It's technically not a conflict of interest, as long as the revenue streams roll through different offices or partners. /s
Or as McKinsey puts it
> "across more than a decade of service to the FDA, we have been fully transparent that we serve pharmaceutical and medical device companies. McKinsey’s work with the FDA helped improve the agency’s effectiveness through organizational, resourcing, business process, operational, digital, and technology improvements. To achieve its mission, the government regularly seeks support from additional experts who understand both the government’s mission and the industries’ practices. We take seriously our commitment to avoid conflicts and to serve the best interests of the FDA."
In practice, just another example of questionable behaviour from McKinsey
Your example is an investment bank that was caught and fined for advising clients to buy toxic assets during the 2008 housing bubble, while it simultaneously unloaded the same assets.
Of course they too publicly claimed that wasn’t a conflict or even evidence of a conflict, but then the communications were leaked showing Goldman employees knew the assets were toxic and the company needed to push on them on customers to keep the price up while the bank liquidated its own positions.
When reviewing goverment grant proposals I am not allowed to review anything coming from the same university, even if I work in a completely different department/campus etc. same goes for conference reviews, but somehow if there is much more money involved the rules don't apply anymore?
Generally the rule for declaring a conflict of interest is not if you think that you have a conflict of interest, but if your role could be perceived as a conflict of interest. I would say this is clearly the case here.
Does Goldman sign contracts promising to disclose all potential conflicts of interest when they help with an IPO? Does Goldman have a history of violating those contracts and paying $30 million to settle the case? Does Goldman have a very recent documented history of corrupting government officials and leveraging them to make money?
I guess it wouldn't surprise me, but all those things are definitely true of McKinsey.
So-called firewalls at i-banks and consulting firms are routinely circumvented. These conflicts are self-policed and waivers are doled out more often than not
Consulting is more about long-term multi-year projects to shape things like policy (for regulators) or strategy (for companies).
IPOs are very transactional by nature.
The walls you speak of are usually between the trading side and the capital markets side of the firm, where there is very little overlap. In this case though, I would wager people who worked on the regulatory side were constantly being restaffed onto the pharmaceutical side and vice versa.
I'm pretty sure Goldman discloses that, and the probably exlains/demonstrates to the client their controls to enusre the areas stay seperate. Not disclosing it is at least a bit sketchy.
> “the Contractor agrees it shall make an immediate and full disclosure, in writing, to the Contracting Officer of any potential or actual organizational conflict of interest or the existence of any facts that may cause a reasonably prudent person to question the contractor’s impartiality because of the appearance or existence of bias.”
So "it should have been obvious" or "technically it wasn't a real conflict of interest" is really not a defense here.
> > “the Contractor agrees it shall make an immediate and full disclosure, in writing, to the Contracting Officer of any potential or actual organizational conflict of interest or the existence of any facts that may cause a reasonably prudent person to question the contractor’s impartiality because of the appearance or existence of bias.”
> So "it should have been obvious" or "technically it wasn't a real conflict of interest" is really not a defense here.
Exactly the key sentence that many people overlook is: "actual organizational conflict of interest or the existence of any facts that may cause a reasonably prudent person to question the contractor’s impartiality"
Like i said above it's not if you think you can be impartial it's if others might think you might not be impartial, in other words if they perceive that you could have a conflict of interest.
There is this TV show called Goliath, on Amazon. In the latest season, a drug company gives work to many attorneys, with the sole aim of preventing them from being on the opposite side later on. I had no idea this was a thing.
Companies do all kinds of shady shit to go around the law. They will push and stretch laws to the max, if there is profit to be made.
Though it would be naive on the side of the FDA to assume McKinsey didn’t advise some pharma companies. The list of Fortune 500 companies they don’t advise is probably shorter than the one they advise. That doesn’t excuse bad disclosure if it is the case, but it is hard to argue the FDA would have done anything differently.
I bet McKinsey also never told the Department of Transportation that it was working for both the DoT and major car manufacturers.
Executives senior enough to approve hiring McKinsey to study something, whether they're F500 CEOs or government agency heads, know full well that the top consulting firms are all advising their competitors, counterparties, and regulators/regulatees. The facts reported in this article would indeed be scandalous if they included evidence that the FDA team at McK was tipping the pharma teams on private FDA plans or discussions, but that is not the case. If anything, this case is merely illustrative of why major consulting firms have borderline-paranoid cultural norms around never discussing client work outside of the respective client team, even (and especially) to one's own colleagues at the firm who are not staffed on said team.
Did anybody here read the article? I don't want to keep pasting the same quotes on every comment, but McKinsey just paid $30 million to settle a case where they did the exact same thing to the Department of Justice. Why would they do that if this is normal and nobody cares? The contract language is very clear: they have to disclose potential conflicts (even if "everybody already knows"), and they didn't.
