Business Ethics: The McDonald's Beef Fries Controversy - Case Study Example

McDonald’s has frequently been accused of resorting to unfair and unethical business practices. While McDonald’s has often been accused on various grounds, the beef-fries controversy in 2001 revealed the negligent and the irresponsible way that is unexpected of a global player of the magnitude of McDonald’s. Becoming a global player has certain responsibilities that have to be fulfilled. Economic opportunities also bring with it social and political considerations, which cannot be ignored. Post (2000) contends that an organization’s global corporate citizenship is shaped by internal and external factors. How a company deals with past public issues, stakeholder issues and community concerns determines the employees’ perception of the importance of citizenship matters. Even though people in the West are basically non-vegetarian, America does have a good strength of vegetarians. Besides, there are many who avoid beef on ethical, religious or health grounds. These were ignored by McDonald’s when they decided to add beef flavoring agent when they started losing customers. According to Robinson (2002), ethics is a set of moral principles held by an individual or a group, encompassing individual behaviour, environmental policy, staff policy, and corporate social responsibility, which has gained importance recently. Demands of the shareholders, stakeholders and investors are forcing industries to maintain a high morality in how companies conduct business. Any deviation can adversely affect the brand image, customer retention, and overall business. McDonald’s initially declined to comment and then issued a ‘conditional apology’. As the people became more violent, the company kept changing their approach. This adversely affected their brand image. McDonald’s follows the ‘Code of Federal Regulations’ which does not require the restaurants to list the ingredients. The French fry suppliers do use a small amount of beef flavoring agent as an ingredient in the raw material. The ingredients in ‘natural flavors’ need not be broken down. This was their initial reaction but when there was an upsurge created, they reacted saying that they never claimed that the fries sold in US were vegetarian but this claim of theirs was also subsequently proved wrong. They went on the defensive instead. They were blamed for deceiving million of people who may not want to have beef extract in their fries for religious, health, ethical or other reasons. The Utilitarian and deontological perception on Kant on ethics is based on reason, intention and duty. Carrigan, Marinova and Szmigin (2006 pp1,2) state that according to Kant duties cannot be associated with self-interest like rewards and pay-offs. Firms exist for the society and have a moral obligation to satisfy the needs and deliver benefits to the society. Such an approach would result in richer dividends for a firm because consumers will perceive its operations as ethical. Very often companies are not willing to place the interest and welfare of the society before its self-interest. This is what McDonald’s resorted to. Since they had been able to make the number one position for themselves in the fast food industry, their relinquished the moral obligation to deliver benefits to the society. John Mills views on ethics based on Utilitarianism, is also associated with common good rather the company’s self interest. The utilitarian view does not always result in ethical marketing conduct. The term ‘common good’ is ambiguous since in international marketing it could mean transcending country borders and nationalities. The theory states that business ethics should maximize the total amount of happiness in the world and minimize the pain. Kant places the customer first while Mills views place profitability as the core purpose of business. McDonald’s was concerned with self interest but did not attempt to minimize the pain. Morality is not absolute and is based on the social norms of the society in which they are practiced. Ethical relativism applies to different ethical standards applicable in different countries. Hooker (2003) argues in the long run morality pays. Unethical people do run into trouble even if they have reaped profits for some time. Ethical companies develop a brand image; investors come forward and support it in times of trouble. Above all, it brings financial rewards with it. Had McDonald’s responded to the beef-fries controversy in a responsible manner, they would have got the support of the investors when they were in trouble. Business ethics should not be merely a corporate code but should be implemented as a corporate philosophy. Virtue does not guarantee success but it is essential for success otherwise the fate will be short-lived benefits. Tung & Miller (1990) emphasize that in international business relations, managers face uncertain situations and tend to fall back on their own values to make decisions (cited by Wong & Chung). Kim & Olsen emphasize that no industry