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McKinsey and Company

Website:

www.mckinsey.com/
Type:

Global Management Consulting Firm
Formation:

1926
Founder:

James McKinsey
Location:

Offices in 130 cities in 67 countries

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McKinsey & Company is a global management-consulting firm with offices in over 130 cities in 67 countries. 1 McKinsey generated over $12 billion in revenue in 2022, according to Forbes. 2

McKinsey consultants work in more than 20 different industries, including financial service, aerospace and defense, agriculture, education, automotive, energy, life sciences, and healthcare. 3 New York Times reporter Walt Bogdanich called McKinsey by far “the most powerful consulting firm in the world” in 2022. 4

McKinsey has been criticized for taking consulting jobs on both sides of public-policy disputes. The House Oversight and Reform Committee held a hearing in 2022 about McKinsey’s work with both U.S. health regulators and opioid drugmakers. Critics have suggested that McKinsey work for both the U.S. Department of Defense and Chinese state-owned enterprises may pose a national-security risk. 5

McKinsey paid almost $600 million in a 2021 settlement for advising a drug manufacturer how to sell more prescription opioid medications during a nationwide overdose crisis. 6

Leadership and History

McKinsey was formed in 1926 by James McKinsey, a University of Chicago professor. 7 By the mid-1950s, McKinsey had grown to just less than 100 consultants. 8

Bob Sternfels took the role of McKinsey the global managing partner in July 2021. 9 Sternfels joined McKinsey in 1994 and was its leader of the global Private Equity & Principal Investors Practice. 10

McKinsey has an elected board of directors that it calls its Shareholders Council. 11

CNBC reported that McKinsey recruits the “best and brightest,” and that its alumni head some of the world’s largest companies, such as Sundar Pichai at Google, James Gorman at Morgan Stanley, Jorgen Vig Knudstorp at The Lego Group, and Sheryl Sandberg at Facebook. 12

Bloomberg News reported in February 2023 that McKinsey intended to cut 2,000 jobs. The company’s workforce had grown from 28,000 in 2018 to 45,000 in 2023. 13

Criticism

National Security

McKinsey took on $851 million worth of consulting work with the federal government from 2008 to 2021 with the U.S. Department of Defense being the top client, generating nearly one-third of McKinsey’s government-derived revenue. 14

An NBC News investigation in 2021 found that McKinsey had also advised Chinese state-run enterprises that supported the Communist country’s naval buildup in the Pacific, while also having a key role in extending China’s influence around the globe. 15

McKinsey’s simultaneous work for the U.S. government and for Chinese state-owned enterprises has drawn criticism. Marianne Jennings, a professor of legal and ethical studies in business at Arizona State University, told CNBC: “I can’t see how you could work in the areas they’re working in for the Defense Department and at the same time have the extensive connections in China, and not be compromised.” 16 She further said there was a “great deal of risk” for the United States due to McKinsey’s consulting with both U.S. and China. 17

Playing Both Sides of The Fence

The House Oversight and Reform Committee questioned Sternfels, McKinsey’s top manager, in 2022 about the consulting firm’s work with U.S. health regulators and opioid drugmakers. 18

The committee’s investigation found that 22 McKinsey consultants had worked both for the Food and Drug Administration as well as an opioid manufacturer. 19 McKinsey consultants advised the drugmaker how to increase its sales of opioid drugs, while consulting with the U.S. Food and Drug Administration (FDA) on overhauling its drug-safety division. 20

Then-U.S. Rep. Carolyn Maloney (D-NY) said McKinsey should not be setting strategy for both drug companies and the FDA, characterizing it as advising “both the fox and the hen-house.” 21

Employee Scandals

Puneet Dikshit, a former partner with McKinsey & Company, was sentenced in April 2022 to 24 months in prison 22 after he pled guilty to securities fraud in connection with an insider-trading scheme. 23 Goldman Sachs had hired McKinsey & Company as a consultant involving the purchase of GreenSky, a financial-technology company. 24 Dikshit used non-public information he gained as a consultant to trade GreenSky options in 2021 and made a profit of $450,000. 25

