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McKinsey

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management consulting firmcommercial

 McKinsey  link
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File:Mckinsey and company.jpg
Formation1926
FounderJames O. McKinsey
HeadquartersNew York City
Typecommercial
Staff38,000
Interestsfinancial consulting, public-private partnerships, privatization,lobbyism
Sponsor ofDemocracy and Culture Foundation
MembershipDominic Barton, Sylvia Mathews Burwell, Chelsea Clinton, Ronald Cohen, Susan Colby, Vittorio Colao, Penny Dash, Bill Drayton, Matthew Elson, Louis Gerstner Jr., James Gorman, Stephen Green, William Hague, Nicolaus Henke, Bobby Jindal, Steve John, Marius Kloppers, Nick Lovegrove, Martin Markus, James McNerney, Mona Mourshed, Peter Orszag, Helmut Panke, Dirk Schmautzer, Jonathan Schwartz, Christopher Sinclair, Jeffrey Skilling, Adair Turner, Luis Ubiñas
corporate hit-men to loot the economy

McKinsey & Company is a global management consultancy advising many of the world's most powerful corporations, as well as governments, institutions and philanthropic foundations. There is a well-oiled 'revolving door' between McKinsey and policy-making, and McKinsey has been described as acting as the "ultimate old boys' network".

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Covid

McKinsey played a leading role in several countries during COVID deep event, especially in implementing the coerced vaccination program.

In Switzerland, the Federal Office of Public Health (BAG) commissioned McKinsey and its pharmaceutical team to develop an international overview of the status of vaccine development" between April and July 2020. Other of the so-called Big Four companies received orders related to Covid-19, including PWC, the number one consulting and auditing firm in the country. How much McKinsey charged and what they did is confidential information, but the outsourcing is unusual, since the BAG itself has many well-paid experts, including those for vaccinations.[1]

In France, it was Maël de Calan from McKinsey helped “frame and coordinate”[2] the vaccination plan to the regional health agencies (ARS) and to certain hospitals, after a short introduction by the Minister of Health Olivier Verran. Maël de Calan was a candidate for the 2017 legislative elections for Macron's movement En Marche!. One of the leaders of McKinsey France, Karim Tadjeddine, is the author of a book published in 2016 and prefaced by Emmanuel Macron.[3]

Despite a turnover of "329 million euros on the national territory" in 2020, a French Senate inquiry found that the firm had not paid any corporate tax from 2011 to 2020. The committee also described the use of management consultancy firms by the state under Macron a "sprawling phenomenon".[4]

In Belgium, the "socialist" Secretary of State in charge of recovery, Thomas Dermine, worked at McKinsey in London from 2009 to 2016. The one who replaces him at the head of the PS research department is also a former McKinsey employee. [3]

In the United States, many advisers move from McKinsey to Democratic Party leadership. For example, President Joe Biden chose Pete Buttigieg to be his transportation minister. Buttigieg worked for McKinsey. [3]

Due to the "exceptional nature of the crisis", the government in the Canadian province of Quebec discarded internal departmental expertise. Instead, McKinsey was hired in and played a central role in the game plan for the vaccination campaign in Quebec. The company already had Pfizer as its corporate customer. The private consultants contributed to crucial decisions during the "pandemic" by giving advice to the Legault government, in particular for the communication strategy. The firm led committees, organized strategic meetings, distributed roles on working groups. It also had access to confidential information. Emails show advice from the firm about Pfizer, recommending reaching "an agreement with the manufacturer Pfizer" regarding distribution locations.[5]

Planned debacles

McKinsey's fingerprints can be found at the scene of some of the most spectacular corporate and financial planned debacles of recent decades.

Enron: 'the house that McKinsey rebuilt'

The collapse of energy-trading giant, Enron in 2001 was one of those high-profile corporate scandals. Enron's extraordinary growth – it become America's 7th biggest company in just 15 years – turned out to have involved an elaborate scam. Enron lied about its profits and concealed debts so they didn't show up in the company's accounts. Shareholders lost billions, thousands of investors lost their retirement pots, and many people lost their jobs. Enron CEO Jeffrey Skilling and former CEO Kenneth Lay, as well as its former chief financial officer, Andrew Fastow, were handed prison sentences for a range of crimes, including: fraud, money laundering, insider trading, making false statements to banks and auditors, and conspiracy.

The one Enron partner that was said to have escaped largely unscathed is McKinsey, which is odd, writes The New Yorker's Malcolm Gladwell, 'given that it essentially created the blueprint for the Enron culture.'[6] McKinsey were also directly employed by Enron and the consultancy was key in Enron's massive growth and diversification. Under Mr Skilling, himself a former McKinsey employee, Enron was reportedly paying the firm $10m (£6m) a year for advice. McKinsey endorsed the accounting methods that caused the company to implode. The firm's dealings with Enron, however, were kept almost totally secret in the media despite McKinsey employees attending Enron board meetings and public appearances. [7] [8][9]

As the Observer noted in the wake of the scandal: 'Enron is the house that McKinsey rebuilt.' 'The processes and principles [Skilling] allowed were very McKinsey', it notes. Meanwhile, McKinsey 'used Enron as their sandbox'.