>but McKinsey just paid $30 million to settle a case where they did the exact same thing to the Department of Justice. Why would they do that if this is normal and nobody cares?
Yes and?
This is normal. Nobody cares as long as you do it right. Just because the desk that deals with DOJ did it wrong doesn't mean the desk that deals with FDA did. You see these kinds of complicated, seemingly conflicting, relationships in high finance all the time. In practice it's a non-issue because of how these companies are structured and because they try to keep clients at arms length as a matter of routine business. The business relationship here is very similar to one that AWS and Azure may have with a 3rd party datacenter contractor. Sure one could pay the contractor for tips but in practice that doesn't happen except very rarely because of how everything is structured.
> Just because the desk that deals with DOJ did it wrong doesn't mean the desk that deals with FDA did.
But...they did. They didn't disclose their conflicts, unless the FDA is lying for some inexplicable reason. Again, it's in the article, it's not that long.
> You see these kinds of complicated, seemingly conflicting, relationships in high finance all the time.
You sure do.
> it's a non-issue because of how these companies are structured
These companies are structured to make money by any means necessary. Just a few years ago McKinsey corrupted government officials and used them to get contracts with utilities and infrastructure providers. Was there a firewall between the government desk and the utilities desk?
These as fines are too small. It is just a cost of doing business. The fines should be devastating so getting 5-6 of such fines should be a death penalty for the company
The fines aren't big enough to change their business, but they are quite possibly big enough to change their _proceedures_. I can easily imagine there becomes more stringent internal rules and processes on disclosures, even if they keep doing business the same way in general.
If we are talking about fines that could cause the firm to go out of business, we need evidence of actual abuse of position. I'm not sure failure to disclose, by itself, is a sufficient transgression. On the other hand, it seems that it might be fair to penalize firm their fee on the contract, or a meaningful portion of it, on the basis of breach of contract. I'm not sure if that would be higher or lower than the current penalty.
Yes, which is his point, 10-20% of yearly profits is a literal cost of doing business, and not a particularly damaging one. Most companies would gladly trade 20% profit in order to control information from every side of their industry...
Sure, but the requirement for disclosure seems pretty straightforward:
> . McKinsey’s contracts with the FDA, which ProPublica obtained after filing a FOIA lawsuit, contained a standard provision obligating the firm to disclose to agency officials any possible organizational conflicts. One passage reads: “the Contractor agrees it shall make an immediate and full disclosure, in writing, to the Contracting Officer of any potential or actual organizational conflict of interest or the existence of any facts that may cause a reasonably prudent person to question the contractor’s impartiality because of the appearance or existence of bias.”
If I see McKinsey on someone's resume, it's a huge red flag. Similar to "Head of marketing for children's sales at Phillip Morris". Sure, all companies do some bad things, but the complete lack of ethics required to succeed at McKinsey is next-level.
I work for McKinsey. In my opinion, the ethical costs of working for Facebook are far worse. In some way, if you work for facebook, you are supporting the product Facebook, which I find unethical. If you work for McKinsey, it's a decentralized org. You might not like that there's a team serving oil or cigarette or saudi clients, but the work you do won't have any bearing on them. You can work on helping clients in spaces that you think are good to serve and refuse to serve clients in spaces you don't. There's an element in that money goes to the top, enriching partners whose work you may disagreement. But... eh, I would say the flow of money is much less interesting than the individual impacts of my work. Am I enabling more work to be done in oil and cigarettes? In my opinion, not really.
It's pretty cool to be able to turn down projects because you disagree with them ethically. I can't say I agree with the other doom and gloom posts that say everyone leaving hates the company. I would say the average employee leaves on positive terms.
If you don't care about the money, couldn't you do the same work for an organization that doesn't work for Saudi Arabia? Job market is pretty good right now, and it's not like it's difficult to find a company that doesn't have seven chapters in its Wikipedia Controversies section.
Money is pretty good. Probably less than tech equivalent. When I said I don't care about the money flow I meant I don't care if the work ultimately enriches people whose ethics I don't agree with in part.
Short answer is I like my job. I like the work that I do. I think it directly helps the world be better. I get to operate at a very high level working with CEOs of important companies. The company is genuinely interested in advancing my career. It's a rare mix of tech and business. Coworkers are pleasant. Leadership is good and listens to its people.
