McKinsey & Co.: Facilitating Bribery in South Africa

The head of the South African subsidiary of the US consulting firm McKinsey & Company (McKinsey), has to address the implications of the firm’s involvement in a corruption scandal. The South African office was implicated in a scandal involving its local partner, Trillian Capital Partners (PTY) Ltd. (Trillian), and Eskom, a South African state-owned enterprise (SOE). McKinsey was required to partner with a local company as a condition of any contract with a South African SOE. McKinsey took on Trillian as its local partner after Trillian was recommended by a former client. Trillian was, however, associated with the Guptas, a family that the South African Public Protector (an ombudsman) had accused of using its influence with the South African president, Jacob Zuma, and his family for corrupt activities. The partnership (first with a company named Regiments Capital (PTY) Ltd. [Regiments] and then, following restructuring, with Trillian) directly benefited the Gupta family. More than three years into the relationship, McKinsey claimed to have discovered that its partner was politically exposed and under investigation by the South African authorities. McKinsey’s new global managing partner attempted to limit the damage to the company’s reputation by issuing an apology. However, the South African public appeared skeptical about the apology, and questions remained regarding McKinsey’s integrity. The questions left unanswered included the following: Was Sneader’s apology enough to enable McKinsey to quell the attack on its reputation? Should McKinsey do more to enhance its standing within the South African business community, or should it accept that its reputation had suffered irreparable harm?

TThis case is suitable for use in graduate-, and executive-level courses on corporate strategy, corporations and society, international business, ethics, and governance. In international business courses, the case helps to understand corruption in emerging markets, subsidiary independence, and headquarters control. In strategic management courses, the case can be used to analyze the management of crises. In ethics courses, the case can be used to study a break in ethical conduct and how to reinstate it in a subsidiary. The case could also be used for specialized courses on the management of consulting firms. The case highlights the problems associated with assessing political risk as well as with identifying and avoiding corrupt practices in international business. The case also illustrates the impact of being implicated in corruption on a global brand’s reputation. After working through the case and assignment questions, students will be able to<ul><li>identify corrupt practices in government/multi-national corporation (MNC) relationships;</li><li>recognize the indicators of corruption; and</li><li>identify strategies for the management of corrupt partners in host countries.</li></ul>

• corruption, africa, consulting