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- 1. THE MCDONALD’S UNETHICAL BEHAVIOR & IMPLECATIONS Presentedby Francis Mensah MensahFMGT7019-8
- 2. WHAT IS MCDONALD’S ABOUT 1.Mcdonald’s can be ascribed as the most successful fast food provider of our times. The Corporation was founded by Ray Kroc on 15th April, 1955 after taking over McDonald’s Restaurant from Richard and Maurice McDonald (McDonald Brothers) his employers. 2. Ray Kroc commenced his chain of restaurants in Des Plaines, Illinois (Via Chicago), where the McDonald's Corporation was born, Ray offering the McDonald Brothers 0.5% of gross sales (MCSpotlight, n. d.).
- 3. UNETHICAL BEHAVIORS FOUND INMCDONALD’S 1. Corporate Social responsibility ethics violated. 2. Geoffrey Guiliano, a main Ronald McDonald actor, quit on ethical grounds. 3. Ray Kroc donated $250,000 to presidential campaigner Richard Nixon “Watergate corruption scandal” (MCSpotlight, n. d. p. 3). 4. London Greenpeace revolt against McDonalds’ between 1986 – 1990.
- 4. UNETHICAL BEHAVIORS FOUNDIN MCDONALD’S CONT’ 1. McDonald's sued a Jamaican for breach of trademark in Jamaica. 2. McDonald's claim of global dominance backfired. 3. Supreme Court of Denmark ruled against McDonald's. 4. Food poisoning from McDonald’s burgers.
- 5. MCDONALD’S ETHICAL STANDARDS 1. McDonald’smotto of Quality, Service, Cleanliness and Value (Q.S.C. & V.) epitomise its ethical beliefs. 2. Their labels are clear and concise. 3. McDonald’s nutritional information was the first of its kind in UK. restaurant group business throughout the country for customer benefit. 4. McDonald’s awarded the highest Royal Society grade for the Prevention of Accidents (RoSPA) “Quality Safety Audit scheme”. 5. McDonald’s achieved the “Most Parent Friendly” restaurant by Tommy's Parent Friendly Campaign in the UK for two successive years.
- 6. INFLUENCE OF LEADERSHIP 1.Leadership is the process of influencing followers to achieve organizational goals (Mission and vision). 2. An effective leader embodies interpersonal skills, such as diplomacy, respectfulness, listening skills, empathy, and fairness in dealing with others. 3. An authentic leader possesses mental capacity and ability, that is commensurate with formal education, decision-making ability, communication and creativity potentials, an experience, diligence, and above all the ability to create and articulate a clear vision. 4. A Credible, charismatic, encouragement, and the ability to motivate others even in turbulent times are added leadership attributes. 5. A leader MUST possess certain basic values, such as strong ethical behavior, honesty, integrity, and trustworthiness.
- 7. MCDONALD’S RESPONSE TO SOCIALRESPONSIBILITY 1. Hamburger University opened in Elk Grove, near Chicago. 2. McDonald's restaurant in every US state. 3. Ronald McDonald Children's Charities is founded in his memory to raise funds in support of child welfare. 4. McDonald's sponsored the Child of Achievement Awards. 5. McDonald's charity for child welfare fundraising, Ronald McDonald Children's Charities, was registered. 6. McDonald's sponsored athletics in the UK through the McDonald's Young Athletes' League and the International McDonald's Games.
- 8. SOCIAL RESPONSIBILITY RESPONSES CONTD: 1.Development of local community - OPPORTUNITY FROM DAY ONE. 2. Create opportunity. 3. Promote diversity and inclusion. 4. Improving the Lives of Children and Their Families. 5. Strengthening Communities.
- 9. CULTURAL, ENVIRONMENTAL AND LEGAL IMPLICATIONS 1.McDonald’s plan 20% increase in energy efficiency in all its global operations. 2. Increase energy efficiency through its restaurant standards. 3. An increase in amount of In-Restaurant recycling activities to 50% and minimize waste generation. 4. Maintaining environmental regulations. 5. Water efficiency management.
- 10. IMPACT ON STAKEHOLDERS 1. Fastfood nutritional issues. 2. Unionization problems. 3. Child labor. 4. Causing deforestation. 5. Bad image which affects market price and therefore investment
- 11. OUTCOMES OF EVENTS ANDCOMPARATIVE ANALYSIS 1. Bad judgment. 2. Longest lawsuit in the UK. 3. Bad image for McDonald's.
- 12. OUTCOMES OF EVENTS ANDCOMPARATIVE ANALYSIS CONT’ McDonald’s escalates CSR projects globally: 1. Hamburger University opened in Elk Grove, near Chicago. 2. McDonald’s “Best Of Green” Report Recognizes Environmental Innovations from around the World. 3. McDonald's Awards Suppliers for Advancing Global Sustainability Initiatives.
- 13. OUTCOMES OF EVENTS ANDCOMPARATIVE ANALYSIS CONT’ McDonald’s escalates CSR projects globally: 1. McDonald's Celebrates 90 Ground breaking Advancements in Environmental Practices Around the World. 2. McDonald's and Environmental Defence Fund Mark 20 Years of Partnerships for Sustainability. 3. McDonald's(R) Funds $100,000 Scholarships to Four Hispanic Students.
- 14. FAIRNESS OF PUNISHMENTS 1. Denialof fair trial for Steel and Morris by UK judicial system . 2. No consequences for McDonlad’s offences. 3. No compensation for customers affected by unwholesome food by McDonald’s.