The controversies don't bother me that much. the firm is decentralized. It bothers me about as much being associated with American problems. On a whole I think the firm helps things more than it hurts. The same confidentiality rules prevent us from sharing our successes. ymmv
I cannot share specifics of my work, which is unlikely to result in a satisfactory answer. So, sorry. I'll be blunt that most of it is tackling banal issues. Scrolling through our social impact report which includes the public stuff I found the highlights I thought were interesting. You can take this with a grain of salt and I don't tend to find these things super convincing for any company, but here:
* Founded a non profit which has upskilled hundreds of thousands of medical workers
* Did a lot of pro bono work (meaning "valuable" consulting work, but also the usual humble volunteer stuff) to keep food banks alive during covid
* About $200M in pro bono work dedicated to improving racial equity and hosting a leadership program for black leaders
* $2B in cash and support dedicated to social responsibility (I think this is mostly climate?) over the decade
* Around 220,000 hours of pro bono consultant time over the year
* Apparently we helped Khan Academy reach kids as things were going remote and TeachForIndia
_____
And of course there's the not totally pro bono stuff which is just "nice problems to work on". Some people scoff at this because its paid for, and it is typically very expensive. But I'll list it it anyway:
* COVID response for 35+ national governments and many smaller governments
* Public Health
* Economic and Social Development
* Racial equity and diversity
* Upskilling or reskilling workers who lost jobs
* Lots of decarbonization and renewable energy stuff
And again, many companies have stuff like this. I tend to think this is a bit better than average big co., but whatever, it doesn't hit my day to day. In my opinion the more down to earth impact that you might enjoy is just helping companies you like do better. If you like to help pharma, or renewables, or videogames, or... banks, you can do that. Which is just kind of good enough on its own. Unlike a job where you work within your little sphere within a big company, consulting lets you just tackle big problems with the big decision makers. idk, my experience has been largely positive. I'm happy to speak on its behalf. I know I could go work for Facebook and earn probably another $100k, but I feel pretty strongly that would be a lot less fulfilling. My view of the firm has maybe 50 people in it. It's a pretty flat org. And you have a clear line of what partners oversee your stuff. It was legit upsetting to hear about the ICE work during the trump admin for myself and many others, but at the same time it feels more like a separate subsidiary. Less like facebook where all rolls up to zuck. Like if you worked for ben and jerry's and something bad happened at dove. Both are owned by unilever. Is dove thus representative of all of unilever? Ehhh I don't think so. Example companies chose at random.
tl;dr solving business problems you're interested in is simply a good business.
Depends wildly on geography and group. For me
Pre-covid, traveling to client sites sunday evening through thursday on about 80% of weeks. Avg day 10-12 hours with periods of harder hours, which can be a lot but is easier to do when you're going to a hotel with all of your food taken care of (compared to living at home and having responsibilities and a commute). Never worked weekends though. Most work happens in a group of ~3-7 people over months. New manager every time, but it's cool if you ask their previous teammembers if they were nice to work with before you commit to a new project. Things move fast. You usually come in with a mandate from the top to peel back red tape. A ton of meetings listening to people, synthesizing their inputs, and coming up with a plan on what to do about it.
If you're on the tech / data analytics side, it'll be more of listening to how they accomplish X today, thinking about how it could be done smarter, and working with the client to come up with a basic model that does X better.
Feedback culture is strong. It's very hard to do well if you're not actively part of the team. Maybe like... a bougy hackathon vibe.
The organizations where you can do the same work that aren't McKinsey (assuming you're in the strategic management consulting side) tend to not be much better than McKinsey on that front. You could go niche, but you might end up making half the money (or double, or both depending on the year).
On the margins this really isn't true. I know a couple people working on Mckinsey's renewable energy team. They're directly responsible for billions of dollars of solar and wind farm build out that likely wouldn't have happened to anywhere near the same extent if the generators hadn't brought in consultants. I also know someone who was on the Tyson chicken team whose job was to remodel the slaughterhouse so they could fire everyone.
Mckinsey absolutely lets you choose the team you work on, there is zero expectation to work on teams that service immoral industries or companies.
I don't agree though. That's my point. A database engineer, accountant, and PM all enable the product they support. That is the ultimate goal of the work.
If I work on a project to help a pharma company set up its supply chain to produce rare disease treatments, does that enable some guy in Asia to work on oil projects? Vaguely, yes in the sense that there is more money in the system. But not much, and certainly far less than it does on building the local capability to support other pharma companies on similar supply chain problems.
Personally I feel the direct impact of my work is positive, and likely orders of magnitude more positive than I would see working in tech for "engagement" or spyware or whatever. If I decide to leave, I'll go to one of the companies working on these same sets of problems.
And on a wider spectrum, no I don't believe the firm is bad on a whole. I think it nets good, trending towards banal average.
edit: putting it another way Facebook could not run (or would run less effectively) if it had 0 database engineers or PMs. McKinsey's oil division could work just fine if it had 0 pharma consultants. And its not that much of an anathema for some people to work on oil clients.
> McKinsey's oil division could work just fine if it had 0 pharma consultants
Their oil division would be much smaller, or possibly insignificant without the other divisions because the of the total "power" the company has by having its tendrils in every industry and government all over the world.
If the COO of Ghana Oil needs a consultant, he will ask his friend the COO of Ghana Pharma, who is using McKinsey, and will get that recommendation.
