Tag: Defense

MUNICH, Germany — Many of the biggest names in business and politics will cross the red carpet of the stately Bayerischer Hof hotel this weekend for the Bavarian capital’s annual Munich Security Conference. But to identify the real power behind the A-list event, turn to page 169 of the conference’s annual bible, the “Munich Security Report.”

There, in baby blue letters at the bottom half of the page, is a name as familiar to most conference-goers as their own: McKinsey.

Over the past decade, the U.S.-based consultancy has quietly influenced the agenda of the conference, according to current and former employees and internal documents viewed by POLITICO, steering everything from the focus of its marquee report to the event’s program, to the guest lists. 

The relationship has been symbiotic: While the non-profit MSC benefits from the convening muscle of the most powerful management consultancy in the world (free of charge) and its army of experts, McKinsey gets to shape the agenda of one of the premier venues for global elites, giving it the opportunity to push narratives that serve the firm’s client base, be they in defense, the energy sector or government, people close the conference say. 

Yet the collaboration is also a delicate one. The MSC is a state-sponsored event held under the aegis of the German government. Without the close involvement of the state, which aside from financial support also helps recruit the global leaders who lend the conference its cachet, the MSC would cease to exist. The extent of McKinsey’s behind-the-scenes influence in shaping the conference’s agenda is bound to raise questions about the governance and oversight of an event that sells itself as a neutral forum to debate world affairs. 

In a statement to POLITICO, the conference said that “as a politically independent, non-partisan organization, the MSC is solely responsible for the MSC program,” adding that all participants to its flagship event “are invited as personal guests by the MSC Chairman.”

McKinsey described its association with the MSC, which refers to the firm as a “knowledge partner,” as that of a provider of “publicly-available facts and data” and graphics, adding in a statement that it does not undertake new research or analysis for the MSC security report.

“We have no editorial control over the report or influence over its topics, and we do not have a role in shaping the conference program, its guests or events,” the firm said. “Any assertions to the contrary are wrong.”

‘The McLeyen System’

What makes the depth of the MSC’s partnership with McKinsey particularly sensitive in Germany is that the firm was at the center of a political scandal during Ursula von der Leyen’s tenure as German defense minister involving allegations of cronyism and irregularities in procurement. The ministry of defense is one of the primary funders of the MSC.

After being named defense minister in 2013, von der Leyen hired the then-head of McKinsey’s Berlin office, Katrin Suder, as a senior aide. In the years that followed, McKinsey, where two of von der Leyen’s children have also worked, was awarded contracts worth millions from the ministry under what internal critics claimed were questionable circumstances.

The affair — dubbed “the McLeyen System” in Berlin — triggered a nearly two-year-long parliamentary probe, and a 700-page report into allegations the ministry squandered hundreds of millions of euros on McKinsey and other consultants. By the time the investigating committee completed its work in 2020, however, von der Leyen was firmly ensconced in Brussels as president of the European Commission and Suder had left the ministry.

The investigation concluded that relations between von der Leyen’s ministry and the consultants were far too cozy and that much of the work they were hired for could have been handled by the civil service. Though von der Leyen and Suder weren’t accused of direct involvement in dodgy procurement practices, many opposition politicians argued they bore political responsibility.

A spokesman for von der Leyen, who is due to attend the MSC on Saturday, declined to comment for this article. Suder did not respond to a request for comment.

Boiling Munich’s Ocean

Von der Leyen and Suder were central to the evolution of McKinsey’s involvement with the MSC, as well.

In December 2012, when Suder was still running McKinsey’s Berlin operation, the firm hosted an exclusive “roundtable” in the German capital together with Wolfgang Ischinger, the former German ambassador who heads the MSC. The meeting led several months later into the first “Future of European Defence Summit,” an exclusive gathering of “military, industry and academic leaders” co-sponsored by McKinsey and the MSC.

The gist of the initiative was to nudge European policymakers into pooling resources and steer the EU on a path toward common defense, a longstanding if elusive goal for many in Europe. It was also a goal for some of McKinsey’s biggest clients in defense, such as Airbus, which has encouraged common procurement in the region. And who better to help European ministries of defense along the difficult path of rationalization and weeding out inefficiencies than McKinsey?  

