McKinsey & Company

This article is part of the Health Portal project of Spinwatch.

McKinsey & Company is a global management consultancy company, particularly advising senior management of almost all of the most powerful corporations (much of the Fortune 100) as well as a number of governments. The company operates in 50 countries and made $6 billion in 2008.

Company policies

McKinsey is at the top of its field and has maintained its strong reputation for advancing the interests of its clients partly through strict and ruthless employment rules and organisational strategy. One such rule is 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 does not operate as a corporation, but instead as a partnership, with no executive board. This has the effect of making the company less accountable for the mistakes/dealings of its employees than companies with a more directly overseeing board.

Another unique policy is their non-exclusivity, whereby they will 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. it also gives McKinsey the potential to play companies off against each other.

Finally, the company has been accused of 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."

The article goes on to examine how the firm contributed to and profited from the collapse of Railtrack in 2002, after advising them to limit infrastructure repair, which resulted in accidents and their ultimate demise:

Railtrack is a good example. Former chief executive Gerald Corbett has links with former board member and Tory MP Archie Norman, an ex-McKinsey man. There is a link with Kingfisher chief Sir Geoff Mulcahy, who last year appointed Mr Corbett to run Woolworths, until recently owned by Kingfisher. And Mr Norman was once Sir Geoff's finance director at Kingfisher. Taking things a step further, Kingfisher is a big customer of McKinsey, and the retail group's former chairman, Sir John Banham, is a former McKinsey partner.

Confused? This is exactly the sort of tangled web of contacts that McKinsey is expert at exploiting. And once it has been paid millions to create something, it can knock it down again, as is about to happen at Railtrack. In the late 1990s Mr Corbett commissioned McKinsey to devise a blueprint for the company. The central recommendation that came out 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.

Vision 20/20: exacerbating poverty in Andhra Pradesh

In 2002 McKinsey were contracted by the Andhra Pradesh government to create a development plan which would bring them into the global economy. The document they produced, entitled 'Vision 20/20, cost the Andhra government £3 million and advocates the industrialisation of farming and the influx of energy intensive industries to the region, boasting of India's exceptionally cheao wage labour (e.g $0.24/hour for textiles manufacture). The Department for International Development (DfID) offered £65 million to the project, which would benefit British corporations and industrial interests, but arguably exacerbate real poverty in the area. According to a Corporate Watch article a DfID spokesman said:

'Vision 20/20 is going ahead…Our aim is to take farmers out of the poverty they and their families have been in for centuries. The only way to do so is by modernisation, commercial consolidation of farms and the introduction of up to date farming methods, including the use of pesticides and machines and GM crops.'

In response the International Institute for Environment and Development, the University of Hyderabad and other bodies, created a 'citizens jury' which analysed the evidence around the Vision 20/20 strategy and unanimously rejected it. Their objections included claims that 20 million farmers would lose their land and livelihoods and fail to find other employment (being of lower castes); that there would be mass displacement; environmentally and socially destructive farming practices; bias towards export crops and goods at the expense of the local economy.

Corporate watch note the implicit bias in the involvement of McKinsey, who represent large corporate interests and help them to maximise profits, in developing a poverty alleviation plan, especially at great expense (£3m) to the local government, money which could arguably have gone some way towards really alleviating the poverty in the state.

Pushing mining and metals in East India

McKinsey's report 'Turning the minerals and metals potential of eastern India into a gold mine' suggests that exploiting the deposits (mostly bauxite, coal and iron ore) in three East Indian states - Chhattisgarh, Jharkhand and Orissa could lead to an 'unprecedented economic boom'. However, they note that;

Capturing this potential however will require a concerted and coordinated effort by industry players and the government.'

This area of East India contains some of the largest concentrations of Scheduled tribes, and reserved forest in India, and has already been the subject of major controversy over mining and refinery projects which have destroyed forest reserves, displaced tribal communities and been approved despite massive local resistance. Felix and Padels book 'Out of This Earth: East India Adivasis and the Aluminium Cartel' documents mining and metals developments in these states highlighting the clash of cultures between companies and the Government- looking for profit, and the needs of local people, who's livelihoods are invariably left in tatters by the health, environmental, social and economic ill-effects of mining projects. The book documents hundreds of environmental and human rights abuses, and collaboration between the legal system, companies, foreign aid agencies, consultancies and the government which have led to illegal and damaging projects.