Encouraging risk on Wall Street

McKinsey has advised 'virtually all of the Wall Street banks' in recent years. According to Ben Chu, writing in the Independent, McKinsey's consultants promoted the securitisation of mortgage assets, 'the practice that poisoned the global financial system and precipitated the 2008 credit meltdown'. The firm also encouraged the banks to fund their balance sheets with debt, driving up risk.[10]

Insider trading

In January 2010 Anil Kumar, a former McKinsey director, pleaded guilty to insider trading charges and publicly acknowledged giving corporate secrets gleaned on the job to Raj Rajaratnam, a founder of the Galleon Group hedge fund, in return for cash. More damaging for the firm, however, was the conviction in 2012 for insider trading of Rajat Gupta, who ran McKinsey for ten years. He also leaked boardroom secrets to the hedge fund billionaire.[11][12]

Opioids

In Novemeber 2021, McKinsey agreed to pay $573 million to settle claims from 49 US states that the company helped fuel the opioid addiction epidemic, by providing marketing advice to drug manufacturers including Purdue Pharma and Johnson & Johnson. The company will immediately pay about 80 percent of the amount to bolster treatment programs and support police budgets strained by the widespread abuse of addictive painkillers. The rest will be paid in four years.[13]

According to the Massachusetts Attorney General, the consultancy had suggested ways to "boost" sales of Purdue's pain reliever OxyContin at a time when the legal market for opioid-based drugs was shrinking due to a wave of negative publicity. McKinsey will not admit any wrongdoing as part of the deal.[13]

Privatisations and public sector 'reform'

McKinsey is a believer in markets, the private sector provision of services and reducing the role of the public sector in delivering public services. It has controversially advised many national and regional governments on opening up their public sectors to private sector companies.

As Management Today commented in 2013: McKinsey is seen by some as a 'neo-liberal stooge promoting a market-oriented public sector into which its private clients might be helped to win lucrative contracts'.[14]

Healthcare

McKinsey says it works 'with healthcare leaders to improve world health outcomes'.[15]This includes helping national and regional government 'to transform care delivery and make it more sustainable', which has involved the widespread privatisation of services (see 'UK: the privatisation of NHS'). At the same time McKinsey, earns most of its revenue from advising corporations: health insurers, private hospital groups, pharmaceutical companies, tech interests and investors – in other words companies that might benefit from the opening up of public services. McKinsey is, however, famously tight-lipped about the identities of its private sector clients. Who they work for and what they do for them is confidential.

Rail privatisation: UK

Railtrack, the track operator created in 1994 as part of the privatisation of British Rail, is a good example of McKinsey networks at work.

For example, Railtrack's former CEO Gerald Corbett has links with one of its former board members, the Tory MP and ex-McKinsey man, Archie Norman. There is also a link with Kingfisher chief Sir Geoff Mulcahy, who subsequently appointed Mr Corbett to run Woolworths, until recently owned by Kingfisher. Archie Norman was once Sir Geoff's finance director at Kingfisher. Kingfisher is a big customer of McKinsey, and the retail group's former chairman, Sir John Banham, is a former McKinsey partner.

McKinsey has been accused of contributing to and profiting from Railtrack's collapse in 2002. According to reports, in the late 1990s Corbett commissioned McKinsey to devise a blueprint for Railtrack. The central recommendation was that Railtrack should "sweat" its assets. This meant replacing its cyclical system of rail maintenance with a programme where infrastructure was mended on an as-and-when basis. "The theme was very much that we should get the most out of the assets before we renewed them," says a Railtrack insider. [16]

Railtrack's approach to limiting repairs on its infrastructure resulted in accidents and their ultimate demise. A 2002 article in the Independent commented on McKinsey's role:

'Once it has been paid millions to create something, it can knock it down again, as is about to happen at Railtrack.'

Alumni: the 'ultimate old boys' network

McKinsey has been described as acting as the "ultimate old boys' network" as past employees and clients become part of the 'alumni network' which includes Enron boss Jeffrey Skilling and Tory leader William Hague. According to a 2002 Independent article:

One source close to McKinsey says: "The alumni are seen as ambassadors to the McKinsey brand. The network isn't openly exploited, but the firm maintains a database of members and holds an annual reception for the alumni." [17]

According to a 2013 CBNC report:

There are approximately 27,000 McKinsey alums spanning 120 nations in virtually every business sector. In recent years, 150 McKinsey alums had a top spot at companies with more than $1 billion in annual sales. According to USA Today, the odds of a McKinsey consultant becoming a CEO were the best the world, at 1 in 690.[18]

Some of McKinsey notable alumni are:

Clients

McKinsey is notoriously secretive about its clients: ‘We just don’t talk about our client work,’ is the standard response to inquiries.

As a result, little is known about who it works for. They do include, however, in the healthcare sector: health insurers, private hospital groups, pharmaceutical companies and financial sector investors.

