Apologies in advance if it seems like I’m beating the proverbial dead horse railing yet again about McKinsey’s immoral business practices, but it turns out the revered consulting firm is even more despicable than was publicly known. I’ll stop writing about McKinsey if and when the New York Times stops with their Pulitzer Prize worthy exposes on what is decidedly one of the world’s most ethically challenged business enterprises.
In today’s installment, the Times revealed that for decades McKinsey worked with Big Tobacco and advised Juul, the e-cigarette company. In the greater scheme of McKinsey’s abhorrent behaviors, the firm’s work helping tobacco companies market and sell cancer causing cigarettes pales against the firm’s consulting work for Purdue Pharma advising the opioids peddler how to “turbocharge” the sales of its addictive OxyContin, a feel-no-pain prescription drug also known as “poor man’s heroin.”
The Times previously revealed that McKinsey had its consulting tentacles in all aspects of pharmaceutical narcotics sales, ranging from the harvesting of the raw materials to devising sophisticated marketing strategies on how to enlist doctors to become narcotics prescribers. As the opioid crisis progressed, McKinsey also advised U.S. agencies on how to mitigate the fallout, while simultaneously advising its pharmaceutical clients on how best to deal with those agencies.
Lest you think that McKinsey wasn’t cognizant of the societal harm the firm unleashed, the firm prepared spreadsheets estimating how many customers of companies, including CVS and Anthem, might overdose taking OxyContin. The Times said CVS and Anthem were among McKinsey’s biggest customers.
What made my eyes bulge in the Times’ latest report is that Juul paid McKinsey $15 million to $17 million for “less than two years work.” As well, from 2018 through early 2020, McKinsey made “at least” $45 million in fees from four tobacco companies, including $30 million from Altria alone.
The Times just a few days ago reported that Providence, a hospital chain based in Washington state, paid McKinsey “at least” $45 million in 2019 to help turbocharge the revenues of the supposed “nonprofit.” Acting on McKinsey’s advice resulted in Providence running afoul with state regulators; Washington’s attorney general Bob Ferguson has alleged Providence committed “thousands of Consumer Protection Act violations” instructing its patient-facing staff to aggressively seek bill payments, even from those who were eligible for free medical care.
How is it that McKinsey billed a supposed hospital “nonprofit” $45 million for possibly one year’s work, and yet billed four tobacco companies the same amount for possibly two years work? Presumably, McKinsey assigned a much bigger account team to Providence, but I’d welcome knowing just how much bigger and how much more hourly work was performed and by whom.
It’s also a wonder how McKinsey could advise four clients in a highly competitive industry. I’m sure the firm insisted that it maintained a Chinese Wall as impenetrable as Fort Knox, but when I ran my PR firm, I’d never retain a company that was advising my competitors.
I was amused by the Times’ disclosure that internal McKinsey documents revealed that Bob Sternfels, now McKinsey’s managing partner, played an administrative role on the Juul account, but yet a McKinsey spokesperson insisted that while Sternfels knew a senior Juul executive, he didn’t work on the account. Just a hunch, but I’ll bet Sternfels helped pitch the business and promised his personal involvement, which possibly is why his name showed up on the Juul account documents.
What saddened me in the Times story was the reminder that America was once a country where corporate wrongdoing, particularly activities that harmed consumers, sparked outrage from those in authority.
As noted by the Times, in 1992 federal judge H. Lee Sarokin was so angered after reading internal tobacco industry documents produced in a liability lawsuit that he declared, “Who are these persons who knowingly and secretly decide to put the buying public at risk solely for the purpose of making profits and who believe that illness and death of consumers is an appropriate cost of their own prosperity!”
There was also federal judge Gladys Kessler, who branded cigarette makers racketeers, saying the industry had “marketed and sold their lethal product with zeal, with deception, with a single-minded focus on their financial success, and without regard for the human tragedy or social costs that success extracted.”
Judge Sarokin retired from the United States Court of Appeals in 1996; according to Wikipedia, Kessler is an inactive Senior United States District Judge for the District of Columbia.
I can’t recall reading in recent years U.S. judges expressing moral outrage with the eloquence of Sarokin and Kessler. To appreciate the severity of the decline of America’s judicial system, read this story about Judge Kahlilia Davis of Detroit’s 36th District Court, who worked only 15 months in the nearly six years since she was elected to her $139,000 a-year-job. Even by Michigan’s lowly standards, Davis is a remarkable piece of work.
Where I have a disconnect with the Times is the publication’s claim that McKinsey’s clients include “many of the most respected blue-chip companies.” It’s unfortunate that the Times didn’t identify the blue-chip companies it deems respected because I, an avid follower of business, can readily name any.
There was a time that American Express immediately came to mind, but that company has fallen mightily. As reported by the Wall Street Journal, AmEx is under investigation by the IRS for pitching to small business customers a tax break “based on a shaky interpretation of tax law.” The investigation appears to have been sparked by a whistleblower report filed with the IRS alleging that AmEx knowingly persuaded business owners to underreport their income and taxes. The Journal says AmEx’s tax avoidance pitch was part of a strategy to persuade business owners to sign up for costly payment services.
AmEx reportedly is a longtime McKinsey client.
I once perceived Ford as a stand-up outfit but a company that knowingly sold cars with faulty transmissions, deliberately lied in its advertising, and whose product quality is so poor that this year alone it has issued more than 50 safety recalls, can’t be deemed respectable.
In finance, Goldman Sachs is the biggest name, but how respectable is a company whose litany of alleged wrongdoings includes a $2 billion settlement for its role in a Malaysia corruption scandal.
Kaiser Permanente was once the gold standard of U.S. healthcare, but the DOJ last October accused the company of defrauding Medicare of $1 billion.
IBM once commanded considerable admiration and respect, but no longer, possibly because of its ageism discrimination.
Here’s a link to the company’s in Vanguard’s Fortune 500 ETF; I’d welcome knowing companies that adhere to the lofty values they all claim to uphold.
As much as I admire the Times’ reporting McKinsey, the publication deservedly no longer commands the respect or influence it once did, thanks to its biased and often discredited journalism. The publication’s rabid anti-Trump focus is apparent even its McKinsey coverage.
The Times notes that “in four years under President Donald J. Trump, McKinsey took in $77 million in consulting contracts with the F.D.A.” The story doesn’t offer a comparison to the value of F.D.A. contracts McKinsey was awarded during the Obama years, so the Trump reference was gratuitous, particularly as it isn’t clear that the Trump Administration had any active involvement in the awarding of F.D.A. contracts.
The tragedy of the Times’ dogged reporting on McKinsey’s questionable business practices is that it won’t make a difference. McKinsey’s lucrative consulting business will grow unabated because the harsh truth is that ethics and morals in business are no longer valued or appreciated.
The real genius of McKinsey is the firm’s early understanding and wholehearted embracement of this disheartening reality.