Thomas Klikauer for BuzzFlash: Why You Should be Concerned About the McKinsey Institute

January 29, 2023

By Thomas Klikauer

The world’s most influential management consultancy firm – McKinsey – not only prides itself as a truly global company – even though it remains distinctively American – but it even has its very own Global McKinsey Institute.

With that, the management consulting (bad people say: “insulting”) firm has accomplished a crypto-scholarly camouflage. While being out for profits as the sole raison d'être for its existence, McKinsey’s institute gives the somewhat misleading impression of being interested in “science” by aiding the appearance of being scholarly.

McKinsey has, of course, its own journal: the perfectly named, McKinsey Quarterly. Today, the 92 year-old McKinsey operates 130 offices in 65 counties. Yet, two countries which McKinsey has targeted in recent times are particularly noteworthy: South Africa and Saudi Arabia.

McKinsey’s operation in South Africa (SA) and the Kingdom of Saudi Arabia (KSA) were accompanied by dire consequences for both countries and for many people living in these countries. In the case of South Africa for example, in 2022, McKinsey was charged with corruption.

Long before McKinsey’s debacle in South Africa, it had opened an office in Riyadh, Saudi Arabia where the management consultancy firm has been particularly active for decades. McKinsey likes to claim to be a simple management-oriented consultancy firm, engaged in business-to-business or B2B activities. Yet unlike its PR façade, it is deeply involved in politics, as these examples show:

·       In China, McKinsey has supported island building in the South China Sea;

·       McKinsey was eager to participate in the demolition of Britain’s health system, the NHS;

·       McKinsey has lent a helping hand to Donald Trump; and finally,

·       It supported authoritarianism in Saudi Arabia.

True to its longstanding favorite theme of featuring as a double agent – the playing of both sides – McKinsey has been working for private companies and corporations, while simultaneously also working with state and government agencies. As a consequence, McKinsey has been deeply involved in what political science refers to as, state capture.

The basic idea behind state capture is that state capture describes a type of systematic corporate-political corruption in which private interests significantly sway a state’s decision-making processes to their – in this case, McKinsey’s – advantage and often financial benefit. This not just undermines the institutions of democracy; it is also highly corrosive for any democratic society.

Historically, the term state capture was first used by the World Bank. It outlined corruption in some Central Asian countries during the transition from the evil Soviet system to the best system we have ever seen: neoliberal capitalism.

Under state capture, a small corrupt group – a management consultancy firm, for example – uses their power over government officials to usurp government decision-making in order to strengthen their own economic and political position – and make higher profits as the end result.

In the case of the Kingdom of Saudi Arabia (KSA), McKinsey delivered a kind of Uber-state-capture by moving directly into their Planning Ministry. With that, McKinsey became – informally – known as the Ministry of McKinsey. The ministerial status of McKinsey and state capture of KSA went so far that McKinsey’s consultants even used government email addresses.

One of the key drivers of virtually what McKinsey does is the raking in of a hefty fee for the firm. This also determined McKinsey’s rather sizable growth inside the Kingdom of Saudi Arabia (KSA). Simultaneously, McKinsey claims to be a management consultancy firm, but it was deeply engaged in a political phenomenon the Saudi royal family desperately wanted to eliminate – the Arab Spring.

To stabilize the authoritarian rule of the royal family, McKinsey suggested to ease some of KSA’s more stringent political restrictions. It selected non-threatening cosmetics such as, ending the ban on female driving, and granting access to movie theaters. Simultaneously, there was a harsh subjugation of dissident voices.

Perhaps not unconnected from what McKinsey had done in China, it also turned KSA into a sort of laboratory for a new kind of electronic authoritarianism – a form of surveillance capitalism. McKinsey was helping “him” do it. This “him” is none other than Mohammed Bin Salman known as MBS. In their book on McKinsey, Walt Bogdanich and Michael Forsythe note,

MBS was ruthless. One story has him sending a single bullet in an envelope to a land-registry official who wouldn’t sign over a parcel of land to him, earning him the nickname Abu Rasasa, or “father of the bullet.

