McKinsey’s partnership status challenged in court
NEW YORK, UNITED STATES — Global management consulting firm McKinsey & Company is facing scrutiny over its partnership structure amid a lawsuit and internal governance review.
This situation has sparked debate about the nature of the firm’s organization and its future direction.
Former partner sues McKinsey for breach of fiduciary duty
A lawsuit filed by Arnab Ghatak, a former senior partner, claims McKinsey breached its fiduciary duty as a partnership.
Ghatak was dismissed just before McKinsey’s $574 million settlement with U.S. states over its advice to opioid manufacturers. He contends his firing was a scapegoat tactic and that he never engaged in document deletion, as the firm implied.
In response, McKinsey has argued that as a corporation, it does not have a fiduciary duty to its partners. This stance could have significant implications for the firm’s internal dynamics and public image.
“To take the position in open court that they are not a partnership might irritate their partners, who say they are a partnership and believe they have fiduciary duties to each other. Not to mention the marketing issues it might cause,” said Dan Kaiser, Ghatak’s lawyer.
Internal governance review and leadership challenges
Internally, McKinsey’s recent leadership elections have been contentious.
Former global managing partner Kevin Sneader and current leader Bob Sternfels have pushed for more corporate-style governance, which has caused friction among the firm’s 750 senior partners. Sternfels narrowly secured a second term, underscoring the tension.
A governance review is underway, considering longer leadership terms and election rule changes. Initial steps include making the “shareholders council” function more like a corporate board overseeing executive actions.
However, significant changes to the partnership system seem unlikely for now, as most leaders still support the traditional model despite some private concerns about its future viability.
Future prospects for McKinsey
McKinsey employs 46,000 people in 65 countries. If the firm continues to modernize its decision-making processes, questions about selling a stake to private equity or going public might arise, according to journalist Stephen Foley.
This shift mirrors Goldman Sachs‘ transition from partnership to public company, highlighting a potential path for McKinsey.