can exist free of its external environment (Ingram, 1995). McDonald overlooked the fact the in Untied States there are any number of vegetarians who are sensitive to beef products. Their French fries process varies across countries and depends upon individual cultural, religious and dietary considerations. Since they were losing customers after they switched on 100% vegetable oil for their fries, they started adding this as a natural flavor because it gave a unique flavor which their customers were used to. This in itself may not be a very big issue had the company handled it the right way. McDonald’s has a moral and ethical responsibility first to be honest about the products it serves, and second, have the courage to face the situation. McDonald responded by releasing a conditional apology on its website admitting that it carried a trace of beef flavoring. After the courtroom battle they decide to issue another apology and had to pay $10 million for the settlement of the law suits. Thereafter they decided to admit that they should have created public awareness of the ingredients used in fries and hash brown after they switched over to vegetable oil. Had this stand been taken at the very first instance when Shah sent the first letter, they could have saved themselves the $10 million compensation. Their approach was totally against business ethics and was vested with self-interest. They had total disregard for customers’ religious sentiments and health concerns. As global players, they are expected to have a mature outlook and as theory suggests morality is what pays at the end. Why has McDonald attracted so much hostility and various allegations despite being the number one fast food chain in the world? While fast food meals based in burgers and fried chicken have been considered convenient, they have also been considered to be unhealthy. One of the reasons for the vast number of allegation against McDonald’s is that processed convenience foods contribute to obesity (Schröder & McEachern, 2006). This has led to several litigation proceedings against6 McDonald’s. There have been other allegations that McDonald’s have indulged in deceptive acts that lures people to eat with substantial frequency. McDonald usually does not disclose the nutritional information for their food and as well as the adverse health effects associated with consumption of foods considered being high in cholesterol (Ritter et al., 2003). Their advertisements entice children and lure them towards unhealthy eating habits which are considered unethical. McDonald’s make the nutritional contents in food readily available on their website but not in their restaurants. This is taken as an intentional act to lure consumers because consumers are impulsive buyers, according to Schröder and McEachern. While McDonald’s defends that its products form an overall balanced diet, a consultant to the World Health Organization claims that they are encouraging the use of a style of food that is closely associated with the risk of cancer and heart disease (Kellner, n.d.). They even target advertising at children associating with popular films and pop culture artifacts, with an intention to attract young customers who would persuade their parents in to buying them food from McDonald’s. Based on the Weber’s theory of rationalization also McDonald’s does not provide the value that it promises. Besides, McDonald’s practices are environmentally harmful. They initially denied importing beef from areas like Costa Rica and Brazil that were threatened with excessive deforestation, but it was later proved that they did receive supplied from these areas. Under public pressure they had to resort to biodegradable products for their previously non-biodegradable styrofoam cups and other packaging materials. When they first opened in Israel, they developed a reputation of disregarding long-established traditions and conventions (Azaryahu, 1999). The location that they chose gave rise to a great deal of controversy. Their activities emphasized conflict and confrontation and appeared to be a challenge to the local Israeli traditions. Their response to the location choice again demonstrates their lack of social concerns. They stated that the restaurant actually lent dignity to the place and made it look better. McDonald thus gained a reputation of defending themselves against all allegations but when the public turns hostile, they soften their attitude externally. McDonalds has often been the target of anti-globalization protesters. At the end of 2003 it employed more than 1.6 million people and is considered to be America’s largest job training program. They claim to make the world a better place and claim to respect and value their employees, but reports suggest that pay and working conditions are far from being ‘overwhelmingly positive’ (Royle, 2005). Work at McDonald’s is low-paid, hard and often unrelenting. As labor turnover is very high, workers seldom get beyond the basic wage or qualify for additional benefits. Wages have not moved with