True to its double agent role, McKinsey was not just representing KSA’s and MBS’ interests, it was also representing the interests of the United States. Simultaneously, the Saudi project of the city of the future called NEOM became a lucrative fish for McKinsey. The firm charged millions of dollars to advise on the NEOM project. Yet, worse was to come.

While McKinsey has, of course, a code of ethical conduct and even a human rights statement, McKinsey was actively assisting an absolute monarchy where its de facto leader jails or kills his political enemies.

With nice corporate ethics statements in place as a smokescreen, McKinsey’s story turns really bad. In the first week of November 2017, about 350 Saudi princes, ministers, and businessmen were invited to come to the Saudi capital – using several ruses to entice them to come. They were invited by the aforementioned MBS.

Yet, when the people arrived in Riyadh, security personnel quickly impounded their mobile phones and wallets – even pens were confiscated. They were confined to the Ritz-Carlton – now turned into a 5-star prison. The British Guardian called what came next, “the night of the beating”.

With McKinsey never far away, the detainees were forced to sign over huge portions of their assets to the Saudi state. According to Bogdanich and Forsythe, some were beaten, and at least one was bludgeoned to death during a torturous affair that became known as the Ritz purge.

Not surprisingly, the work of the ethical McKinsey was seen by MBS and his government as important to the very survival of the House of Saudi. While preferring to claim that McKinsey is just an ordinary management consultancy firm, its work in KSA was not only unethical to the extreme and exceedingly political, but it also went very far beyond the traditional McKinsey remit. Yet, the global travesty of simply being a consultancy firm is maintained – rather successfully.

McKinsey’s assistance to the ruthless ruler also included a report on how the Saudi people reacted to government policies. The report identified Omar Abdulaziz, along with some other Saudis, as being highly influential in shaping the public’s opinion. Abdulaziz’s two brothers were thrown in jail. Still, worse was to come.

On 2nd October 2018, a columnist for The Washington Post named Khashoggi entered the Saudi consulate in Istanbul to pick up some paperwork for his marriage. A Saudi killer squad was waiting.

After his killing, his corpse was dismembered – never to be found. American agencies said, MBS was responsible for the murder. Perhaps slightly uncomfortable for McKinsey, its – until then very secretive – report on Omar Abdulaziz had become public during the immediate weeks after Khashoggi’s murder. Secrecy – although a key speciality of McKinsey – can fail, at times.

Yet, the ethical McKinsey still believed in 2019, that it had made a positive contribution there – in Saudi Arabia. In the book When McKinsey Comes to Town, it is put this way,

Your client is the Saudi Arabian Government. They have hired McKinsey to look into ways that they can suppress journalists and dissidents who criticized the Kingdom’s autocratic policies. You’ve been asked to determine how many dissidents you can put into a vat of acid to dissolve and hide their bodies. Assuming that you have a 10’ x 10’ x 10’ vat of hydrochloric acid, how many dissidents would fit in? Explain your approach

In the years after the Khashoggi killing, Saudi Arabia became somewhat like the plague – untouchable. Influential people like Blackstone’s CEO, Stephen Schwarzman, Jamie Dimon of JPMorgan Chase, and Christine Lagarde, then head of the IMF, declined to attend a Riyadh conference promoted by MBS. The conferences was hyped up by MBS as the Davos in the Desert. All of that came in the wake of the Khashoggi murder.

Undeterred by the brutal murder, McKinsey led conference panels on money and energy. In 2019, a year after Khashoggi’s killing, McKinsey’s revenue in Saudi Arabia appears to have increased. Around that time, a CNBC reporter asked McKinsey, what would McKinsey do if it found out its client was a murderer? To this question, McKinsey replied, you walk.

Disguised by its beautifully written ethics code, McKinsey did not walk – it continued to cash in – inside a state that had just committed a gruesome killing in another country. In true George Orwellian- Newspeak style, the ethical McKinsey’s code says, McKinsey stands firmly against bribery and corruption in all its forms.

Masquerading as a simple management consultancy firm, McKinsey continues its “work” (!) in no-bribery, no-corruption, no-human-rights-violation, and no-killing in Saudi Arabia. And pigs can fly.