Jim Armitage: McKinsey's gilded web should be more transparent

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If it were Goldman Sachs, there’d be an outcry. Questions would be asked in the House of Commons, the Press would be clamouring for its tentacles to be tied.

But revelations that another powerful network of elites, the management consultancy McKinsey, has a secretive investment fund for partners which can buy (or sell) into companies run by its alumni, will cause little outrage. 

Unlike Goldman, McKinsey’s power has largely escaped notice outside the business world.

But for how long? From Vodafone’s Vittorio Colao to Facebook’s Sheryl Sandberg; from Lloyds’ Lord Blackwell to Credit Suisse’s Tidjane Thiam, McKinseyites run more major companies than alumni of any other consultancy.

Links with public policymakers are none too shabby either, with former employees in the UK including William Hague and the Bank of England’s Charlotte Hogg. 

The way McKinsey keeps in touch with former employees throughout their careers, described in today’s FT as “a bit like Opus Dei”, means the network stays together like no other, too. 

In its marketing for new clients, the power of this gilded web is a primary tool. That, and the undoubted brainpower of its employees, of course.

Surely with such great power comes great responsibility. For the firm’s current and former partners to be benefiting from secret financial bets by McKinsey’s MIO Partners fund is questionable in the extreme. 

Potential conflicts of interest abound. Not only is the MIO potentially investing in companies its own investors now run, but McKinsey’s bread and butter is advising clients on corporate activities which could affect their share prices. 

And what happens if MIO invests in a hedge fund laying siege to a McKinsey client? Does McKinsey let the customer know?

The firm says the MIO operates as a blind trust, and its investment managers take their own decisions without access to McKinsey’s client details. That’s fine, but it also means the public, and McKinsey’s clients, must take a lot on trust. 

Better surely to publish MIO’s biggest investments, or at least disclose when McKinsey is on both sides of a trade. Otherwise, it smells as fishy as a vampire squid.

The Wright angle

Now Mike Ashley has deigned to grace Westminster with his presence, it’s up to the Treasury Committee to treat him with the respect he has failed to show them.

Unlike grandstanding MPs’ grillings in the past, Frank Field’s BHS hearings have been dignified and informed. Meaningful insights have resulted. Iain Wright MP must hold his team of parliamentary inquisitors to similar standards.

Source Article from http://www.standard.co.uk/business/jim-armitage-mckinsey-s-gilded-web-should-be-more-transparent-a3264746.html

June 6, 2016 |
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