McKinsey & Company partners this week voted out the consulting firm’s top executive Kevin Sneader as it continues to suffer a setback over his role in sparking the opioid crisis.
The decision to deny Mr. Sneader a second term of three years as global managing partner was voted on by more than 600 senior partners, according to a company executive. Earlier this month, McKinsey agreed to pay 49 states a historic severance payment of nearly $ 600 million for making recommendations to sell drugs to drug makers.
It is highly unusual for a seated managing partner at McKinsey to be denied grace. The last time a company director was denied a second term was in 1976, according to the company’s internal history book.
According to the company director, who spoke on condition of anonymity, the 54-year-old Sneader did not even make it into the final round of voting. The final candidates for Mr. Sneader’s replacement are Bob Sternfels from San Francisco and Sven Smit from Amsterdam. The Financial Times reported for the first time on the conversion of the renowned consulting firm.
Mr. Sneader’s tenure was tumultuous from the start as he attempted to address controversy arising from client work carried out during the nine-year tenure of his predecessor Dominic Barton, who is now Canada’s ambassador to China. The problems Mr. Sneader faced went way beyond the deadly opioid crisis.
Days after his new job in July 2018, Mr Sneader flew to South Africa to apologize for the company’s work with a state electricity company. McKinsey’s lucrative contract, in violation of South African contract law, involved the use of a local broker tied to a corruption scandal that overthrew the country’s president. McKinsey has returned tens of millions of dollars in fees it earned in South Africa.
“We came across as arrogant or unaccountable,” Mr. Sneader said at the time. “To be brutally honest, we were too far away to understand the growing anger in South Africa.”
He defended McKinsey earlier that month after a New York Times report revealed he was working with U.S. Immigration and Customs, even amid widespread anger over the Trump administration’s separation of migrant children from their parents.
At the same time, the fuse was ignited for the biggest scandal in McKinsey’s 95-year history: its extensive collaboration with Purdue Pharma to more than “turbo-charge” OxyContin sales amid a national opioid epidemic that has killed 450,000 people in the past two decades.
On July 4th of this year, two senior McKinsey partners exchanged emails on the Purdue account discussing the possible “disposal of all of our documents and emails” in order to avoid any possible impact on the company. This exchange was an integral part of the settlement states that closed with McKinsey this month. McKinsey did not admit any wrongdoing in the settlement, but both high-profile partners – who would have voted in choosing Mr. Sneader’s successor – were sacked.
“We deeply regret that we have not adequately recognized the tragic consequences of the epidemic in our communities,” Sneader said this month. “With this agreement, we hope to be part of the solution to the US opioid crisis.”
While observing, Mr. Sneader oversaw the implementation of measures to prevent controversial projects, including new procedures for screening prospects. But he could also be a staunch defender of McKinsey in the aftermath of the scandal, including his extensive work in Saudi Arabia, which came under scrutiny in late 2018 after The Times announced that a McKinsey employee had written an influential reviewer report had identified the Saudi government and that some of these critics or their family members were later arrested.
Mr. Sternfels, who like Mr. Barton was a Rhodes Fellow, leads many of the company’s technology-led initiatives and is also the senior partner overseeing McKinsey’s bankruptcy restructuring practice. This work has been the focus of lawsuits in recent years. In 2019, the company agreed to pay $ 15 million in a settlement with the Justice Department to clarify allegations that potential conflicts of interest were not properly disclosed due to its bankruptcy.
Mr. Smit is co-chair of the McKinsey Global Institute, the company’s internal think tank.
A McKinsey spokesman would not comment on the details of the election, saying in a statement: “The election, which will be conducted by an independent third party company, is now underway and we will announce the result after the election is over.”
Walt Bogdanich contributed to the reporting.
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