Rajat K. Gupta was the worldwide managing director of McKinsey. 26 Gupta was sentenced to two years in prison in 2012 for his involvement in an insider-trading scheme. 27 Gupta repeatedly disclosed nonpublic information that he obtained as a member of the board of directors of Goldman Sachs to a friend, with the understanding the friend would use that information to buy and sell securities. 28 The Securities and Exchange Commission imposed a $13.9 million penalty in 2013 against Gupta, who was also permanently barred from serving as an officer or director of a public company. 29

Anil Kumar, a former senior partner at McKinsey, was sentenced to two years of probation and ordered to forfeit $2.26 million for illegal insider trading. 30 Kumar gave nonpublic information stolen from McKinsey and its clients to the head of Galleon Group who then made trades based on that information. 31

New York COVID-19 Nursing-Home Deaths

In July 2020, the New York State Department of Health issued a controversial report that absolved then-Gov. Andrew Cuomo (D) and his administration of responsibility for what ProPublica characterized as the “soaring number of COVID-19 deaths” in New York’s nursing homes. McKinsey and Company provided data analysis for the report. 32

That New York State Department of Health report said that Cuomo’s March 2020 mandate ordering nursing homes to take recovering COVID-19 patients was not responsible for an increase in nursing-home deaths. The report blamed the increase on nursing-home staffers. 33

Lawmakers and healthcare experts criticized the report with ProPublica characterizing it as “deeply flawed,” and critics alleged that it was made to provide political cover for Gov. Cuomo and his staff. 34

The New York Times reported that Cuomo and his team rewrote the report to exclude the more than 9,000 residents in nursing homes who had died by June 2020. 35

Opioid Settlement

PBS reported that in early 2021, McKinsey “agreed to pay nearly $600 million  for its role in advising businesses on how to sell more prescription opioid painkillers amid a nationwide overdose crisis.” McKinsey paid $573 million of the $600 million settlement to 47 states, the District of Columbia, and five U.S. territories. 36

McKinsey’s role in the opioid crisis came to light when legal documents were made public during bankruptcy proceedings related to Purdue Pharma, the maker of OxyContin. The legal documents showed McKinsey worked with the drugmaker to boost sales of OxyContin even after the opioid epidemic became clear. 37

