McKinsey’s role in opioid scandal happened under a boss who led the charge for stakeholder capitalism. Now he’s our ambassador to China

McKinsey & Company, an elite global consulting firm, recently agreed to pay $ 573 million (U.S.) to settle investigations into the role it played in “turbocharging” opioid sales.

Any corner drug dealer will tell you that getting people hooked on drugs boosts sales and profits. McKinsey allegedly helped Purdue Pharma operationalize the strategy to sell OxyContin. For its transgressions (which included targeting doctors and pharmacists with bribes, kickbacks, and misinformation) Purdue paid hundreds of millions of dollars in civil and criminal fines. Now McKinsey is on the legal hook too.

While it was advising Purdue, McKinsey was run by Dominic Barton. It’s not clear whether Barton knew what his firm was up to — he’s stayed silent in his role as Canada’s ambassador to China, which he assumed after leaving McKinsey in 2018 — and questions are being raised about whether he could or should have. But there’s another question too, a broader one raised by the debacle: What does it tell us about business elites’ current enthusiasm for “stakeholder capitalism?”

Stakeholder capitalism — an idea originally conceived by Klaus Schwab, founder and head of the World Economic Forum, and host of its annual meeting in Davos — holds that corporations should be conscientious and responsible to society and the environment, not only to their shareholders. It became de rigueur two years ago when JPMorgan Chase’s Jamie Dimon and his Business Roundtable proclaimed it to be corporate capitalism’s new ethos, and now it sits at the heart of Schwab’s recently proposed “Great Reset.”

Barton has been a longtime and leading advocate for stakeholder capitalism, writing in his aptly named book “Re-Imagining Capitalism” that corporations should “use (their) strengths to help society”; that social and environmental commitments should “be woven into a business’s day-to-day activities, and made a key priority by leadership”; and that companies should “provide lasting benefits to their stakeholders and to the communities in which they operate.”

For his decades-long advocacy, Barton has been much lauded, and he can take credit (alongside Schwab, Dimon and others) for stakeholder capitalism becoming embedded in the big-business mainstream.

But Barton’s leading role in the stakeholder capitalism movement raises a question: How is it that a company headed by an advocate for conscientious corporations could become a target for allegations of despicably unconscientious behaviour?

And it’s not just McKinsey. Many other companies have done the same. Think of Volkswagen and British Petroleum. Both previously topped lists of corporate goodness and then, following revelations of dangerous criminality, shifted over to top lists of record criminal fines. Many more examples illustrate the same dynamic (as I document in my book and film, “The New Corporation”).

The point is, despite all the corporate virtue-signalling attendant to stakeholder capitalism’s ascent, corporations — many of them led by scions of the movement — continue to do terrible things. Why? Because of a big loophole in the concept of stakeholder capitalism. No advocate, including Barton, says corporations should do good or refrain from doing bad in ways that hurt their bottom lines. Their call is to try to align the bottom line with doing good and avoiding harm. It’s not to abandon or diminish that bottom line. In other words, “do well by doing good.”

But that’s not as benevolent as it may sound. Because logically it bars doing good where it doesn’t contribute to doing well, and permits doing bad where it does. The latter is what appears to have happened at McKinsey (and VW and BP, among others). While Barton and other champions of stakeholder capitalism advocate for corporations to do good, there’s always that implicit rider: only if it will help your company do well, and not if it won’t.

Purdue did very well by doing very bad, and McKinsey allegedly helped them. That’s all within the logic of doing well by doing good, not outside of it. Which is why McKinsey’s alleged role in fuelling the opioid crisis reveals just how limited, and potentially deceptive, the idea of stakeholder capitalism can be.

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Joel Bakan is a professor of law at the University of British Columbia, and a legal scholar and commentator. His most recent book “The New Corporation: How ‘Good’ Corporations are Bad for Democracy” is the basis for the documentary film, The New Corporation: The Unfortunately Necessary Sequel, co-directed with Jennifer Abbott.

TORONTO STAR