McKinsey Caught up in China Procurement Bribe Scandal

This one comes courtesy of The Spend Fool. According to, "The English-language Shanghai Daily reported Friday that police have detained 22 people from seven companies, including McKinsey, McDonald's, Whirlpool, and ABB, in connection with a bribery investigation in that Chinese city ... Bribes totaling about 4 million yuan (slightly more than $500,000) were given to directors, senior employees, and other individuals by four companies that operate local computer networks and that sought equipment orders".

McKinsey, which has a significant Chinese operation set-up to advise companies on global sourcing and supply chain efforts, is in the middle of the scandal. In May 2006, the article quotes the Shanghai Daily as noting that "authorities received an anonymous call claiming that the general manager of a local computer company had bribed a computer-department employee in McKinsey's Shanghai office in return for a contract to install a computer network. Two employees of the computer company later confessed that they had given about $50,000 to two employees of McKinsey at the end of 2005, according to the newspaper. After further investigation, wrote the paper, police determined that between 2003 and 2006, the two McKinsey employees received a total of about $250,000 in bribes from four companies."

It's good to know that the premier large strategy consultancy of choice knows a thing or two about local customs (and in theory, how to get away with them). Granted, McKinsey's China operation might not be quite as corrupt as most businesses in the region, but in teaching clients how best to make sure that container arrives to the port on time, they definitely have a leg up on the competition. One wonders what Peter Kraljic would have to say ...

Jason Busch

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