Known clients:

McKinsey Social Initiative

According to the firm, McKinsey Social Initiative (MSI) was founded 'to develop innovative approaches to global problems'.

'Its unique model leverages relationships across the public and private sectors to create, test, and scale new ways to address the world’s most pressing issues.[21]

It is run by Helene D. Gayle, formerly CEO of CARE USA and before that Bill & Melinda Gates Foundation.

MSI, according to NonProfit Quarterly MSI 'will start life with a $70 million capital infusion from McKinsey plus access to 25 of its consultants to work on MSI projects and advice from 10 McKinsey partners.' It also suggests that MSI has also started off with a $15 million infusion from USAID—'if that’s so, it had to have been in the works when Raj Shah, a former Bill & Melinda Gates Foundation official, was still USAID administrator'—and $3.2 million from Walmart.[22]

'For MSI, the Walmart and USAID grants are parts of a larger program it calls Generation Initiative that will “give youth the practical skills and personal confidence for career success—and build a cohort of work-ready, high-energy new hires who are set up for long-term career success” in a program of 8-12 weeks (sites are planned or already operational in Pittsburgh, Kenya, India, Spain (Madrid and Barcelona), and Mexico. The expectation of the initiative is one million young people trained and placed in jobs in five years.'[23]

Culture

McKinsey has a strong reputation for advancing the interests of its clients partly through strict and ruthless employment rules and organisational strategy. These include the 'up or out' policy, whereby staff must either get regularly promoted or be fired, encouraging a particularly rapacious breed of employee, eager to maximise the profit of clients and the firm. McKinsey will also accept any client, even if they are direct competitors of another client. Though this rule requires absolute confidentiality, it works to their advantage as they can attract competing companies who are keen to get the same high profile advice.

Refences

  1. ↑ https://insideparadeplatz.ch/2022/02/14/bersets-bag-hat-mckinsey-fuer-impf-studie-mandatiert/
  2. ↑ https://www.marianne.net/politique/gouvernement/mckinsey-le-cabinet-qui-dirige-le-monde-et-la-vaccination-en-france
  3. ↑ 3.0 3.1 3.2 https://www.solidaire.org/articles/mckinsey-il-est-temps-de-nettoyer-les-cabinets
  4. ↑ https://www.bfmtv.com/economie/economie-social/france/affaire-mc-kinsey-macron-s-agace-et-conteste-d-eventuelles-combines_AN-202203270137.html
  5. ↑ https://ici.radio-canada.ca/nouvelle/1920666/mckinsey-quebec-covid-legault-gestion-pandemie
  6. ↑ Malcolm Gladwell, The Talent Myth, "The New Yorker", 22 July 2002
  7. ↑ Jamie Doward 'The firm that built the house of Enron' The Observer, 24 March 2002. Accessed 01/02/10
  8. ↑ Clayton Hirst, 'The might of the McKinsey mob: It's big in business and politics and is Britain's most powerful old boys' network' the Independent, 20 January 2002. Accessed 01/02/10
  9. ↑ Ben Chu, McKinsey: How does it always get away with it? Independent, 7 February 2014
  10. ↑ Ben Chu, McKinsey: How does it always get away with it? Independent, 7 February 2014
  11. ↑ Joanna Chung and Alan Rappeport, Ex-McKinsey director Kumar took $1.75m for tips to Galleon The Financial Times, January 8 2010. Accessed 01/02/10
  12. ↑ Rajat Gupta Convicted of Insider Trading, New York Times, 15 June 2012
  13. ↑ 13.0 13.1 https://www.nytimes.com/2021/02/03/business/mckinsey-opioids-settlement.html
  14. ↑ Matthew Gwyther, McKinsey head Dominic Barton: 'We don't dominate the brain pool', Management Today, 10 July 2013
  15. ↑ Healthcare Systems & Services, McKinsey website, accessed November 2015
  16. ↑ Clayton Hirst, 'The might of the McKinsey mob: It's big in business and politics and is Britain's most powerful old boys' network' the Independent, 20 January 2002. Accessed 01/02/10
  17. ↑ Clayton Hirst, 'The might of the McKinsey mob: It's big in business and politics and is Britain's most powerful old boys' network' the Independent, 20 January 2002. Accessed 01/02/10
  18. ↑ McKinsey's 'secret' influence on American business, CBNC, 13 Sep 2013
  19. ↑ Clayton Hirst, 'The might of the McKinsey mob: It's big in business and politics and is Britain's most powerful old boys' network' the Independent, 20 January 2002. Accessed 01/02/10
  20. ↑ Global Health Partnerships: Assessing Country Consequences, Gates Foundation and McKinsey publication, 2005
  21. ↑ A new CEO for McKinsey Social Initiative, McKinsey website, accessed November 2015
  22. ↑ McKinsey & Company Starts Its Own Version of Bain’s Bridgespan, NonProfit Quarterly, 27 March 2015
  23. ↑ McKinsey & Company Starts Its Own Version of Bain’s Bridgespan, NonProfit Quarterly, 27 March 2015
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