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McKinsey's reputation

Unwanted attention for a discreet firm

Mar 2nd 2011, 12:41 by R.L.G. | NEW YORK

RAJAT GUPTA was the boss of McKinsey, the world’s most famous consulting house, from 1994 to 2003. He parlayed the connections he made in that powerful shop, which advises firms on big decisions like restructuring and buying other firms, into a number of plum perches afterwards. He advises the United Nations’ secretary-general on management, is the chairman of the International Chamber of Commerce, co-chair of the American India Foundation, and sits on several boards.

Now the SEC has charged Mr Gupta with using those board positions illegally. What might the allegations mean for McKinsey? The alleged incidents took place after Mr Gupta’s time running the consultancy. But the firm (or “the Firm”, as its employees like to call it) has a proud tradition of advising bosses both expertly and discreetly. Its consultants almost never even divulge their clients’ identities. Marvin Bower, who ran McKinsey in the 1950s and 1960s, fought to have consulting considered a profession like law and accounting, with the training, prestige and adherence to ethics that professionals pride themselves on.

For the former boss of such a firm to be found double-dealing would deal a more profound reputational blow than the usual insider-trading scandal. Traders and hedge-fund types are expected to scrap for every bit of momentary advantage to make their money. It’s rarely a shock, then, when the boiler-room pressure occasionally blows through legal safeguards. But elite consultants, and McKinsey foremost among them, consider themselves in a different class.

McKinsey is unlikely to suffer any immediate disaster. But its rivals, the hungry two other top-tier consultancies Bain & Co. and the Boston Consulting Group, are surely gleeful today, and will get to work seizing whatever advantage they can tomorrow.

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willstewart wrote:
Mar 2nd 2011 12:54 GMT

'discreet' I think - unless there is some clever word-play!

Nicolas.V wrote:
Mar 2nd 2011 1:31 GMT

"McKinsey is unlikely to suffer any immediate disaster. But its rivals, the hungry two other top-tier consultancies Bain & Co. and the Boston Consulting Group, are surely gleeful today, and will get to work seizing whatever advantage they can tomorrow."

As a leader McKinsey has been pulling the market upwards, creating room in its sillage for the other consultancies (top-tier + and others as well). This looks like a blow to the entire profession, isn't it?

davidzet wrote:
Mar 2nd 2011 2:26 GMT

Maybe McKinsey can empower a flow process that creates highly-leveraged footwork into their bottom-up synergies?

RoyFan51 wrote:
Mar 2nd 2011 3:55 GMT

In the world of commerce it is getting increasingly difficult to be surprised by this type of news, becoming a stretch to believe that a preponderance of firms are being run by ethical individuals. The trail of deception and greed is littered with the bodies of naive victims, lives destroyed, hard earned savings stolen by the likes of Madoff, Lay, and now, perhaps, Gupta.

It is a sad but true fact that governments the world over need to keep such a close eye on business conduct. Unfortunately, corporations, hedge funds, and other like organizations have proven over and over and over again that they cannot be trusted to police themselves. The rot, the corruption, the greed is just too deep, too widespread to ignore.

johntoronto wrote:
Mar 2nd 2011 4:49 GMT

Let's not forget that Jeffrey Skilling was a prize alumnus of McKinsey, so this is not surprising. Also, please note that McKinsey would have wasted their tme trying to get consulting classified as a profession - there are no longer any professions, ony businesses. As a former Chartered Accountant I can tell you that the accounting business is doing very well, but the accounting profession - no longer in existence

lecycliste wrote:
Mar 2nd 2011 10:35 GMT

corruption .... is not rarer in the west .... just shared by a larger plutocracy. I assume most Economist writers don't earn million dollar bonuses. They should perhaps speak out a touch more often at the lack of prosecution at anyone involved in the many frauds during the 2008 crash. The do us all a disservice otherwise.

hikeandski wrote:
Mar 3rd 2011 12:21 GMT

This situation will probably cost McKinsey dearly, and the others less so. Their reputations have all been damaged and justifyingly so. It will be interesting to watch this case unfold and see how it ends up.

Mar 3rd 2011 12:57 GMT

Assumption of guilt is an atrocious thought. It stifles the truth we all seek. The article is premature and not befitting of the Economist.

Mar 3rd 2011 4:55 GMT

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In this blog, our correspondents respond to breaking news stories and provide comment and analysis. The blog takes its name from newsbooks, the 16th-century precursors to newspapers, which covered a single big story, such as a battle, a disaster or a sensational trial

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