Readers Report
Is McKinsey Responsible If Its Clients Fail?
McKinsey did exactly what it was hired to do: help client executives formulate business strategies using sound psychology and economics, the foundations of marketing, finance, and all other business disciplines that increase the value of the client's organization ("Inside McKinsey," Cover Story, July 8). Client management had the fiduciary (key word) responsibility to select those strategies/tools that it believed would increase the firm's value, as measured by the stock price in most cases, without jeopardizing the future of the organization. No one should blame McKinsey for providing client executives with a diverse set of perspectives and options. Client management is responsible for executing those strategies.
Dennis Knueven
Columbus, Ohio
"Inside McKinsey" does not provide any evidence to suggest that McKinsey in any way contributed to the downfall of Enron, Kmart, Swissair, or Global Crossing. We now know that Enron's fall resulted from questionable practices.
We also know that Kmart continued to stay behind Wal-Mart in deployment of technology, management of supply chains, strategic alliances with major suppliers, and the product mix preferred by the consumer. Low prices and higher sales should have resulted from cost-effective procurement and operations--not from a price war. Regarding Swissair, strategy execution remains one of the weakest areas in many corporations. It should become a fertile area for academic research.
Kalyan Singhal
University of Baltimore
Baltimore
The consultants I've encountered in my 40-plus years in business (I'm now retired) usually have presented themselves as strategic thinkers. If the strategy fails, it's always due to poor execution, never to a flawed strategy. In my opinion, this is the standard cop-out for consultants, including McKinsey.
Martin Parker
Thousand Oaks, Calif.
As a longtime management consultant, I must take issue with your understanding of the management-consulting process. A company will frequently seek advice and then argue for the opposite conclusion. Or the company will partially implement your suggestions, often because it has sought advice from other professionals who provide conflicting advice. In addition, you ignore the political dimension. Frequently, the client has the right solution in-house, and the consultant merely resolves the internal conflict--with the added bonus that management doesn't have to take responsibility should things go awry.
Ira Davidson
New York
You ask, "What accountability does [McKinsey]--or any consulting firm--have for the ideas and concepts it launches into a company?" If in fact McKinsey should share the blame because of the ideas and concepts it launched into Enron, then why stop there? Perhaps you should also blame the brilliant professors at the business schools from which McKinsey recruits many of its consultants and who may have taught the same concepts to Enron executives. On the other hand, perhaps blaming teachers for the scandalous actions of their students is a pursuit not worthy of BusinessWeek.
Christopher John Davison
Ponte Vedra Beach, Fla.
Your "McKinsey over the years" photo timeline shows a picture of Marvin Bower. Apparently, the picture was not taken in 1933, as the caption indicates. The automobiles behind Mr. Bower look more like 1938 models.
William K. Sharpe
Las Vegas
Corporate Scandals Draw Advice and Dissent
Bruce Nussbaum's essay "Can trust be rebuilt?" ("Scandals in Corporate America," Special Report, July 8) says "Boards of directors are firing CEOs left and right." But these fired CEOs are walking away with golden parachutes paying them more money for being fired than most Americans earn in a lifetime. Such actions continue to destroy, not rebuild, trust.
John Mitchem
San Jose, Calif.
As a result of the well-publicized failures of Enron, Global Crossing, WorldCom, and other companies, Congress is formulating legislation to strengthen the standards pertaining to accounting and auditing practices for public corporations. The simplest and most effective way to deal with this problem is to empower the Securities & Exchange Commission to select the firms that will audit and certify the financial records of any company that is allowed to sell stock to the American public.
Under this regulatory scheme, any company that wanted to sell stock to the American public could hire any accounting firm of its choosing. All of the financial statements prepared by the public corporation and its accounting firm, however, would be subject to review and certification by an independent auditing firm appointed by the SEC. A public corporation would simply have to accept the fact that this was the price of admission to the stock market.
This is essentially a free-market solution that would create a well-defined system of checks and balances not unlike the division created between a pharmacist and doctors to help regulate the medical profession.
Robert Finke
Oak Brook, Ill.
"Surprise! The little guy loses" (Special Report, July 8) cites a Lipper analyst commenting that retail investors in loan funds operated by Eaton Vance and other mutual-fund providers have now learned that these funds have "high risk." The direct implication is that these funds have a large material position in the senior, unsecured debt of WorldCom. With regard to Eaton Vance, this implication is inaccurate. Approximately 98% of the loans in Eaton Vance's portfolio are senior and secured. WorldCom has never been a holding.
James B. Hawkes
Chairman and CEO
Eaton Vance Corp.