McKinsey's report recommends; reducing clearance ands approval time and hurdles for mining projects, de-regulating the mining sector and privatising government mining companies and bodies, creating faster and cheaper infrastructure, providing cheaper power supply (coal or hyrdo-power). Their more detailed recommendations include creating 'Special Mining Zones' where conservation areas such as reserved forest are de-registered.

Enron dealings

McKinsey were employed by ex-McKinsey employee and CEO Jeffery Skilling in 2000 and was key in Enron's massive growth and diversification in that year. The firms dealings with Enron were kept almost totally secret in the media though McKinsey employees attended Enron board meetings and public appearances. Later, rumours suggested that McKinsey's may have come up with the 'off-balance-sheet' accounting strategy led to Enron's downfall.

Connections to Westminster

A 2002 Independent newspaper article calls McKinsey the "ultimate old boys' network" and details some of their connections to Whitehall:

Matthew Elson, a former McKinsey senior partner, has become transport adviser in the Downing Street Policy Unit. Also working on transport is Nick Lovegrove, another senior McKinsey partner. He has agreed to work for nothing with his old friend Lord Birt, the former BBC director-general, on a similar transport study.

It's not the first time Mr Lovegrove, who would normally charge clients well over £1,000 a day, has offered his services to the Government for free. In 1998 he wrote a report on productivity that formed the backbone of Lord Falconer's reforms to the town and country planning system.

Another ex-McKinsey partner drafted into Lord Birt's "Forward Strategy Unit" is Adair Turner. He is a former head of the Confederation of British Industry, which boasts three past and one present McKinsey-trained director-generals.

Ex McKinsey director makes $1.75 for illegal Galleon tips

In January 2010 Anil Kumar, a former McKinsey director, admitted in Court to accepting about $1.75m for passing confidential tips on McKinsey client companies to Raj Rajaratnam, founder of the Galleon hedge fund, who is accused of heading up an insider trading scheme on Wall Street. Kumar allegedly earned $2.6m through the scheme, while Rajaratnam may have made $36m in illicit profits due to Kumars advice.

History

According to Forbes Fortune website:

McKinsey & Co. has been provided strategic advice to corporations and other organizations since 1926, when James O. McKinsey, a University of Chicago professor, opened a consulting office in Chicago. Marvin Bower joined the firm in 1933 and became the firm's head after McKinsey left to become chief of Marshall Field & Co. Bower established the firm's core principles and created the practice of management consulting. McKinsey opened its first international office in London in 1959, and has expanded steadily since. It now has about 90 offices in over 50 countries, making it the biggest pure consulting firm in the world. The firm is among the largest hirers of newly minted MBAs in the United States.

People

Senior managers/directors

Due partly to the company structure, which lacks an executive board, there is very little information on senior employees on the firm's website.

In 2009:

• Ian Davis CEO (age 58)
• Dominic Barton Managing Director

Alumni

A 2008 USA Today article reported that McKinsey were the top company worldwide for producing CEOs from its alumni.

Some of McKinsey notable alumni are:

• Louis Gerstner, Jr. - former chairman and CEO of IBM and chairman of The Carlyle Group,
• William Hague - Ex-Tory leader
• James McNerney - chairman and CEO of Boeing,
• Helmut Panke - former chairman and CEO of BMW AG,
• Christopher Sinclair - former chairman and CEO of PepsiCo,
• James Gorman - Co-President of Morgan Stanley,
• Stephen Green - chairman of HSBC,
• Jonathan Schwartz, CEO of Sun Microsystems,
• Jeffrey Skilling, former (now incarcerated) CEO of Enron,
• Marius Kloppers - CEO of BHP Billiton,
• Bobby Jindal, current Governor of Louisiana,
• Vittorio Colao, CEO of Vodafone.
• Chelsea Clinton, daughter of former President and present Secretary of State Bill and Hillary Rodham Clinton.

McKinsey Quarterly

McKinsey publish a quarterly journal giving advice on market exploitation in various areas. Their 'Food and Agriculture' section contains articles on supermarkets, the brewing industry, genetic modification and selling packaged food to the Chinese.

Contact

55 East 52nd Street New York NY 10022 Phone: 212-446-7000 Fax: 212-446-8575

http://www.mckinsey.com

Resources

See: The Corporate Capture of the NHS