Why McKinsey’s apology might not be enough
Kevin Sneader, the head of McKinsey, one of the world’s most secretive business organisations, visited SA this week to seek forgiveness for the firm’s role in state capture. But ‘sorry’ might not be enough
Sorry, the song goes, seems to be the hardest word. But in the case of McKinsey’s newly minted global head Kevin Sneader, it was the centrepiece of his mea culpa to the SA business community as he gave a thoroughly Japanese-like apology for his company’s involvement in state capture through its deals with Eskom, Transnet, Trillian and Regiments Capital.
Sneader still took a lashing. At an event this week hosted by the Gordon Institute of Business Science, he was grilled by attendees like Business Leadership SA’s unforgiving head Bonang Mohale, Corruption Watch’s David Lewis, JSE chair Nonkululeko Nyembezi and the media.
Nicola Kleyn, dean of the business school, told Sneader that he’d "dived into a pool of pain", while Mohale lambasted a business community that he said had profited from corruption in state-owned companies while giving little back.
"Context in SA is everything," said Mohale. "You are part of a business community that after 350 years didn’t even ask for forgiveness, just took forgiveness. After taking it, you still behaved in the manner that you did, so I’m hoping you’ll begin to understand not only the frustration but the bone-deep anger."
And this was one of Mohale’s more restrained criticisms.
Sneader’s apology came on the same day that McKinsey repaid Eskom R902m of a R1.6bn fee it received in 2016 (without adding interest).
He admitted that McKinsey’s governance processes had failed when in 2015 it contracted Regiments as its empowerment partner to help Eskom save money and build internal engineering capacity.
Sneader acknowledged McKinsey’s due diligence into Regiments was "quick" and "inadequate", but he defended its due diligence into Trillian as "robust", if belated. "Due diligence should have been completed before any work started. We were so focused on delivering our work we did not focus on the broader risks."
He said the fee McKinsey charged Eskom was exorbitant because it was "weighted towards recovering our investment, rather than being in line with Eskom’s situation".
McKinsey and Trillian stood to earn a staggering R9.4bn from a three-year advisory contract with Eskom, signed in January 2016 against Eskom’s own legal advice. Leaked memos showed how McKinsey partners Vikas Sagar and Alexander Weiss discussed how to share the spoils with Trillian.
McKinsey launched a disciplinary process but Sagar left the company before it was concluded. Sneader insisted Sagar had not been "rewarded" to leave.
Referring to the time it had taken McKinsey to come clean, Sneader said: "We came across as arrogant or unaccountable. We were too focused on ourselves and our legal obligations. To be brutally honest — we were too distant to understand the growing anger in SA."
He added: "We understand now."
Sneader denied that McKinsey had done anything "criminal" when Lewis accused the company of being complicit in paying "a huge bribe" to Eskom.
"There’s no other way to coat it," said Lewis. "As far as we’re concerned, you’re guilty of offences in terms of the Foreign Corrupt Practices Act. Do we have the ability to prove that last mile? No we don’t, which is why we need the US department of justice or institutions with policing powers."
Lewis said McKinsey could not glibly say "sorry" and hand back the money. "When you steal large amounts of money you go to jail," he said.
Sneader replied: "I said I’d be as open as I possibly can and I will be: we have found no evidence to support the first part of your statement. You talk about inferences; I’m not in the world of inferences. Your inferences do not match up with the evidence. We simply disagree."
Sneader, 51, a Glaswegian, joined McKinsey nearly 30 years ago, after leaving university, and is clearly familiar with robust confrontation.
In a recent article about him, the Financial Times wrote: "McKinsey executives usually practise a Trappist-like silence when it comes to discussing the inner workings of their organisation." But the company’s "conversion to glasnost" had been partly forced by the Eskom scandal, it said.
Lewis had more to say at this week’s event. "Let me tell you, this would not be an unusual situation for a senior McKinsey executive … six years ago one of your predecessors went to jail for two years on an insider trading scandal, and guess what his surname was? Gupta.
"If I were the leader of the worldwide Gupta clan I’d steer clear of McKinsey … I’m not sure the good name of the Guptas could survive another brush with you."