“This independent study contains … key numbers and analyses with respect to long-term productivity and annual savings potential,” Ischinger wrote in the forward of a 33-page report McKinsey produced after the event. “I am confident that professionals from industry, from the military and from politics will find this paper helpful and thought-provoking when pondering options for the future of European defense.”

The 2013 report, the first of many, marked the beginning of a process that would transform the MSC, people close to the conference say. McKinsey offered to bolster the MSC’s analytical output with its own resources, people close to the MSC said, flooding the zone with analysis, an approach McKinseyites call “boiling the ocean.”  

“I was thrilled to see that past analyses that originated from our cooperation made their way into the core of the European debate on defense,” Ischinger wrote several years later. “Our findings — for instance, about the fragmentation of European capabilities and about the annual savings potential if European countries organized defense procurement jointly — have been widely used in public appearances and official documents by defense ministers and other European leaders.”

When Ischinger took over the MSC in 2008, the conference was struggling to remain relevant. Founded during the height of the Cold War as a conclave for NATO allies, the MSC still attracted stalwarts (including then-U.S. Vice President Joe Biden, who first attended in the 1970s), but had lost much of its flair and relevance. Nearly 90 percent of the attendees were male, and the vast majority were over 50. 

With guidance from his friends at McKinsey, Ischinger accelerated the MSC’s makeover, expanding its calendar of exclusive events, including at the ritzy Schloss Elmau hotel in the Bavarian Alps, and bringing on dozens of new corporate sponsors. 

By 2014, the number of sponsors rose to nearly 30 from just six in 2010 and contributions jumped to more than €2 million, according to internal records viewed by POLITICO.

Even as the money rolled in, however, Ischinger’s advisory board — which at the time included several German CEOs, a Saudi prince and a former governor of Bavaria — was wary of overextending the organization and earning a reputation for sacrificing substance for financial gain, according to the internal documents. Above all, they didn’t want the MSC to turn into a copy of the World Economic Forum in Davos, Switzerland.

“The beauty of the MSC is its limited, focused, serious substantial and non-commercial character in comparison to Davos, which is an acquisitive ‘money-making machine’ and networking event,” reads an internal summary of the board’s view.

The board’s advice was to “keep the sponsors group small” and “discreet.” 

Ischinger had his own ideas, however.  

Pooling Resources

In von der Leyen, who became defense minister in late 2013, a role that also gave her a big say in the conference, Ischinger won a ready ally, people close to the MSC said. And with Suder, McKinsey’s former Berlin chief, at von der Leyen’s right hand, Ischinger had a direct line into the defense ministry. It was during von der Leyen’s tenure that the partnership between McKinsey and the MSC flowered.

Von der Leyen and Suder had vowed to reform and modernize Germany’s dysfunctional Bundeswehr, or army. The MSC was a perfect opportunity to showcase what they promised would be a new dawn in German security policy.

“If we Europeans want to remain a serious actor in security policy, we have to pool planning and action,” von der Leyen told the conference in her first major address there in early 2014, echoing the line articulated by Ischinger and McKinsey at their “Future of European Defence Summit” a few months earlier.

Following von der Leyen’s speech, the chief executives of the defense contractor Raytheon and the aerospace company Airbus took the stage along with former NATO Secretary General Javier Solana. Frank Mattern, a senior director at McKinsey, introduced them.

For the consultancy, the choreography couldn’t have been better. 

The Ghostwriters

A year later, the MSC unveiled its first Munich Security Report: “Collapsing Order, Reluctant Guardians.” In his introduction, Ischinger describes the report as a “conversation starter” for the conference, which took place shortly after publication. 

It was also an opportunity for McKinsey to define the agenda. 

“Europe could save 13 billion euros annually by pooling defense procurement,” the report claims in its opening chapter, citing McKinsey.

In the acknowledgments, the report cites McKinsey in the middle of a laundry list of think tanks and government ministries for “research and input.” What it doesn’t reveal is that the report was largely conceived and funded by the consultancy. 

