McKinsey & Company: Semper Fi

The New York Times obtained a copy of McKinsey & Company from 2010, the high powered consulting firm compared its 90-plus-years of doing business as akin to the Marine Corps, the Roman Catholic Church, and the Jesuits. The report describes McKinsey as “analytically rigorous, deeply principled seekers of knowledge and truth.” However, actions do speak louder than words and McKinsey is an amoral technician. McKinsey pushes the envelope in its interpretations of the law. They elude illegality, but their actions feel slippery. Here is a summary:

Federal bankruptcy rules require that financial consultants and advisors in bankruptcy (generally Chapter 11) proceedings. Yet, as documented on this website, McKinsey paid an $11 million fine after it finally revealed that its retirement fund held investments in the companies involved or affected by the restructurings and debt resolutions in those bankruptcies. For example, McKinsey’s retirement fund held interests in two hedge funds that were creditors of GenOn Energy Inc. Yet, McKinsey served as an adviser in the Chapter 11 bankruptcy of that company. Bankruptcy rules require advisers to disclose all interests that may be a conflict of interest. McKinsey did not disclose its retirement fund’s investments in the hedge fund, let alone the hedge funds’ interests. “Not a problem,” was McKinsey’s take because it did not own any interest. Pure balderdash that those working with GenOn’s outcomes could benefit or be harmed by its bankruptcy restructuring. De minimis, said they.

McKinsey provided advice to Janssen Pharnaceuticals on how to market opioids to increase sales. The states of Oklahoma, Massachusetts, and New Jersey used McKinsey records to help build its case that the company engaged in irresponsible marketing of its fentanyl patch. McKinsey also advised Purdue Pharmaceutical on how to “turbocharge” its sales of OxyContin. McKinsey assured that its work supported” the legal prescription and use of our clients’ products” and that it was no longer “advising clients on an opioid-specific business on a global basis.” Does that mean they advise on a local or national basis? No worries, however, when an executive for the company was asked about its aggressive marketing plan using the language from McKinsey’s advice, McKinsey went under the bus. Twice the executive said that the marketing plan consisted of “McKinsey’s words,” not ours. However, McKinsey was not fired, and, in fact, is still used by Janssen today for “different projects.” Nothing illegal, just amoral.

When doing government work at Rikers, a McKinsey partner told government officials and members of his team to use Wickr, a messaging site that automatically deletes messages under a timetable set by the users for hour or days. Certainly avoids all those public records requests on the project — the records automatically disappear. Not illegal, but an interesting approach to transparency on government work.

McKinsey worked for Boeing exploring options for obtaining titanium (in short supply in 2006) for its planes. McKinsey came up with the idea of Boeing investing in a titanium mine in India and thus eliminating the suppliers and thereby obtain titanium at the source. There was a McKinsey PowerPoint slide on a potential investment in a mine in India in cooperation with a Ukrainian oligarch that would require influencing eight government officials, listed in the slide. The partner encouraged Boeing to “respect traditional bureaucratic processes, including the use of bribes.” McKinsey responded by saying that it did not encourage violation of the FCPA, but declined to provide the full slide set on the presentation of the mining opportunity. Let’s see, Ukraine, India, and a mine involved together in an investment in India. What could possibly go wrong?

The list could go on with the power company in South Africa, and the mess with the GSA and contract pricing rules that McKinsey got changed in its favor, something that the OIG concluded “violated requirements governing ethical conduct.” Not illegal, amoral.

Yes, onward march, ye deeply principled consultants seeking knowledge and truth. Just be sure to put it all on Wickr.

About mmjdiary

Professor Marianne Jennings is an emeritus professor of legal and ethical studies from the W.P. Carey School of Business at Arizona State University, retiring in 2011 after 35 years of teaching undergraduate and graduate courses in ethics and the legal environment of business. During her tenure at ASU, she served as director of the Joan and David Lincoln Center for Applied Ethics from 1995-1999. In 2006, she was appointed faculty director for the W.P. Carey Executive MBA Program. She has done consulting work for businesses and professional groups including AICPA, Boeing, Dial Corporation, Edward Jones, Mattel, Motorola, CFA Institute, Southern California Edison, the Institute of Internal Auditors, AIMR, DuPont, AES, Blue Cross Blue Shield, Motorola, Hy-Vee Foods, IBM, Bell Helicopter, Amgen, Raytheon, and VIAD. The sixth edition of her textbook, Case Studies in Business Ethics, was published in February 2011. The ninth edition of her textbook, Business: lts Legal, Ethical and Global Environment was published in January 2011. The 23rd edition of her book, Business Law: Principles and Cases, will be published in January 2013. The tenth edition of her book, Real Estate Law, will also be published in January 2013. Her book, A Business Tale: A Story of Ethics, Choices, Success, and a Very Large Rabbit, a fable about business ethics, was chosen by Library Journal in 2004 as its business book of the year. A Business Tale was also a finalist for two other literary awards for 2004. In 2000 her book on corporate governance was published by the New York Times MBA Pocket Series. Her book on long-term success, Building a Business Through Good Times and Bad: Lessons from Fifteen Companies, Each With a Century of Dividends, was published in October 2002 and has been used by Booz, Allen, Hamilton for its work on business longevity. Her latest book, The Seven Signs of Ethical Collapse was published by St. Martin’s Press in July 2006 and has been a finalist for two book awards. Her weekly columns are syndicated around the country, and her work has appeared in the Wall Street Journal, the Chicago Tribune, the New York Times, Washington Post, and the Reader's Digest. A collection of her essays, Nobody Fixes Real Carrot Sticks Anymore, first published in 1994 is still being published. She has been a commentator on business issues on All Things Considered for National Public Radio. She has served on four boards of directors, including Arizona Public Service (1987-2000), Zealous Capital Corporation, and the Center for Children with Chronic Illness and Disability at the University of Minnesota. She was appointed to the board of advisors for the Institute of Nuclear Power Operators in 2004 and served on the board of trustees for Think Arizona, a public policy think tank. She has appeared on CNBC, CBS This Morning, the Today Show, and CBS Evening News. In 2010 she was named one of the Top 100 Thought Leaders in Business Ethics by Trust Across America. Her books have been translated into four different languages. She received the British Emerald award for authoring one of their top 50 articles in management publications, chosen from over 15,000 articles. Personal: Married since 1976 to Terry H. Jennings, Maricopa County Attorney’s Office Deputy County Attorney; five children: Sarah, Sam, and John, and the late Claire and Hannah Jennings.
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