McKinsey is the whole sum of its parts. If some parts didn't exist, the whole would be much less effective, just like engineers and product managers at FB who don't directly work on the "problematic" parts make the whole more effective.
Also, I was being sarcrastic to compare your statement about working at McKinsey to FB employees
In all cases, yes, the hypothetical employee contributes to FB-spread societal damage.
For example, if I design a boring mechanical part for a bomb my labor is integral to when that bomb kills civilians. So, if you are in the defense industry, believe in the net benefits of the missions that you support. And likewise for FB.
Claiming one is a meaningless cog in a machine, FB or otherwise, and one is therefore absolved of the responsibility of one's downstream impact is disgusting cowardice.
Component design sounds like a critical part. I find that take uninteresting and obvious.
What if you design t shirts for a fashion company that shares a parent with the the bomb company. You're not even in the defense industry. You might be able to argue that your t shirts generate revenue which may translate into capital that the parent company reallocates into the bomb company.
What if you're a voter who's elected representative, among a handful of liberal, pro-humanity policies, also supports bombing people in the middle east to support the defense industry?
When does it stop being disgusting cowardice and instead pragmatism to acknowledge systems are interlinked and complicated and you may be better focused on the local direct sphere of influence your choices make as the primary driver of your decisions?
The GP asked if Facebook database, accounting, etc are complicit. Yes.
You're asking if capital flows between 2 unrelated entities sharing ownership matter? No.
You're asking if diffuse responsibility via elected representation matters? Yes, even if you didn't vote for the representative, it does because they act on your behalf.
Obviously, one should focus on what one can change directly where possible.
There's no dichotomy--disgusting cowardice can be pragmatic. After all, FB has to pay someone to run its databases and to close its books and therefore someone is going to get paid. But it doesn't have to be you. You have a choice.
An increasingly interlinked system makes one increasingly responsible, not less. Unless you want to throw up your hands and to declare utter powerlessness. I can't live that way.
I was just making sure kids would go to school and had a sense of national pride. I helped them be involved in their communities.
Was I a nazi? Well, yes, but I don't see how my work helped gas the jews 1000kms over there. I was just doing community work as a nazi and helped a lot of kids stay in school. Are my actions may have made people higher up have a better control over the population and future soldiers, in my opinion, not really.
If you are implying that a primary school teacher in nazi germany is inherently accountable for the crimes of the nazi regime, then I fiercely disagree with you. I think that's an incredibly entitled opinion.
And yet, you might be a math teacher, who likes teaching kids math, and doesn't have the financial resources to move; or has familial constraints, or maybe just wants to live in their homeland. You might not like the nazi regime, and yet, you still need a job and are maybe in danger if you don't show some token support.
Fiction in the free world loves to say "You always have a choice", but the characters who learn this lesson tend to have much more power than others, be it physical strength, political power, or maybe just access to some important thing. Many people don't have a meaningful way to make a difference, and the cost is the livelihood of themselves and their families. And it ignores the local goodness of their action in favor the some vague affiliation with a bigger picture that they may not personally agree with.
I also think the whole analogy is entirely tangential.
I am not particularly well informed on the Hitler Youth. Most of my knowledge on them comes from the excellent but fictional comedy film, Jojo Rabbit. But I'd still reckon the average Hitler Youth counselor was not accountable for the crimes of the Nazi regime. Definitely less so than a facebook database engineer is for facebook being shit.
If you're interviewing a former McKinsey employee who didn't spend any time at Partner, there is a very good chance you're interviewing someone who 1. has at least as much distate for McKinsey as you do and 2. cannot say so before being hired because badmouthing employers isn't a great interview approach.
The reason you hate McKinsey is not the people who leave, it's the people who don't.
I've worked with a lot of former "big 3" consultants and they universally hated it and got out once they realized how toxic the culture and organization was. Remember that they recruit people right out of college and they're very good at selling themselves, as that's what they do for a living. People won't want to badmouth their former employer in an interview, but this is definitely something you should keep in mind.
I'd agree with you. Basically the way these companies work is that either you make partner in a specific timeframe, or you are encouraged to go elsewhere. Almost by definition, people who have a big consultancy on their resume did not make it to partner for one reason or another.
Most people I know who worked for the Big 4 left because they were treated like dogs and worked endless hours. It’s not that they couldn’t make partner it’s that they didn’t want to. This applies to both the accounting and IT consulting practices. A few of the accounting people have very successful careers that pay much more than consulting, including being a CFO.
A lot of others left for smaller consultancies where they are able to have a say in the company versus being a cog in the wheel.
I’ve debated going to McKinsey or the Big 4 but I’m not traveling Sunday-Thursday. Smaller shops pay more. Speaking with other consultants I’ve found that working with medium sized Software Vendors means great benefits including sweet RSUs and they don’t travel as much.