Boston
Pharmacia: The Science on Celebrex Is Sound
We strongly disagree with the tone and conclusions of Paul Raeburn's commentary "The credibility gap in drug research" (Science & Technology, June 24) regarding Pharmacia's Celebrex (celecoxib capsules) and the study referenced. The commentary focuses on a single endpoint of one study and completely ignores other important and meaningful results from that study. This served to deprive your readers of the rich clinical data and good science--based on extensive clinical studies involving more than 30,000 patients--that support the safety and efficacy of Celebrex. Equally disturbing, this commentary implies that findings from the study in question that were published in the Journal of the American Medical Association (JAMA) were selectively chosen to favorably compare Celebrex to other nonsteroidal anti-inflammatory drugs (NSAIDs) involved in the study. In fact, the study's executive committee of external authors carefully considered the unexpectedly higher drop-out rate among study patients taking NSAIDs compared to those in the Celebrex group, and they determined that the safety analysis published in JAMA was the most meaningful and appropriate.
Pharmacia stands by the improved upper-gastrointestinal safety profile of Celebrex as reflected in the new Food & Drug Administration-approved Celebrex label and the positive impact Celebrex has had for millions of patients worldwide.
G. Steven Geis
Group Vice-President
Clinical Research
Pharmacia Corporation
Chicago
An Appreciation of Fidelity's Bob Pozen
We are managing, or have managed, billions of dollars in equity assets for Fidelity Management & Research Co. Contrary to the insinuations in the article "Here Comes Abby" (Finance, July 8), Bob Pozen was an outstanding president of FMR. While he brought more discipline, Bob let each portfolio manager pursue his or her own investment approach. He encouraged debate and discussion rather than imposing one viewpoint. Although trained as a lawyer, Bob quickly learned the investment process and used that knowledge to provide us with any help and support we needed to do a better job.
Robert Stansky
Steven Kaye
George Vanderheiden
Stephen Petersen
Boston
Begging to Differ with Tyson on Tax Cuts
"Tax cuts for the rich are even more wrong today" (Economic Viewpoint, July 8) is distorted, prejudiced, and incorrect. Laura D'Andrea Tyson says that "over the decade, these Americans will enjoy an average tax cut of $342,000 per taxpayer, draining $500 billion from the federal budget," and "in 2010, the tax cuts passed by Congress last year will shower $121 billion in tax relief on the wealthiest 1%." One sure way to exaggerate your case is to use "over the next 10 years" or "in the year 2010" because I can absolutely guarantee you that no one knows what the economy will be 5 years from now, let alone 10. So this way, you can pick the biggest numbers imaginable. What about using "based on last year's tax collections" to bring the article back to earth?
I think Ms. Tyson is using the top 100 or so taxpayers in the country to distort her averages and then projecting these numbers over 10 years out into never-never land to try to build resentment against the Bush tax cut. As a small-business owner with a lot of bills, I pray that the tax cuts take effect.
Peter J. Hess
President
Albany Steel Inc.
Albany, N.Y.
State Attorneys General Touch a Nerve
I was disappointed in "White knights or loose cannons?" (Legal Affairs, June 17) about state attorneys general. It appears that these bureaucrats have determined that the way to get extra revenue for their respective government organizations and gain publicity as individuals is to penalize companies without due process, whether justifiable or not.
I don't know the statistics, but I am sure there are many more businesses subjected to these inequities than there were five years ago. If these trends continue unchecked, we will surely see a negative impact on productivity and performance. The bureaucrats need to recognize that companies are not just faceless entities but rather groups of real people trying to do the best for themselves and our great country.
John Yaukey
Prescott, Ariz.
Canada Really Is for the Birds--and Other Wildlife
William Snape III's letter "U.S. timber tariffs help Canadian forests--a little" (Readers Report, June 24, regarding "Bush: What price fast track?," News: Analysis & Commentary, June 3) repeats inaccuracies about Canadian environmental practices.
The level of cooperation on wildlife-management issues between Canada and the U.S. has been unparalleled ever since 1916, when the Migratory Birds Convention Act was signed. That agreement, coupled with the 1986 North American Waterfowl Management Plan, stands today as an example to the rest of the world of cooperative migratory wildlife management and habitat conservation.
The 1997 Framework for Cooperation was put in place for the joint protection and recovery of wild species at risk. The goal of this agreement is to prevent populations of wild species shared by the U.S. and Canada from becoming extinct as a consequence of human activity. These are but a few of the many programs Canada has in place that protect cross-boundary wildlife species and ecosystems.
Peter M. Boehm
Minister, Political & Public Affairs
Canadian Embassy
Washington
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