McKinsey Braces for Reputation Hit

In June, 2009, McKinsey published an article in the McKinsey Quarterly entitled “Rebuilding Corporate Reputations.” The article not only convinces you McKinsey understands the role and value of reputation as a corporate intangible, but that it knows how to insulate, protect and repair, including the fact you have to “get out in front of the story.” 

Now McKinsey appears to following its own advice, making sure it has the capacity to handle a coming reputation storm

Looking to hire at McKinsey…“Working under the direction of the Director of Reputation Risk Management, the Reputation Risk Specialist is responsible for helping actively monitor, report and prepare for potential and actual reputation risks that could impact the Firm. The successful candidate will help protect the Firm’s reputation and serve as a member of the Communications team.”

Rajat K. Gupta, as a director of Goldman Sachs in 2008, is accused by the SEC of passing along inside information to his friend (who acted on it and netted his firm a reported $900,000).

Gupta has resigned from the boards of AMR, Proctor & Gamble, and other firms. But what he might have done in his long-time McKinsey tenure (three decades; ultimately chief executive [until 2003]) may well be exposed at trial … and there is genuine fear that what comes out might “destroy” McKinsey. Though there is no evidence Gupta did anything wrong while at McKinsey, any revelation that he did jeopardizes the company’s very existence. If your success is based on your reputation, and you have spent years and millions of dollars on branding that repuation as secret, private, and discreet, you have a reason to worry.

John Carney (NetNet; CNBC) is following the trail.  Where was Gupta, when was he there, and what unusual trading activity occurred while he was there.  For example, “In 2005, Proctor & Gamble made a $61 billion bid for Gillette. At the time, there were widespread suspicions that traders had learned of the deal in advance. Options volumes spiked before the news hit the wire after the closing bell on January 27.” Gupta was close to that deal, very close. To be sure, the suspicious pre-deal trading does not necessarily lead to Gupta, but the research is getting dangerously close to 2003 and before, and McKinsey is preparing to follow its own advice and protect its value.