Part of the business model is farming out “alumni” to lucrative management roles at large companies (usually clients) with the expectation they’ll turn around and engage the firm for even more consulting work.
I had a CS professor in college who every year would give a speech about a hypothetical engineer designing pipe fittings that are eventually used in concentration camp gas chambers. The point is not that if something you make is used for evil that makes you a bad person, but that you should pay attention to the broader consequences of your work even if it appears innocuous, and if you find out it's being misused, do something about it. Quit or complain to your boss or tell the media or alter your design or something.
I'm sorry to jump to Nazis, I know you're not supposed to do that on the internet. I'd like to explicitly state that I don't think McKinsey employees are as bad as Nazis. This comment just reminded me of that very valuable lesson in engineering ethics.
In this case it's not really relevant - engineers on consulting projects are not "back office staff". They're part of the team, on site, in meetings, making decisions.
The "pipe fittings" reminds me of the first season of "Patriot", an Amazon Prime show whose first season was excellent, a spy/engineering thriller (I only watched the first two episodes of season two, not sure whether it's good or not, seemed weak by comparison).
In any case, watch https://www.youtube.com/watch?v=P5-9Rfrui9A "'Patriot' Piping Lingo, The McMillan Way (Amazon Prime)", where a seasoned CEO / engineer talks about pipe fittings at length. I'm sure software/devops engineers sound just as obtuse to those not familiar with software.
That is the long running “Turbo Encabulator” trope, the original is here https://www.youtube.com/watch?v=Ac7G7xOG2Ag but there are some wonderful rerenditions and tributes if you search for those keywords on YouTube.
McKinsey is an interesting place, but I think this is very much the wrong take - and the headline is out of context.
McKinsey is a conglomerate of silos, and it's entirely possible for McKinsey NY to be working on something that's related to something McKinsey Atlanta is working on - that doesn't make it a conflict of interest.
In any more than banks advise and act for all sorts of clients who have related interests.
There are reasons to maybe having Red Flags (or points of concern really) about McKinsey people but I don't think that this is generally it.
I would hire everyone from McKinsey that I know if there were a role for them, and their 'integrity' wouldn't remotely be an issue. The issue frankly is how applicable their skills would be in most operational environments.
It seems that you didn't even read three paragraphs into the article:
"At times, McKinsey consultants helped those drugmaker clients fend off costly FDA oversight — even as McKinsey colleagues assigned to the FDA were working to bolster the agency’s regulation of the pharmaceutical market. In one instance, for example, McKinsey consultants helped Purdue and other opioid producers push the FDA to water down a proposed opioid-safety program. The opioid producer ultimately succeeded in weakening the program, even as overdose deaths mounted nationwide."
McKinsey was actively helping opioid manufacturers minimize government oversight. The misconduct in question by McKinsey isn't hypothetical.
You've provided evidence that supports my position.
Different McKinsey teams were hired by different entities to do different things.
To the extent that those teams are not related or coordinating, that's understandable and not a breach of ethics.
An Accenture division can be helping to the IRS build tax compliance software while another division help companies write tax minimization software.
There are only a small number of 'Big Accounting' firms, and they all have overlapping interests.
Banks to similarly.
McKinsey, Goldman, Accenture, all the big accounting firms are always working with 'Big Pharma' and 'Government' at the same time and all of the parties know this.
While we do need to be wary and cautious about backchannel information passing etc. - the notion that there's a breach of public interest as it is being presented is hyperbole.
Except US government contracts have specific language requiring disclosure of conflicts. That Kinsey ignores this language and instead pays fines indicates both that Kinsey lacks some morals and also that the contract process with the US is broken (at minimum, the fines should be higher to discourage this behavior).
Well known, based on personal experience with these folks.
But most of the time, it's due to how these guys are managed by their client.
When you bring in an individual from a top consulting firm, they will fight tooth and nail to get the results you want. Or at least not "fail" at getting those.
If this means doing a great job, they will definitely do that. If - due to factors they can't really control - they need to endanger the rest of the project so that their part is successful, they will avoid to do it if they can. But they will do it if they need to. Failing is just not an option.
This is the danger of hiring consultants: incentives are not fully aligned between you and them. You want the whole project to be successful - on the long run. They want their part to be successful - right now.
If you are careful enough, these two absolutely coexist. If you aren't it can be dangerous for you whole organisation.
McKinsey is a consultant. If a company asks it to figure out how to make the world a better, happy place, it'll consult on that, but they don't. McKinsey has been used as an excuse for a host of evil activity but it's their clients that asked them to advise them and the clients that execute on the suggestions.
That sounds very close to "just following orders".
Enabling evil is itself evil.
Whether or not McKinsey is, when taken as a whole, evil is debatable. But, they certainly do enough work with dictators and other known bad actors that we should have the debate.
