McKinsey part 3 – from climate change to the NHS

In June 2019 McKinsey arrived at the US Aspen Ideas Festival. Their major speaker was Dickon Pinner, co-founder of the company’s sustainability practice.

Bogdanich and Forsythe report that he delivered a lecture inevitably illustrated by PowerPoint slides charting carbon dioxide levels going back 350,000 years and predicted what we all know (except for the intentionally disbelieving) that there was a case for urgent action.  As McKinsey says on its website “We are committed to protecting the planet.”

The FT’s Gillian Tett, who chaired the Aspen session, asked “have you tried to take this to Washington”? Have you tried to take it to the White House?”

Pinner said no mouthing the usual McKinsey platitude: “I think from our point of view we don’t really have a role to play on the policy side.”

Three weeks after this a departing McKinsey consultant, Erik Edstrom, took aim at the ‘feel good initiatives’ that companies use to help greenwash. He didn’t single out specific companies but rather McKinsey itself in an excoriating email which included the following: “I believe it’s time for McKinsey to take precedent-setting action around client selection.”

He said McKinsey regularly took on clients who brought harm to others and was an ‘amoral institution’. “As an organisation McKinsey seems to talk a lot about values and principles without taking a valued or principled stand for much of anything.”.

And what clients: Helping an Asian client to increase coal production by 26%; 17 mining and fossil fuel clients from which McKinsey earned hundreds of millions of dollars; Exxon Mobil, Chevron, BP, Royal Dutch Shell, Gazprom and Qatar Petroleum; and, the Canadian company, Teck, responsible for 73 megatons of carbon dioxide in 2019 – equivalent to about 10% of Canada’s total carbon emissions that year.

How did McKinsey rationalise this? McKinsey managing partner, Bob Sternfels, said: “Companies can’t go from brown to green without getting a little dirty. And if that means some mud being thrown at McKinsey so be it. To us the case is straightforward. The bigger the player the bigger the possible reductions. Abandoning those that are contributing the most to emissions doesn’t advance the cause.”

Bogdanich and Forsythe also devote a chapter to McKinsey’s role in the securitising of credit and their recommendation to weaken part of the Sarbanes-Oxley Act designed to prevent the type of fraud that bankrupted Enron.

McKinsey also helped banks restructure and played a role in the development of what became the toxic debt that blew up the financial system in 2008.

Paul Volker, former Fed Chairman, said: “in his day he knew a bank was headed for trouble when it grew too fast, placed the board chairman as the head of the art committee, and hired McKinsey & Co to do an incentive compensation study for senior officers.”

McKinsey consultants Tom Peters and Bob Waterman, in their best-selling book In Search of Excellence warned against recommended McKinsey corporate models as did a McKinsey consultant Lowell Bryan who was also percipient enough to promote how technology could transform banks and other companies. Unfortunately, he was also a big proponent of securitisation.

America had come a long way from Jimmy Stewart’s It’s a wonderful Life film.

The last two chapters detail McKinsey’s work with Saudi Arabia and the NHS in the UK.

In Saudi Arabia they had small beginnings which just got bigger and bigger including getting close to MBS and his plans while also working on a social media mining project which eventually led to a prolonged court case and allegedly helped the government identify and act against dissidents including Jamal Kashoggi.

At the London Olympics opening ceremony the NHS took centre stage. From its founding by Aneurin Bevan it became Britain’s most loved (along with the Queen) institution.

Today it is a mess. The authors say: “Britain’s leaders have enacted major changes to the NHS, channelling a small but increased share of the country’s health care spending to the private sector and opening the door for American companies to enter the market. …Two of McKinsey’s biggest American client’s benefited from them.”

In doing so McKinsey joined the inbred Tory club, dubbed ‘the chumocracy’, which benefitted so many of the few as privatisations, COVID contracts and other rorts flourished.

And of course, we shouldn’t forget McKinsey and Scott Morrison. When he suddenly recognised he needed a climate policy did he turn to Treasury, the CSIRO or the dozens of well-qualified expert academics to produce the policy?

Of course not, he just employed McKinsey.