McKinsey & Co is the biggest name in the consulting industry. Founded in 1926, it employs 30,000 people, has offices in more than 130 locations and counts Pete Buttigieg, the US Secretary of Transportation, among its alumni. From vaping to nonprofits, insurance to energy, government work to healthcare, the McKinsey footprint is here.
Traditionally, McKinsey had the luxury of distance, sideways watching clients bear the brunt of scrutiny, lawsuits and risk. But the space between the field and the bleachers has shrunk. McKinsey finds himself under the microscope.
When McKinsey Comes to Town is a very informed, fascinating read. The authors, New York Times investigative reporters Walt Bogdanich and Michael Forsythe, did their homework. They name names, connect dots and dig up documents. Sources speak in Technicolor.
Bogdanich is a three-time Pulitzer winner. Forsythe takes a careful look at the intersection of money, politics and China. He was previously based in Hong Kong. McKinsey happens to have worked for both the US Department of Defense and Chinese state-owned companies that have helped bolster Beijing’s military.
McKinsey says Bogdanich and Forsythe “fundamentally distort our business and our work.” He issued a similar statement when the Times and ProPublica highlighted his attributions on behalf of U.S. Immigration and Customs Enforcement and U.S. Customs and Border Protection. ProPublica said, “McKinsey called our story about his ICE contract fake. It’s not.” The contract with Ice was worth $18 million.
McKinsey has advised over 40 US agencies. He played an outsized role in Jared Kushner’s attempts to deal with Covid, hailing from China. At the same time, it maintained a presence in China. The apparent conflict of interest has caused concern in Congress. Group of Republicans says McKinsey’s work ‘on behalf of Chinese companies…equates to working on behalf of the CCP’ [Chinese Communist Party] and could lead to direct or indirect support for the CCP’s armed wing, the People’s Liberation Army”.
Amid rising tensions between Washington and Beijing, McKinsey’s relationships, contracts and loyalties are likely to continue to draw attention.
The firm remains in the news. In February 2021, McKinsey reached nearly $600 million in legal settlements with state attorneys general. Why? The platinum-plated powerhouse reportedly helped Perdue Pharma “turbocharge” opioid sales. The plaintiffs alleged that “McKinsey sold its ideas to…Purdue Pharma…from 2004 to 2019, including before and after Purdue’s 2007 guilty plea for poor brand image. »
McKinsey also counts the United States Food and Drug Administration among its clients. But this is only the beginning. To quote members of Congress, on at least four occasions the company may “have passed on nonpublic information based on its relationship with the FDA or discussed its willingness to do so” with Purdue Pharma.
Bogdanich asks, “What does it mean when you have an opioid manufacturer offering opioids in the middle of an epidemic?”
Since 1999, opioid-related deaths have increased more than fivefold. In two decades, opioids have killed more than 450,000 people in the United States. Life expectancy is down and it’s not just because of Covid. Death by despair rises.
In 2020, McKinsey apologized for its involvement with Purdue Pharma, “recogniz[ing] that we had not sufficiently acknowledged the epidemic unfolding in our communities or the terrible impact of opioid abuse.”
McKinsey also counted among its clients Juul Labs – the vaping company and bane of teachers, moms and dads – charging it between $15 million and $17 million. His most important work for Juul was responding to an FDA crackdown on youth vaping.
Childhood addiction can be profitable – until it’s not. In September, Juul and more than 30 state attorneys general reached a $438.5 million settlement. The electronic cigarette manufacturer has not admitted his guilt. McKinsey was not involved in the settlement. Juul is on the verge of bankruptcy.
Bogdanich and Forsythe focus on another “long-standing” McKinsey policy – simultaneously serving competing clients with “competing interests” as well as “counterparties in merger, acquisition and alliance opportunities.” Clearly, McKinsey can end up on both sides of deals.
Self-monitoring works – until it doesn’t. Unlike the constraints that govern lawyers, the rules for consultants, if any, are porous and less rigid. Last month, South African prosecutors indicted McKinsey on unspecified charges related to the alleged looting of Transnet, the state-owned rail freight monopoly.
“We believe the charges against our office in South Africa are without merit and we will defend ourselves against them,” a McKinsey spokesperson replied.
Regardless of the outcome of the case, McKinsey’s experience in South Africa stands as a study of the perils posed when governments offload governmental functions onto non-state actors.
McKinsey will face intense scrutiny. Again, it is unclear whether work like that of Bogdanich and Forsythe can or will lead to change. McKinsey’s services remain in demand. Passionate college and trade school students line up to try to snag the brass ring.
Speaking to Bogdanich and Forsythe, a former McKinsey consultant put the scope of the business into perspective. Forget the secret cabals, “the illuminati, the lizards or the globalists,” he said. Instead, “there’s… McKinsey.”