If the preference is to perceive the world as a Marvel movie, McKinsey can play the part of a secret society of evil do-ers. If there's any interest in the actual mechanics of an economy dependent on growth, "evil" is fairly common and spread out with individuals making decision independently (even if they're "just following orders")
We should have that debate about every organization.
McKinsey primarily (not exclusively) works with actors who have the ability to pay fees, and those tend to be actors in power.
The number of organizations whose leaders have had intimate dealings with saudi arabia or other nation states with dictators at the helm would include most of our employers.
Even in the benign case it usually intent laundering. Consultants are often brought in to deal with organizational inability to do something that a substantial chunk of the employees already knows they need to do. It is one of the reasons they can be successful hiring people straight from school and putting them on big accounts. The basic formula for many of these jobs is to interview employees, figure out the way forward that the sponsoring exec really wanted anyway in the form a synthesis of what the employees suggested, add some data and pretty graphs to a report, and then lend the idea external credibility (and future blamability if it fails).
Yes that's why they hire them. Often managers hire McKinsey to legitimize their own ideas and then use them as scapegoats if things go sideways. That's one of their main selling points.
This isn't a scandal, and is probably required by the FDA client contract and the pharma client contracts. It is normative. The FDA is fully aware that McKinsey serves pretty much every major pharma company in the world. Pharma companies know McKinsey is likely involved with federal agencies, probably including the FDA. The contracts formed with all organizations will clearly indicate that the relationship is going to remain private. A really important part of working with a big consulting firm is that you keep it internal to the team.
For example, the partnership might be serving both sides of a vendor/procurement situation. It is a huge conflict of interest if these two teams talk to each other and risk leaking their side's position. Thus, not only are the teams allowed to talk to each other, they're not allowed to communicate to others that they're working with that client.
Nothing unique to McKinsey here. That's how consulting tends to work.
> This year ProPublica submitted a Freedom of Information Act request to the FDA seeking records showing that McKensey had disclosed possible conflicts of interest to the agency’s drug-regulation division as part of contracts spanning more than a decade and worth tens of millions of dollars. The agency responded recently that “after a diligent search of our files, we were unable to locate any records responsive to your request.”
> McKinsey’s contracts with the FDA, which ProPublica obtained after filing a FOIA lawsuit, contained a standard provision obligating the firm to disclose to agency officials any possible organizational conflicts. One passage reads: “the Contractor agrees it shall make an immediate and full disclosure, in writing, to the Contracting Officer of any potential or actual organizational conflict of interest or the existence of any facts that may cause a reasonably prudent person to question the contractor’s impartiality because of the appearance or existence of bias.”
> Over the past couple of years, for example, McKinsey’s bankruptcy-advisory practice has paid more than $30 million to the Justice Department and one client’s creditors to settle allegations that it failed to disclose potential conflicts, as required by the federal bankruptcy rules.
There is no evidence that McKinsey disclosed their conflicts in this case, and plenty of evidence that they regularly fail to do so when working with the government, in clear breach of contract. If they paid $30 million to make it go away, then by definition it is a scandal. It is also potentially criminal: https://www.nytimes.com/2019/11/08/business/mckinsey-crimina...
IMO, these things get poured over in great detail by legal teams on both sides. The firm's internal controls are strong and are probably considered sufficient to cover those bits, even if the firm is serving competitors. I'm not a lawyer. I don't look at contracts much, but that sounds like a standard clause. It seems... very unlikely to me that propublica has found anything noteworthy here. The bottom line is that all clients sign agreements forbidding them or McKinsey from sharing knowledge of the relationship. That comes with the understanding that there are similar agreements with other companies. McKinsey cannot disclose its relationships with other companies. Recall that presidential candidate who got a ton of flack because he wasn't able to disclose what he did at McKinsey? It wasn't particularly sensitive, iirc. It was just some work with a grocery chain and some other stuff. But its still hard for the firm to allow sharing that information because everything is NDA'd to hell.
Bankruptcy, as I understand it, is a different problem, that tends to arise when the firm is serving the company in bankruptcy, or one of its subsidiaries, which is problematic because you don't want to do anything that could benefit your position as a vendor for them... I think. Not particularly well informed, but I get the impression its a complicated ordeal.
> McKinsey cannot disclose its relationships with other companies.
Ok, then it can't take a job with the government. The contract is clear. I'm not a lawyer either, but I do read contracts before I sign them, and this one doesn't sound very complicated. You're right that it is a standard clause.
I don't understand why you think it's unlikely that this is noteworthy, and I don't understand your explanation of why the bankruptcy case was different. I agree it might have been worse, hence the criminal investigation, but it sounds like a breach of contract in both cases, possibly even a breach of the exact same standard clause.
> the Contractor agrees it shall make an immediate and full disclosure [...] of any facts that may cause a reasonably prudent person to question the contractor’s impartiality because of the appearance or existence of bias.
