Anil Kumar’s cheap betrayal of McKinsey’s soul

On the front of the McKinsey & Co website is a link to a McKinsey Quarterly article titled Motivating People: Getting Beyond Money.

It is a good topic, for the biggest question about the involvement of Anil Kumar, a McKinsey director, in an insider trading ring allegedly headed by Raj Rajaratnam of the Galleon hedge fund, is why he put his own reputation – and that of the firm – at risk for $2.6m.

Mr Kumar has agreed to forfeit this money, which is said to have been paid to him in return for providing inside information on companies he gleaned through his work at McKinsey, and apologised in a New York court for the “shame and embarassment” he caused his colleagues.

It is a shocking incident for McKinsey, like other blue chip advisory firms such as Goldman Sachs, depends on being trusted with its corporate clients with confidential information.

So far, McKinsey appears to have escaped lightly enough from the affair, although that would change if any other cases of its directors leaking information came to light.

But why on earth did one of McKinsey’s most senior employees break the rules so egregiously simply for material gain? Are McKinsey partners not paid enough as it is?

Perhaps not, is the answer. The annual distribution per partner at McKinsey has fallen from its peak as a result of the financial crisis and, although we do not know the figure since McKinsey is a private firm, is much less than the annual bonus of a senior investment banker.

The case of Mr Kumar shows that at least one McKinsey partner could be bribed for a fraction of what Wall Street’s elite earns.

What would Marvin Bower, the partner who built the modern McKinsey – and who passed on his stock to his partners at book value on his retirement rather than put it into debt – have thought?

Bower, dubbed “the soul of McKinsey”, would not have been impressed, it is safe to say. Rajat Gupta, a former McKinsey managing director, says of Bower:

“Convinced that behaviour and conduct are every bit as important as skills and expertise, Marvin sought to build the firm into an enduring, values-based institution.”

Among the five principles laid out on its website is:

“Keep our client information confidential. We don’t reveal sensitive information. We don’t promote our own good work. We focus on making our clients successful.”


No wonder Mr Kumar was so emotional in a New York court about what he did.