Corporate Governance and Social Responsibility - Case Study Example

Corporate Governance and Social Responsibility Table of Contents 1Introduction 3 2Findings 5 1McDonalds: A Brief Introduction 5 2McDonald’s Stated Position on CSR 5 3McDonald’s Stated Position on Corporate Governance 7 4Critic of McDonalds CSR and Corporate Governance 8 3Conclusion 10 1Nutrition 10 2Lack of Trust by Customers 10 3Environmental Conservation 11 4Giving Back To the Community 11 5Supply Chain 11 6Employees Welfare 11 4Recommendations 12 Bibliography: 13 1 Introduction The issue of corporate social responsibility (CSR) has been debatable for a long time. Browne and Milgram 2009 noted that as businesses operations become complex and competition stiffer day by day, many organisations have resorted to utilisation of CSR in order to develop and maintain competitive advantage. Nevertheless, in the process of developing competitive advantage, some organisations fail to grasp the real meaning of CSR. This could be attributed to the fact that many of such organisations concentrate much on maximising profits and forget to look into issues revolving around factors that could lead to the maximization of the profit (Gray Koury and Lavers 1995). Therefore, the main concern about CSR should be an inclusive outlook of the overall welfare of the organisation’s stakeholders. In this regard, it is critical for organisations to first understand every need of all stakeholders’ whist concentrating on fulfilling these needs (Hohnen 2007). In essence, CSR entails organisations continued commitment to conduct their operations ethically and contribute to socioeconomic development of their employees and the local community as the quality of life of these stakeholders gets prioritised. Nevertheless, the issue of CSR varies with culture across the world (Belal 2008). To some cultures, CSR could be viewed as capacity building for sustainable livelihood to the community where the organisation is based (Mock, Strohm and Swartz 2007). Therefore, organisations need to have a clear understanding of what all stakeholders expect from them. This way, organisations are able to have an action plan on how to make CSR reality. On the other hand, CSR does not simply come without incorporating the system of corporate governance (Adams 2008; Mallin 2007). This assertion is arguably correct because corporate governance entails practices and processes through which an organisation is controlled. If an organisation has poor corporate governance, it is apparent that implementing CSR would be challenging (Sun, Stewart and Pollard 2010). Mainly, this applies to large organisations, which have many and complex organisational processes, and which each of these processes depend on the performance of each of the processes. For instance, an organisation with poor corporate governance translates to having an underperforming workforce, which fails to produce top results in their operations. In this regard, organisations inspiring to have good practices of CSR need to first streamline corporate governance. Corporate governance incorporates all stakeholders’ interests in an organisation (Schwartz 2011; Carroll and Buchholtz 2011). Basically, this entails management, suppliers, financiers, customers and other stakeholders. In fact, research has indicated that corporate governance helps organisation to attain organisation’s objectives. It lays a foundation on which the success of an organisation lies. With such deliberations, it is apparent that both CSR and corporate governance are inseparable. Nowadays, as Bacher (2007) stipulated, it is not enough for organisations to only concentrate on being profitable. There is also a need to have issues of good practices which are stipulated both by CSR and corporate governance. It is on this hypothetical theory that the current paper assesses and evaluates the importance of good practice in areas of Corporate Social Responsibility and Corporate Governance. The rationale for this research will be applied in convincing McDonalds to adopt the recommendations derived at after a thorough articulation of the importance of good practice in areas of Corporate Social Responsibility and Corporate Governance. 2 Findings As the issue of environmental degradation and pollution becomes contentious, many organisations have become cautious on the way they conduct their businesses. In addition, ethical behaviour and sound corporate governance practices has become an ingredient for organisations that want to remain relevant in the highly competitive market. 1 McDonalds: A Brief Introduction For McDonalds, the organisation has retaliated that, right from the start, the organisation has been committed to doing the right thing (McDonalds Corporation 2009). In fact, the organisation has been quoted saying that its continued good performance has been as a result of continued efforts to sustainability and good business practices. 2 McDonald’s Stated Position on CSR According to Gonzalez-Mendez, the McDonalds senior vice president, global CSR, McDonalds has been in the forefront in matters pertaining nutrition and well-being. For example, Gonzalez-Mendez says that McDonald’s global market has been improved by ensuring that their customers are made aware about options of foods ranging from vegetables, fruits to low-fat foods (McDonalds Corporation 2013). Analytically, this concern by McDonalds is a response to the call for fast food restaurants to be on the lookout on foods that causes obesity and other related disorders. Although McDonalds understands that many people especially children like sweet and fatty foods, the organisation is conscious of the consequences of such foods to its customers. This could be termed as a good CSR practice since it helps in addressing health issues of its customers. On the other hand, McDonald’s restaurants are in the process of adopting energy efficient equipments, fewer emissions and less waste. In this regard, it can be argued that McDonalds is aware of the impact of not taking care of the environment. Basically, organisations that fail to take care of the environment risks in having long-term financial failures (Adams and Zutshi 2004). Conversely, McDonalds has been committed to giving back to the community through the