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because we have been mysterious. I’ll give you
an anecdote to bring that home and how far I
think we are willing to go versus where we’ve
been. When I joined the firm, in London, I re-
member booking a taxi to the client location.
I was very quickly told you don’t do that. You
book the taxi to two blocks away, or as we say
in the U.K., “round the corner.” We’ve always
thought about guarding client confidences,
maintaining their secrets. But I think where
the line can get drawn is being very clear that
that doesn’t mean we can’t be much more
open about who we are.
I have the unique perspective of having been a
McKinsey client when you advised Time Inc., the
former owner of Fortune. [Note: McKinsey is also
a sponsor of several Fortune conferences.] So I
know about two McKinsey product lines: growth
strategy and cost cutting. What is the revenue mix
between those two?
Well, we slice and dice in 90 [other] ways
than you’ve just described. And actually I
don’t know the answer, and I’m not trying
to play games here. It’s just not the way we
would look at it because we look at it against
the different types of work we do, whether it’s
strategy, marketing, organization, and so on.
Strategy is about a third of what we do. Orga-
nization is probably about half that number.
Cost work for many years was a big part of the
firm’s activity. But there’s really been a shift
toward helping our clients with growth.
McKinsey recently agreed to pay a $15 million fine
in which the U.S. Trustee Program of the Depart-
ment of Justice said the firm “lacked candor” in
the way that it communicated with clients in its
bankruptcy practice, and that it made “insuf-
ficient disclosure” about its investments. You
have said that McKinsey relied on advice for its
disclosures practices. Whose advice?
I want to try and make sure I restate that just
to be clear. We’ve always relied on and been
responsive to guidance from the U.S. Trustee
and the bankruptcy courts. That’s essentially
what I was saying, and we will continue to
respond to whatever guidance they provide us.
We agreed to that settlement so that we could
put that issue behind us.
Would you agree that the government is essen-
tially saying McKinsey did not use good judgment,
which is the backbone of its reputation?
As I said, one of the main reasons for that
settlement is that we respect their views. And
we are keen that we move on. So I’m not going
to second-guess the statement of the U.S.
Trustee.The New York Times has written extensively about
your hedge fund, MIO Partners, which invests
the personal assets of McKinsey’s partners. It
called the fund overly secretive and conflicted for
investing in McKinsey clients.
We have asserted consistently that MIO is
a separate subsidiary. It was established 30
years ago. I don’t think it’s particularly secre-
tive. It’s regulated. There’s a lot of oversight
of it. But it is separate from our consulting
activities. There have been reports into it that
have validated that view.What reports, and will you publish them?
We don’t need to because one of them is a
report that was commissioned by the Puerto
Rico Oversight Board. It’s called the Luskin
Report. It’s a completely independent review
commissioned for that entity, not by us. And it
had choice words about the independence of
the entity called MIO.The Times reported that McKinsey partners or
ex-partners make up the majority of the hedge
fund’s board of directors. Is that accurate, and
won’t that make it impossible to put this ques-
tion behind you?
I think it’s important to understand what that
board does. It only reviews after the fact what
has actually happened to the small part of
the investments that MIO makes that are not
covered by fund-of-funds-type activity. That
covers 90% of the activity. Essentially, it does
not have real oversight into any of the invest-
ment decisions that are actually being made.Would McKinsey consider selling the hedge fund?
After all, there’s nothing stopping you from
investing partners’ assets in other hedge funds.
Thirty years ago those options didn’t exist.
The fund was founded to provide a way of en-
suring, given that McKinsey partners cannot
invest in individual equities, we had a mecha-
nism to ensure that any investment activity
was robust and distinct from the day-to-day
consulting activities of the firm. Obviously,Recent lawsuits
and reports have
drawn attention
to, and raised
ethical ques-
tions about,
M c K i n s e y ’s w o r k.
A few examples:SOUTH AFRICA
∂ To win a con-
tract with state-
owned utility
Eskom, McKinsey
partnered with a
local firm that was
later implicated in
a sweeping cor-
ruption scandal.
In July, McKinsey
apologized and
repaid $72 million
in fees.SAUDI ARABIA
∂ In October, the
New York Times
reported that
McKinsey had
produced a study
identifying social
media critics of
the Saudi regime,
one of whom was
subsequently
arrested. The firm
says the study
was an internal
project, not pro-
duced for the Sau-
di government.BANKRUPTCY
PRACTICE
∂ In February,
McKinsey paid
$15 million to
resolve a federal
probe into con-
flicts of interest
in its bankruptcy
practice. The firm
says the settle-
ment was not
an admission of
wrongdoing.