Cottage cheese 311.
(photo credit: Fastily)
At first glance, McKinsey & Company’s recommendation to Tnuva Food
Industries Ltd. to raise cheese prices because demand is inelastic (as
Globes revealed Sunday) seems natural and clear. What is more natural than a
consultancy firm recommending to a business client to maximize profitability by
raising prices? McKinsey was simply doing its job.
But when you read the
words of McKinsey managing director Dominic Barton – his apparent empathy for
employees and consumers, his apparent feelings for social gaps, and his apparent
criticism of the pursuit of short-terms profits – you have to wonder about where
all those commendable values went when McKinsey made its
They simply disappeared into thin air.
2010, Barton told Israeli media outlets: “There is another area... Perhaps the
most important: the rise in inequality – widening gaps between rich and poor and
even between the rich and average income earners. This is a problem that
everybody needs to devote attention to.
Businesses, government and the
social sector... businesses cannot deal with unemployment, and neither can
governments deal with it – they need to cooperate. I believe in the saying that
tomorrow’s leaders must be triathlon specialists – they must be good in the
private sector, in the public sector and in the social sector.”
“There are two processes taking place at the same time: a tendency towards
avarice, envy, greed Milton Friedman-style... I think the public’s perception is
that businesses have become more selfish. I think that this began before the
crisis began but subsequently worsened.
On the other hand, I think there
is a perception emerging that that not everything should revolve around value to
shareholders but around all stakeholders.”
“When you work with a company
you think about all the interested parties – the community, employees,
suppliers, taxpayers, consumers – and not just the shareholders,” Barton said.
“Yes that’s what we do. It is impossible to separate between shareholder value
and the value of the parties at interest. It is in fact the same thing. I
believe that we need a more updated capitalism. We have become too focused on
the short term and not on the long term. The issue is interested parties versus
shareholders and governments too.”
McKinsey’s and Barton’s publicists can
be well-pleased with this interview.
To mark 10 years of McKinsey
activities in Israel, they got what they wanted: a relaxed interview, supportive
and pigeonholing Barton with an image of social values and caring for the
“interested parties.” McKinsey was even called “one of the world’s most
important companies” in the interview.
McKinsey’s harsher critics say it
is “the root of all capitalist evil.” Ex- Enron CEO Jeffrey Skilling came from
the McKinsey school, and he was sent to prison for 24 years for defrauding
investors. When McKinsey wrote about Enron a short time before its collapse, it
said it had “built a reputation as one of the world’s innovative
And then there was Rajat Gupta, a former managing director at
McKinsey and then a director at Goldman Sachs, who was accused of insider
trading regarding the Galleon hedge fund. Those were the bad boys that McKinsey
raised in the name of endless avarice and greed. But that does not disturb
Barton from speaking critically about avarice and greed.
with Barton is just one small example of the double, disproportionate moral
standards and hypocrisy of the business sector and governments. In their support
for image and media consultancy, they market themselves in fussy interviews as
socially sensitive and concerned about growing social gaps. They preach a more
sensitive, more contemporary and refined capitalism.
But behind closed
doors, when the publicists study the terrain and cannot be seen by the public,
then the terminology changes. The sensitivity disappears and makes way for
predatory bullying. Raise the prices. Raise them up without taking anything into
account, and forget about pretty slogans marketed in interviews about the same
value given to shareholders and other stakeholders like
McKinsey didn’t care about the consumers or Barton’s preaching
about one “of the world’s most important companies.” It simply understood that
prices could be put up because of the structure of the dairy market. It
understood that there is a cartel managed by winks and sign language and that
Israel’s antitrust laws do not apply to agricultural produce. It understood that
it was possible to exploit those other stakeholders.
The cottage cheese
crisis has lifted the mask. The public does not believe Zehavit Cohen or Ofra
Strauss or Prime Minister Benjamin Netanyahu or the ministers of finance,
agriculture and industry, trade and labor.