Ronald McDonald house Charities. In fact, McDonalds believes that this commitment forms the essential part of its heritage and values of its DNA. This program aims at helping communities and disaster relief. McDonalds has also been committed to source more of its food and packaging from reputable and sustainable sources. This entails setting standards for quality, safety, sustainability, and efficiency (Ethical consumer 2007). This has led to a significant progress. Research has indicated that consumers are rational in consumption (Hond, Bakker and Neergaard 2007; Burns 2000)). They tend to consume products that meet their preferences and certain quality. In this regard, organisations that offer quality products, but later lower the quality stand the risk of chasing away their customers (Innes and Norris 2005; Hawkins 2006). In light of this, McDonalds move to improve on sustainable supply chain is a good move. McDonalds has argued that its employees have enjoyed good working conditions with the latest improvement being executed in 2012. This entailed strengthening system alignment in regard to the role of employment value proposition. Employees’ wellness is crucial since they form the primary asset of an organisation (Bilson 2010). In fact, McDonalds understands that its employees form the face of its brand, something that helps in differentiating McDonalds from other competitors. 3 McDonald’s Stated Position on Corporate Governance McDonalds is proud of its commitment on being an organisation the public can trust. McDonald’s board of directors is entrusted with the responsibility of overseeing business affairs of McDonalds in an honest and ethical manner (McDonalds Corporation 2013). It has been the belief of the board that good corporate governance is essential in the fulfillment of the organisation’s obligations to its stakeholders. The board reviews governance principles annually. This intends to ensure continued improvement (Mallin 2009; corporate watch 2012). In its governance principles, McDonalds states that good governance is a collection and intersection of the relationship between the organisation, management and other stakeholders in regard to laws and regulations. McDonald’s corporate governance system starts with the board of directors who ensures candid engagement with management in the organisation’s operations. In its principles, McDonalds continues to state that the organisation’s governance processes are aimed at meeting its stakeholder’s interests (McDonalds Corporation 2012). In order to ensure that the board of directors harmoniously works together, every director must abide by a specific code of conduct. In addition, the board of directors is subdivided into several committees that are assigned specific mandates in regard to operations of the organisation. One of such committees is the CSR committee. This committee is mandated to oversee strategies such as product safety, employees’ wellness, environment, customers and the communities. Other committees are mandated to oversee the day to day activities of the organisation. In another dimension, McDonalds upholds the dignity of its employees by offering them an opportunity to speak out issues affecting their work in an open manner. In addition, employees are encouraged to raise their issues through McDonald’s business integrity telephone line. In fact, McDonalds has an outside firm mandated to handle sensitive calls from its employees. McDonalds has also empowered its employees to shape and strengthen the organisation’s way of doing business. To enhance this, McDonalds has developed tools in their compliance service visits (McDonalds Corporation 2013). This tool helps employees in identifying and responding to specific risk areas from different parts of the world. Additionally, McDonalds has designed due diligent program that enhances collaboration in the global scope. This ensures that the organisation makes informed decisions in regard to business relationships (Mallin 2009). On the same note, McDonalds communicate anti corruption policy to its suppliers, employees, and other partners, which requires them to abide by the rule of the law. In order to walk the talk, McDonalds has continuously continued working with government and other regulatory agencies through trade associations. This is crucial because most of the issues that relate to public engagement revolve around food, its restaurants and its people (Sankar and Bhattacharya 2004). In light of this, McDonalds engage with policy makers at the international, national and local level. 4 Critic of McDonalds CSR and Corporate Governance Although McDonalds claims to have put measures in place in order to become a reputable organisation, several issues regarding nutrition content of its foods has been controversial especially due to increased cases of overweight and obesity. This involves foods with high quantities of fat, sugar and calories, which are associated with weight gain and has consequences of health problems. Organisations, government agencies, activists and consumer groups have been critical of insensitivity of McDonalds on the issue of health and nutrition. For instance, in 1994-1999, McDonalds accused protesters for their ill statements directed to McDonald’s conduct on its food contents alleging that the organisation poses a health threat on its customers. In its ruling, appellate court ruled that the defendants’ claims that customers faced the risk of heart disease were justified. In another case, McLawsuit 2002-2003, a group of obese teenagers accused McDonalds for causing obese problems. They argued that McDonald’s advertisements entailed a false impression that its foods form a part of the healthy lifestyle. Nevertheless, the court ruled in favour of McDonalds arguing that the plaintiffs had a role to play in ensuring that their weight was at check through exercise and overall dietary habits. However, although the court ruled in favour of McDonalds, the press coverage on the case put the organisation into the public limelight. With such deliberations, it is apparent that although McDonalds claims to adhere to issues touching nutrition and health of its foods, the organisation has to ensure that every concern regarding the same is clearly articulated upon