that we notified the appropriate parties and corrected the mistake.”
Efforts to reach both Cullinan and Martha Ruiz, the other PwC accountant who oversees Oscars balloting and award presentations, were unsuccessful.
The firm’s role in the movie industry’s biggest event long has been a source of pride for the firm. Rivals Ernst & Young audits the Emmys and the Golden Globe Awards and Deloitte Touche Tohmatsu audits the Grammy Awards. Both companies, along with PwC, are among the big four U.S. accounting firms. Grant Thornton, which is not as large, audited the 2016 Tony Awards.
PwC has tabulated results and monitored awards distribution for the Academy of Motion Picture Arts & Sciences for 83 years. The mistake seen by 32.9 million
TV viewers was at the end of Sunday’s ceremony in Hollywood.
For a company of accountants who pride themselves on their commitment to accuracy, an event that ordinarily helps burnish corporate credibility threatened to devolve into a crisis.
Accounting is a “credence good,” which means “customers don’t know to evaluate” it unless something goes wrong, University of Michigan business professor Erik Gordon said. “You trust in the name. If you understood accounting, you wouldn’t need PwC or KPMG or any of them. “This is the most public goof up an accounting firm could make. Accounting firms are in the background.”
Although a “simple mistake” is always possible, Gordon said accounting firms are hired to ensure public companies, for example, have processes in place to avoid blunders.
“You pay your accounting firm a fortune to review your internal control procedures and sign off that you have them,” Gordon said.
PwC is likely to suffer some immediate reputational tarnish over the mistake “because a lot of people will remember it and con- nect it with them,” said Stephen Hahn- Griffiths, managing director of the Reputation Institute, which helps global companies and other clients measure and manage corporate reputation performance. “In terms of longtime impact on the business, it’s unlikely to be a chronic challenge. Quite honestly, mistakes happen.” Hahn- Griffiths added public embarrassment could prove more damaging for the Academy than for the accounting firm.
PwC is sure to remain “the punchline of any number of gags for years to come,” says James O’Rourke, a corporate communication and reputation management expert at the University of Notre Dame’s Mendoza College of Business. But given PwC’s size, O’Rourke said PwC would remain in demand as one of the few companies with the capability of auditing other U.S. corporate giants.
Minutes before presenters Warren Beatty and Faye Dunaway announced La La Land as the victor, PwC tweeted a photo of its two accountants behind the stage monitoring the process.
PwC has often bragged of its role in ensuring the “integrity and trust” of the Oscars outcome.
“Yes, we literally count the votes, put the winning names in envelopes, and walk them down the red carpet in their own briefcase to deliver them to the ceremony!” the firm said in an online newsletter posted before this year’s Oscar night.
With the results officially tabulated, Ruiz and Cullinan memorize the winners and position themselves on either side of the stage, off screen, with separate briefcases, each containing envelopes announcing the victors. They hand the envelopes to the presenters immediately before each category.
The Oscars gaffe isn’t the first time the New York City-based company has landed in reputation-damaging controversy.
The Securities and Exchange Commission censured PwC and hit the company with a $1 million fine in a 2003 settlement of allegations stemming from the audit of SmarTalk TeleServices, a former provider of prepaid telephone cards and wireless services. The accounting firm failed to adequately audit a $25 million restructuring reserve established by SmarTalk, the SEC said.
PwC agreed to the settlement and fine without admitting or denying the allegations.
“In terms of longtime impact, it’s unlikely to be a chronic challenge. Quite honestly, mistakes happen.” Stephen Hahn- Griffiths, managing director of the Reputation Institute