inflation and being market leaders they depress the wages for the whole sector. This amounts to violation of employees’ rights. In Germany they have been accused of slave labor where the workers are constantly on call and dare not question the management. In US they employed foreign students and promised good pay but they deducted practically the entire amount as rent, medicare and social security despite the fact that these students were exempt from such payments. To reduce the labor costs, they even electronically adjust the employees’ clocking-in times. There have been numerous complaints about health and safety regulations. Since managers are under pressure to reduce costs, they seldom respond to the employees’ complaints. All these amount to gross exploitation of labor and demonstrate that they are not keen to act in a socially responsible manner. Mascarenhas states that marketers should behave in an ethical manner as because information about a firm’s ethical behaviors influences product sales and the consumers’ image of the company (Carrigan & Attalla, 2001). McDonald’s now appear to have woken up to this reality because to boost its green credentials, they have announced in January 2007 that all of its 1200 outlets in Britain will sell coffee only from growers certified by the Rainforest Alliance. To further overhaul its image it now procures beef only from farmers who meet special standards on animal welfare and environmental practices. Companies are trying to boost their social responsibility programs because they realize not do so is a major corporate risk, according to the chairman of the consultancy Interbrand U.K (Capell, 2007). At the same time, there are fears that using only genetically modified products may contribute to the destruction of rain forests in the Amazon in order to grow soya beans. There are criticisms that the company is still not doing enough on the nutritional front. Their high fat low-fibre diet can lead to obesity and diabetes while they advertise their products as nutritious. Thus despite being the number one in fast food industry, they have attracted criticism, hostility and allegations because of unethical business practices and lack of social responsibility. They have failed in the responsibility to all the stakeholders including the consumers, investors, employees and the suppliers. They have tried to capture the market by enticing the children; there have been claims of high obesity resulting from their food items. Environmental degradation, exploitation of labor and lack of consciousness in taking care of the sentiments and traditions in the developing nations are some of the other reasons that have compelled the societies all over the world to raise voices against the practices of McDonald’s. References: Azaryahu, M., (1999), McDonalds or Golani Junction? A case of contested place in Israel, Professional Geographer, 51 (4) pp. 481-492 Capell, K., (2007), McDonalds Offers Ethics with Those Fries, Business Week Online (Jan 10, 2007): NA. British Council Journals Database. Thomson Gale. British Council - 4 Mar. 2007 Carrigan, M., & Attalla, A., (2001), The myth of the ethical consumer - do ethics matter in purchase behaviour? Journal of Consumer Marketing, Vol. 18 No. 7 pp. 560-577 Carrigan, M., Marinova, S., & Szmigin, I., (2006), Ethics and international marketing, International Marketing Review Vol. 22 No. 5, 2005 pp. 481-493 Hooker J, 2003, Why business ethics? 04 March 2007 Ingram H (1995), Hospitality and tourism: international industries experiencing common problems, International Journal of Contemporary Hospitality Management Volume 7 Number 7 1995 pp. 44-5 Kellner, D., (n.d.), Theorizing/Resisting McDonaldization: A Multiperspectivist Approach, 04 March 2007 Post, J. E., (2000), Moving from Geographic to Virtual Communities: Global Corporate Citizenship in a Dot.com world, Business and Society Review, 105:1 27-46 Ritter, L., Villafuerte, J., C., Lumelsky, A., Guttman, V., Falit, B., Kelly, C., & Prieto- Gonzalet, M., (2003), Recent Developments in Health law, American Journal of Law & Medicine and Harvard Law & Health Care Society, Volume 31:4, Winter 2003 Robinson K (2002), "The importance of being good: the Enron scandal has put the spotlight back on ethics. Banks can no longer ignore the issue of social responsibility and those which do may not survive.(Brief Article)." The Banker 152.914 (April 2002): 16(5). British Council Journals Database. Thomson Gale. British Council - 04 March 2007 Royle, T., (2005), Realism or idealism? Corporate social responsibility and the employee stakeholder in the global fast-food industry, Business Ethics: A European Review, Volume 14 Number 1 January 2005 Schröder, M. J. A., & McEachern, M., G., (2006), Fast foods and ethical consumer value: a focus on McDonald’s and KFC, British Food Journal Vol. 107 No. 4, 2005 pp. 212-224 Wong C S & Chung K H (2003), Work values of Chinese food service managers, International Journal of Contemporary Hospitality Management Volume 15 Number 2 2003 pp. 66-75 Read More