Can you genuinely say that there are no facts in this case that create even the appearance of bias?
> Can you genuinely say that there are no facts in this case that create even the appearance of bias?
I can say with some confidence that nobody involved in the agreement, on either side, would be surprised by this article's findings. And I am assuming that there is sufficient nuance around the concept of "appearance of conflict of interest" is covered by the mutual understanding of the firm's internal controls. I'll bet that the FDA has no interest in suing McKinsey over this.
I don't think your casual reading of this snippet is enough to understand how this works. You're welcome to disagree.
I am involved in the agreement, because the FDA is part of my government. I don't want my government ignoring conflicts of interest with a wink because "everybody knows". I don't want my government ignoring contracts because of an unwritten "mutual understanding". Based on my understanding of human nature and your own posts in this thread about how easy it is to move between projects at McKinsey, I don't believe "firewalls" are effective and I don't want an unethical organization with an extremely recent national corruption scandal and blatant conflicts of interest working for my government's regulators.
You're missing the point. It's not "wink wink everybody knows". It's "we explicitly understand you're working with pharma companies whose interests may differ from ours but that these teams will be isolated and thus under no conflict of interest". It's not under the table.
I'm not sure what you mean by how easy it is to move between projects. It's not. You don't just get to say "hey I wanna work for tesla, anybody doing a project on tesla?". That information is secret. But you do have the ability to say "I would like to work in energy, and I don't want to serve anyone working on oil".
I'm not entirely interested in changing your mind. Just showing some context.
edit: cannot respond to the below, but the FDA does not disclose all the details of its operations. I too would like if government entities were fully transparent. But that's another issue. You'll have a hard time getting ALL the details of every decision made with FOIA acts. And finally, there are consequences to breaking these contracts. That should be obvious.
Explicitly understood, but not documented, not disclosed to the public, and no measures taken to ensure that McKinsey is staying honest and no personnel or information was shared between teams during the 12+ year engagement. No concern that what they got caught for in South Africa might not have been a one-time deal. Just took their word for it and kept their secrets.
In writing would only be the operative term if the discussions concluded things were a conflict of interest. They're not required to provide non-issues in writing.
"the Contractor agrees it shall make an immediate and full disclosure [...] of any facts that may cause a reasonably prudent person to question the contractor’s impartiality because of the appearance or existence of bias."
You can run in this circle as long as you want. If the FDA execs and the McKinsey execs reach a mutual understanding of the circumstances, including the fact that McKinsey is going to be simultaneously serving unnamed third parties with contrary interests, and that this is ok, then the reasonably prudent person will conclude that these are not factors to cause them to question the contractor's impartiality. It would not be surprising to me at all if additional language in the contract explicitly address this point.
Sorry but I have a hard time believing the FDA didn't know anything about McKinsey's ties to pharmaceuticals.
The scenario here is likely ProPublica coming to the FDA and asking why they hired McKinsey since it has ties to Pharma. FDA comes back and says McKinsey never "technically" told them. So that's the story.
Any public agency that hires McKinsey can assume a conflict, since McKinsey has clients in every industry. That's partially why they hire them, to get insider views on the industry they regulate/deal with.
> The news of McKinsey’s opioid work apparently did little to dampen the FDA’s enthusiasm for the consultancy. In March 2019, just after the news broke, the agency signed a new contract with McKinsey — extending the firm’s multiyear effort to help the FDA “modernize” the process by which it regulates new drugs.
I agree too. I think the FDA hires them exactly because of their clients. They want to modernize their processes, they need intel from industry. How else does McKinsey get this intel besides working with industry?
It’s very much a meet in the middle process. The FDA doesn’t want to completely disrupt industry and they’d like to know their new regulations are able to be implemented and probably also care to some degree how painful they are for industry. However as regulators, they could never Work side by side with the industry in this effort.
It wasn’t disclosed likely because it was part of the value and McKinsey, through conversation with FDA, thought it was understood. FDA hired them again, so I’m interpreting that as a sign of them not actually thinking a COI occurred, or a material lack of disclosure.
It was part of their pitch. “And here is the water cooler where the consultants working for the FDA are known to discuss the details of the FDA investigation into the pharmaceuticals role in the opioid crisis”.
Doesn't McKinsey frequently work for different clients in the same industry even? I never got the impression that consulting firms really limited themselves in that way.
> Doesn't McKinsey frequently work for different clients in the same industry even?
They do. It's a well-known way for companies to get inside info on their competitors. You can't legally/ethically hire an employee away from a competitor and then say, "tell us everything you know about company X". But, you can hire a McKinsey team that worked extensively for your competitor and say "give us a list of 'best practices' in our industry".