to avoid bad outlook by its customers and the overall community (May, Cheney and Roper 2007). This is arguably true because although the allegations by different groups of people were dismissed by the court, the fact that McDonalds has not taken measures to convince its customers that its products are health friendly, then the organisation’s CSR is at its low point (Benn and Bolton 2011). For instance, fast food organisations are required to clearly label the content of nutrients present in their foods in order to enable their customers to make choices of the types of foods to buy. This forms a good part of implementing CSR because the whole issue revolves around the welfare of the consumer (Sims 2003). It is apparent that when customers become overweight because of consuming foods with high content of fat and sugars, the impact of such situations is largely felt by the community because people become unproductive. When this happens, fast food organisations lack loyalty and trust of their customers. In another dimension, this can be as a result of the organisation’s corporate governance, which is mandated to oversee effective management of the whole organisation (Berger 2011). This assertion is arguably true because if the organisation corporate governance works properly, issues pertaining the quality of its foods, which in this case is not only about the taste, but also the nutrition value of the food would ensure that the welfare of the customer’s health is articulated upon (Werther and Chandler 2010). 3 Conclusion It is apparent that issue of CSR and corporate governance are inseparable. Organisations that practice these two concepts stand a better position to win the loyalty and trust of their consumers and the society at large. For McDonalds, it seems that the outline of what is needed to enhance CSR and corporate governance is in place. What lacks is the full force to implement any system and measures on CSR and corporate governance. 1 Nutrition McDonalds claims to be committed to doing the right thing. In regard to nutrition, the organisation claims to have made efforts to educate its customers on the food contents and various options available for them to choose from. This could be termed as a good move by the organisation as it helps customers to select the foods of their choice from the available varieties. With increased cases of overweight due to consumption of fatty and sugary foods, customers may have to choose foods with low quantities of fats and sugars. 2 Lack of Trust by Customers Nevertheless, it is evident that, McDonalds has several cases of lack of trust by its customers in regard to the effects of its foods. Several cases have been brought forward by McDonald’s customers accusing it for being part of the contributing factors to their overweight and obese conditions. Although other organisations in the same business have similar cases of risky foods, this does not mean that McDonalds cannot improve its food nutrients. With clear guidance from nutritionists and other stakeholders in the health industry, McDonalds can make some extensive consultations on how to balance its food nutrients. 3 Environmental Conservation On the other hand, McDonalds has been on record to have instilled measures that help in environmental conservation. Basically, efforts such as adopting efficient equipments and waste management form a good example of such efforts. Several stakeholders develop loyalty to organisations that embrace efforts to conserve the environment. 4 Giving Back To the Community In another dimension, McDonalds has been committed to giving back to the community through the Ronald McDonald house Charities. This is a good move in ensuring that giving back to the community as an essential in CSR is adhered to. Such programs help organisations to develop a good relationship with the community from where they conduct their businesses. 5 Supply Chain In ensuring that McDonald’s supply chain is effective and efficient, the organisation has designed a mechanism and policy of obtaining its raw materials and packaging from reputable and sustainable sources. This has a great impact in the effort of ensuring quality is prioritised. 6 Employees Welfare In the efforts to ensuring that its employees remain productive, McDonalds has been in the frontline in ensuring that its employees are entitled to good working conditions. The organisation understands that employees form the face of its brand. 4 Recommendations Although McDonalds has put some efforts in ensuring that the issues of CSR and corporate governance form the platform on which its operations are laid, it is evident that some aspects of its operations need some improvements in order for the organisation to remain relevant in the highly competitive market. McDonalds should make some extensive consultations with nutritionist and other health practitioners in order to have accurate nutrients in their foods. This will help the organisation in having problems with its customers in the future especially on issues related to effects of its foods on the health of its customers. On the same note, McDonalds should put measures of indicating nutrients contents and quantities on its foods. This will help its customers to make informed decisions on the types of foods they would like to consume. Although McDonalds has had few cases of employees dissatisfaction, the organisation can still introduce new modalities that would empower its employees to participate in the decision making process. This would provide an opportunity to employees to give their views on how to improve the food nutrients in order to avoid cases of customer health problems. Since some foods offered by McDonalds cannot lack fats and sugars that cause obesity, the organisation can introduce a program, probably through collaboration with other organisations or designed campaigns on how to educate its customers and the community on ways through which they can avoid overweight and obesity such as exercise and make right choices on the types of the foods to consume. Bibliography: Adams, C., 2008. 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Werther, B.W and Chandler, D., 2010. Strategic Corporate Social Responsibility: Stakeholders in a Global Environment. NY: SAGE. Read More