References

  1. [1] McKinsey & Company. About Us. Accessed May 29, 2023. https://www.mckinsey.com/about-us/overview/history-of-our-firm
  2. Forbes. McKinsey & Company. Accessed May 29, 2023. https://www.forbes.com/companies/mckinsey-company/?sh=2f063e1c24c1
  3. McKinsey & Company. Industries. Accessed May 30, 2023. https://www.mckinsey.com/industries
  4. Jerry Davich. “Book Takes Aim At ‘The McKinsey Way’”; The Times. Nov. 18, 2022. Accessed May 28, 2023. https://www.nwitimes.com/news/jerry-davich-gary-native-three-time-pulitzer-awardee-authors-book-taking-aim-at-worlds-largest/
  5. [1] Dan De Luce. Yasmine Salam. “Advising Both Chinese State Companies And The Pentagon, McKinsey & Co. Comes Under Scrutiny”; NBC News. Nov. 13, 2021. May 29, 2023. https://www.nbcnews.com/politics/national-security/advising-both-chinese-state-companies-pentagon-mckinsey-co-comes-under-n1283777
  6. Geoff Mulvihill. “McKinsey & Company Agrees To Pay Nearly $600 Million Over Opioid Crisis.” Associated Press. Feb. 4, 2021. Accessed May 28, 2023. https://www.pbs.org/newshour/economy/mckinsey-company-agrees-to-pay-nearly-600-million-over-opioid-crisis
  7. McKinsey & Company. About Us. Accessed May 28, 2023. https://www.mckinsey.com/about-us/overview/history-of-our-firm
  8. McKinsey & Company. About Us. Accessed May 28, 2023. https://www.mckinsey.com/about-us/overview/history-of-our-firm
  9. McKinsey & Company. “What’s Ahead For McKinsey? A Conversation With Bob Sternfels.” July 1, 2021. Accessed May 29, 2023. https://www.mckinsey.com/about-us/new-at-mckinsey-blog/whats-ahead-for-mckinsey-a-conversation-with-bob-sternfels
  10. Business Roundtable. About Us. Accessed May 29, 2023. https://www.businessroundtable.org/about-us/members/bob-sternfels-global-managing-partner-mckinsey-company
  11. McKinsey & Company. About Us. https://www.mckinsey.com/about-us/overview/our-leadership
  12. Jordan Malter. “McKinsey, A Secretive Consulting Powerhouse, Enters The Spotlight”; CNBC. June 5, 2019. Accessed May 29, 2023. https://www.cnbc.com/2019/06/04/how-mckinsey-consulting-created-its-powerful-alumni-network.html
  13. Sridhar Natarajan. “McKinsey Plans To Eliminate About 2,000 Jobs In One Of Its Biggest Rounds Of Cuts”; Bloomberg. Feb. 21, 2023. Accessed May 30, 2023. https://sg.finance.yahoo.com/news/mckinsey-plans-to-eliminate-about-2000-jobs-in-one-of-its-biggest-rounds-of-cuts-021048463.html
  14. Dan De Luce. Yasmine Salam. “Advising Both Chinese State Companies And The Pentagon, McKinsey & Co. Comes Under Scrutiny”; NBC News. Nov. 13, 2021. May 29, 2023. https://www.nbcnews.com/politics/national-security/advising-both-chinese-state-companies-pentagon-mckinsey-co-comes-under-n1283777
  15. Dan De Luce. Yasmine Salam. “Advising Both Chinese State Companies And The Pentagon, McKinsey & Co. Comes Under Scrutiny”; NBC News. Nov. 13, 2021. May 29, 2023. https://www.nbcnews.com/politics/national-security/advising-both-chinese-state-companies-pentagon-mckinsey-co-comes-under-n1283777
  16. Dan De Luce. Yasmine Salam. “Advising Both Chinese State Companies And The Pentagon, McKinsey & Co. Comes Under Scrutiny”; NBC News. Nov. 13, 2021. May 29, 2023. https://www.nbcnews.com/politics/national-security/advising-both-chinese-state-companies-pentagon-mckinsey-co-comes-under-n1283777
  17. Dan De Luce. Yasmine Salam. “Advising Both Chinese State Companies And The Pentagon, McKinsey & Co. Comes Under Scrutiny”; NBC News. Nov. 13, 2021. May 29, 2023. https://www.nbcnews.com/politics/national-security/advising-both-chinese-state-companies-pentagon-mckinsey-co-comes-under-n1283777
  18. Matthew Perrone. “Lawmakers Scrutinize McKinsey’s Opioid, FDA Consulting Work”; Associated Press. April 27, 2022. Accessed May 28, 2023. https://apnews.com/article/business-health-medication-opioids-congress-13b5c743257a04fc0eff23c4649f2003
  19. Matthew Perrone. “Lawmakers Scrutinize McKinsey’s Opioid, FDA Consulting Work”; Associated Press. April 27, 2022. Accessed May 28, 2023. https://apnews.com/article/business-health-medication-opioids-congress-13b5c743257a04fc0eff23c4649f2003
  20. Matthew Perrone. “Lawmakers Scrutinize McKinsey’s Opioid, FDA Consulting Work”; Associated Press. April 27, 2022. Accessed May 28, 2023. https://apnews.com/article/business-health-medication-opioids-congress-13b5c743257a04fc0eff23c4649f2003