> Federal procurement rules require U.S. government agencies to determine whether a contractor has any conflicts of interest. If serious enough, a conflict can disqualify the contractor from working on a given project. McKinsey’s contracts with the FDA, which ProPublica obtained after filing a FOIA lawsuit, contained a standard provision obligating the firm to disclose to agency officials any possible organizational conflicts. One passage reads: “the Contractor agrees it shall make an immediate and full disclosure, in writing, to the Contracting Officer of any potential or actual organizational conflict of interest or the existence of any facts that may cause a reasonably prudent person to question the contractor’s impartiality because of the appearance or existence of bias.”
> Over the past couple of years, for example, McKinsey’s bankruptcy-advisory practice has paid more than $30 million to the Justice Department and one client’s creditors to settle allegations that it failed to disclose potential conflicts, as required by the federal bankruptcy rules.
They do. I would be surprised if they don't operate in compartmentalized teams. I work with a company that has clients in competing markets. We have "conflict houses", organizations within the organization that compartmentalize clients, sets firewalls and prevents information leak between employees. I would be surprised if McK doesn't do anything similar.
Indeed, the 'cool-off' time is even part of the statement of work, and negotiable. Its just part of the game. There are maybe 10 companies active in a given region/content that have the fame to pull off this high level of consulting (I am not claiming they are the only capable ones, or even that they are capable, just saying that the shortlist is rather ... short)
Its known that they work for the competitors. You just want to handle the exposure and limit the risk of your super realistic super important strategy leaking 3 months before you make it public.
The people jumping on here to say "of course McKinsey didn't need to disclose, it should have been obvious because consultants always have these conflicts of interest and don't disclose them." need to take a while to reevaluate their ethical guidelines.
Failing to disclose conflicts of interest (and the details of the exact steps yaken to mitigate those conflicts) is unethical. In this case, the contract requiring disclosure takes this beyond unethical and it becomes a breach of contract that indicates possible fraudulent or deceptive intent.
These are details that ProPublica was unable to get. That doesn't mean they weren't communicated, as spywaregorilla (sp?) has indicated above.
Every law firm, accounting firm, consulting firm once it hits a certain size has clients which conflict, but the same employees - the same teams of employees - are barred from serving a conflict of interest. It is assured that:
1. the FDA asked
2. the FDA knew
3. the FDA agreed
Its also probable that the person from the FDA working with the person from McKinsey had either already worked with them or been referred to them by a colleague that had worked with them.
While I do not doubt the integrity of the good folks at the FDA, it is unclear to me that they could in any way protect against the real conflict of interest in McKinsey telling the opioid makers what the folks at the FDA were thinking, doing or being advised to do, or giving the manufacturers advice predicated on that knowledge.
Another gross thing they did:
A former DEA council in charge of regulating distributors then worked with them to pass a law by unanimous consent neutering this single enforcement tool the DEA had.
The former DEA attorney "gave the industry intimate knowledge of the DEA’s strategy."
Below links have gross records that reveled among other things that a Rep. sponsoring the bill emailed the lobbyists asking for questions he can ask the DEA...
If you haven't watch Gibney's "Crime of the Century" on HBO it touches on this incident. The context is that the DEA used a stop order against McKesson, it was one of the only tools they had. McKesson did not like this. They pushed back HARD. I understand concerns that legit non-opiate meds were held up for a few days, but this was the only tool DEA had to send a message.
Of course.... “Purdue was very active in influencing the ultimate definition of an ‘imminent danger to the public health or safety.’ ”
Humans, hell even the most obvious 'AI', could flag ginormous amounts of pills going to tiny zip codes. They put profits over people's lives. They violated the law, minimally in spirit, I believe in conservative textual reading.
"the sponsors and co-sponsors have received $1.4 million in campaign contributions from the industry and the alliance, according to campaign finance records."
It's shocking how relatively tiny amounts of money open access to decision makers.
Gibney's doc also reveals this addiction pushing behavior is endemic: Purdue had a government regulator sit in a motel and draft their label - which gave them the excuse to market a potentially 'less addictive' drug and we all know what happened from there.
I have very strong feelings about what I consider crimes of big pharma & opiates. To me, our for-profit system is a root cause of human misery. Obviously complicated issue, but I think there has to be some type of semi competitive socialized healthcare.
It made more sense when business knowledge and education was pretty rare. But now they're just very skilled powerpoint makers - nothing McKinsey does is particularly secret or proprietary, and a company could easily have the same results by hiring an internal team or just doing their own research.
Or as McKinsey puts it
> "across more than a decade of service to the FDA, we have been fully transparent that we serve pharmaceutical and medical device companies. McKinsey’s work with the FDA helped improve the agency’s effectiveness through organizational, resourcing, business process, operational, digital, and technology improvements. To achieve its mission, the government regularly seeks support from additional experts who understand both the government’s mission and the industries’ practices. We take seriously our commitment to avoid conflicts and to serve the best interests of the FDA."
In practice, just another example of questionable behaviour from McKinsey