People close to the MSC say the organization took pains to conceal the extent of McKinsey’s involvement. Though the name of a McKinsey consultant, Kai Wittek, is listed as a member of the “editoral team,” his affiliation wasn’t mentioned. In fact, Wittek — one of the authors of the 2013 McKinsey report that emerged from the firm’s initial collaboration with Ischinger — was dispatched to the MSC for months to work on the report, according to people familiar with the matter. 

Wittek, who now works for a German defense contractor, did not respond to a request for comment.

The MSC said in a statement it “has always held full editorial control over the Munich Security Report” and that it was “committed to transparency regarding all its partnerships.” It said that its cooperation with outside partners was always labeled. In McKinsey’s case, the firm provided support for the report with graphic design, production and proofreading, “areas where the MSC did not have resources and capacities of its own.”

Though McKinsey has regularly been listed in the acknowledgments of MSC reports and as a sponsor for individual articles, such as a 2019 piece on artificial intelligence, the extent of its involvement has been deeper, with the firm even footing the bill for the reports’ print production, according to people close to the conference.

In 2016, another McKinsey man, Quirin Maderspacher, joined the team alongside Wittek. Maderspacher said that for the 18 months he worked directly on the editorial content of the reports, he had a contract with the MSC. He subsequently returned to McKinsey as a “senior associate.” Though he continued to work with the MSC it was only for projects directly sponsored by McKinsey, he said.

The MSC said some McKinsey employees have worked for the MSC under the firm’s so-called “social leave program,” under which staff members are granted a sabbatical to join a non-profit organization. The key McKinsey partners involved in managing the MSC relationship, however, were not pursuing charity work, the current and former employees of the conference said.

This group included Mattern, senior partner Wolff van Sintern, a specialist in aerospace and defense, and Gundbert Scherf, a McKinsey partner who left the firm in 2014 to work for von der Leyen and Suder at the defense ministry before returning to McKinsey in 2017. None of the three men, all of whom have since departed McKinsey, responded to requests for comment.

Over the years, McKinsey sought to shift the report’s focus toward issues important to their clients, from cybersecurity to drones, people close to the conference say. The MSC contributors were for the most part recent graduates and inexperienced, making it easier for the senior consultants to push their line, the people said. Still, McKinsey was careful to stay in the shadows. In addition to guiding the direction of the reports, McKinsey offered advice on how to structure the conference program and even whom to invite, the people close to the MSC said. 

So it went until 2020, when, amid the parliamentary investigation into McKinsey’s contracts with von der Leyen’s defense ministry, the MSC offered a fuller accounting of its own engagement with the firm.

That year’s report listed the names of nine McKinsey employees in the acknowledgments, thanking them for “their contribution to the report,” and “support in the design and layout process.” 

Among those cited were Scherf and van Sintern. 

A copy of Davos

The collaboration paid off for Ischinger in other ways. His experience with McKinsey helped inspire him to start his own consultancy, Agora Strategy Group, in 2015, former associates said. Like McKinsey, Agora has operated behind the scenes of the MSC, drawing unwelcome scrutiny, though few repercussions.

“Given the long-standing partnership between the MSC and McKinsey & Company, Ambassador Ischinger has, over the course of a decade or more, been in touch with a number of senior McKinsey executives just like with the leaders of the many partners and sponsors of the MSC,” the MSC said.

Ischinger stepped down from the day-to-day running of the MSC last year, but still heads the foundation that oversees the event.

His ties to McKinsey continue to run deep. For example, the firm has helped to fund the Hertie School, a private university in Berlin, where the former ambassador set up a center for international security. After leaving the defense ministry, Suder joined Ischinger at the center as a “senior fellow” and is also a trustee. Her former McKinsey colleague Mattern, another Ischinger confidant at the MSC, became the head of Hertie’s board of trustees. Though they’ve left the firm, their influence on the conference continues to reverberate. 

Ischinger and his collaboration with McKinsey has also left its mark on the nature of the conference itself. With annual revenue of more than €12 million and about 100 sponsors (including McKinsey), the MSC is well on its way to becoming what a decade ago its advisory council feared: a copy of Davos.

Gabriel Rinaldi contributed to this article.