  21. Matthew Perrone. “Lawmakers Scrutinize McKinsey’s Opioid, FDA Consulting Work”; Associated Press. April 27, 2022. Accessed May 28, 2023. https://apnews.com/article/business-health-medication-opioids-congress-13b5c743257a04fc0eff23c4649f2003
  22. U.S. District Attorney’s Office, Southern District Of New York. “Former McKinsey Partner Sentenced To 24 Months In Prison For Insider Trading Scheme. April 6, 2022. Accessed May 27, 2023. https://www.justice.gov/usao-sdny/pr/former-mckinsey-partner-sentenced-24-months-prison-insider-trading-scheme
  23. U.S. District Attorney’s Office, Southern District Of New York. “Former McKinsey Partner Sentenced To 24 Months In Prison For Insider Trading Scheme. April 6, 2022. Accessed May 27, 2023. https://www.justice.gov/usao-sdny/pr/former-mckinsey-partner-sentenced-24-months-prison-insider-trading-scheme
  24. U.S. District Attorney’s Office, Southern District Of New York. “Former McKinsey Partner Sentenced To 24 Months In Prison For Insider Trading Scheme. April 6, 2022. Accessed May 27, 2023. https://www.justice.gov/usao-sdny/pr/former-mckinsey-partner-sentenced-24-months-prison-insider-trading-scheme
  25. U.S. District Attorney’s Office, Southern District Of New York. “Former McKinsey Partner Sentenced To 24 Months In Prison For Insider Trading Scheme. April 6, 2022. Accessed May 27, 2023. https://www.justice.gov/usao-sdny/pr/former-mckinsey-partner-sentenced-24-months-prison-insider-trading-scheme
  26. Rajat K. Gupta. LinkedIn. Accessed May 28, 2023. https://www.linkedin.com/in/rajat2/
  27. U.S. Attorney’s Office, Southern District Of New York. “Former Chairman Of Consulting Firm And Board Director, Rajat Gupta, Sentenced In Manhattan Federal Court To Two Years In Prison For Insider Trading”; Oct. 24, 2012. Accessed May 28, 2023. https://www.justice.gov/archive/usao/nys/pressreleases/October12/GuptaSentencing.php
  28. U.S. Attorney’s Office, Southern District Of New York. “Former Chairman Of Consulting Firm And Board Director, Rajat Gupta, Sentenced In Manhattan Federal Court To Two Years In Prison For Insider Trading”; Oct. 24, 2012. Accessed May 28, 2023. https://www.justice.gov/archive/usao/nys/pressreleases/October12/GuptaSentencing.php
  29. Securities And Exchange Commission. “SEC Obtains $13.9 Million Penalty Against Rajat Gupta.”; July 17, 2013. Accessed May 28, 2023. https://www.sec.gov/news/press-release/2013-128-sec-obtains-139-million-penalty-against-rajat-gupta
  30. FBI. “Former McKinsey Senior Partner Anil Kamur Sentenced In Manhattan Federal Court For Illegal Insider Trading”; July 19, 2012. Accessed May 28, 2023. https://archives.fbi.gov/archives/newyork/press-releases/2012/former-mckinsey-senior-partner-anil-kumar-sentenced-in-manhattan-federal-court-for-illegal-insider-trading#:~:text=Preet%20Bharara%2C%20the%20United%20States,scheme%20in%20which%20he%20provided
  31. David Warsh. “Exploiting Chaos.” Boston Globe. Oct. 18, 1987. Accessed May 28, 2023.
  32. Joe Sexton. “Cuomo’s Nursing Home Scandal Raises Questions For One Of His Senior Aides”; Pro Publica. March 10, 2021. Accessed May 28, 2023. https://www.propublica.org/article/cuomos-nursing-home-scandal-raises-questions-for-one-of-his-senior-aides
  33. Bradford Betz. “McKinsey, Amid Opioid Scandal, Played Key Role In Report ‘Absolving’ Cuomo In Nursing Home Deaths”; Fox Business. Feb. 16, 2021. Accessed May 28, 2023. https://www.foxbusiness.com/politics/mckinsey-opoid-scandal-cuomo-nursing-home-deaths
  34. Joe Sexton. “Cuomo’s Nursing Home Scandal Raises Questions For One Of His Senior Aides”; Pro Publica. March 10, 2021. Accessed May 28, 2023. https://www.propublica.org/article/cuomos-nursing-home-scandal-raises-questions-for-one-of-his-senior-aides
  35. DeMicia Inman. “Cuomo Aides Hide Higher Deaths In Nursing Home Report: NYT”; Yahoo Sports. March 5, 2021. Accessed May 28, 2023. https://sports.yahoo.com/cuomo-aides-hide-higher-deaths-184900441.html
  36. Geoff Mulvihill. “McKinsey & Company Agrees To Pay Nearly $600 Million Over Opioid Crisis.” Associated Press. Feb. 4, 2021. Accessed May 28, 2023. https://www.pbs.org/newshour/economy/mckinsey-company-agrees-to-pay-nearly-600-million-over-opioid-crisis
  37. Geoff Mulvihill. “McKinsey & Company Agrees To Pay Nearly $600 Million Over Opioid Crisis.” Associated Press. Feb. 4, 2021. Accessed May 28, 2023. https://www.pbs.org/newshour/economy/mckinsey-company-agrees-to-pay-nearly-600-million-over-opioid-crisis
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