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- 16. RECOMMENDATION & CONCLUSIONS CONT’ 1.It is a fact that social circumstances tends to have a major influence over behavior. Apparently, an individual may have carefully thought about a situation and taken a decision on what is right and may be motivated to act accordingly, nonetheless, the corporate or social context in which the individual finds himself may create serious barriers to do so. 2. As individuals, we need to recognize that our social environment will greatly influence the range of options that are open to us and can significantly influence our behavior. Otherwise good people can, in the wrong circumstances, do bad things and less ethically motivated individuals can, in the right circumstances, do the right thing. 3. Business leaders therefore have a responsibility for the business environment (corporate culture) to encourage or discourage ethical behavior. Ethical business leadership require this skill: to create the circumstances in which good people are able to do good, and bad people are prevented from doing bad (Harris, 2000, p. 8).
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- 18. References Barker, H. (2016).CSR Profile of McDonald's Corporation: CSR Press Releases, Events & Reports Comments. Retrieved from http://www.csrwire.com/members/12873-mcdonald-s-corporation BBC News (February 15, 2005). McLibel' pair win legal aid case. Retrieved from http://news.bbc.co.uk/2/hi/uk_news/4266209.stm Bhat, A. B. (2014). The relevance of corporate social responsibility and business ethics across various industries. MBA Dissertation. Retrieved from http://www.slideshare.net/BILALAHMEDBHAT/submission-report?from_action=save. Brightside (2016). Famous cases: McLibel. Retrieved from https://www.brightknowledge.org/knowledge-bank/law-and-politics/features-and-resources/famous-cases-mclibel Chistyakova, A. (2012). Real-world examples of bad business ethics. Retrieved fromhttp://www.brighthub.com/office/entrepreneurs/articles/115557.aspx. Cohen, W. A. (2009). What Drucker taught us about social responsibility? Leader To Leader 2009, 51, 29-34. http://proxy1.ncu.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=35755461&site =ehost-live Dailey, R. (2010). Organizational behavior. Edinburgh: CAPDM Limited. Pp. 7/13-19. Drucker, P. (1981). What is business ethics? Public Interest, 63, 18-36. http://www.nationalaffairs.com/doclib/20080708_1981632whatisbusinessethicspeterfdrucker.pdf George F. Kermis, G. F., & Kermis, M. D. (n.d). Financial reporting regulations, ethics and accounting education. Journal of Academic and Business Ethics. .http://www.aabri.com/manuscripts/131570.pdf
- 19. REFERENCESGibison, A. (2008).McDonald’s: A good image with bad ethics. http://www.neumann.edu/about/publications/NeumannBusinessReview/journal/review_08/Gibison.pdf. Harris, A. (2000).Business Ethics and Social Responsibility. Retrieved from http://highered.mheducation.com/sites/dl/free/0070921989/226745/fer rell_sampleCH02.pdf. Mackenroth, K. S. (n. d.). Ethics, morals and the professional. Retrieved from .http://www.planoweb.org/media/7601/plano__ethics__morals_and_the_p rofessional.pdf. McDonald’s (2016). Good Planet. Retrieved from http://www.aboutmcdonalds.com/content/mcd/sustainability/planet.html MCSpotlight (n.d). A brief history of McDonald. Retrieved from http://www.mcspotlight.org/company/company_history.html Nayab, N. (2014). Real-World examples of bad business ethics. Retrieved from http://www.brighthub.com/office/entrepreneurs/articles/115557.aspx Okoro, E. (2012). Ethical and social responsibility in global marketing: An evaluation of corporate commitment to stakeholders. The International Business & Economics Research Journal (Online), 11(8), 863-869. http://search.proquest.com.proxy1.ncu.edu/docview/1418719342/fulltex tPDF/56CBB0A0B5AA4776PQ/4?accountid=28180
- 20. REFERENCES Stephens, W., Vance,C., & Pettegrew, L. (2012). Embracing ethics and morality. CPA Journal, 82(1), 16-21. http://proxy1.ncu.edu/login?url=http://search.ebscohost.com/login.aspx?d irect=true&db=ofs&AN=73784983&site=ehost-live Sun, C. (2011). Eleven things you can do to avoid ethical breaches. Retrieved from http://www.techrepublic.com/blog/10-things/10-plus-things-you-can- do-to-avoid-ethical-breaches/. WordPress (2011). McLibel case. Retrieved from https://florinpopa.files.wordpress.com/2011/03/mclibel.pdf. Trong Tuan, L. (2012). Corporate social responsibility, ethics, and corporate governance. Social Responsibility Journal, 8(4), 547-560. doi:10.1108/17471111211272110
Editor's Notes
- #2 Slide #1 The genesis, influential leadership role, ethical dilemmas and social responsibility of McDonald’s Corporation.
- #3 Slide # 2 McDonald was established in the year 1940 by Dick and Mac (McDonald Brothers) as a food vendor. In 1954 they appointed Ray Kroc as their first franchise in San Bernardino, California, in the United State of America (U.S.A.). The McDonald’s Company had a vision of quality, service, cleanliness, and value, and this vision propelled the company exponentially, which resulted in the opening of their 100th McDonald’s in Chicago in the year 1959 (MCSpotlight, n. d.). In 1961, Ray Kroc with his business acumen bought all the rights that Dick and Mac have for an amount of $2.7 million and established Hamburger University in Elk Grove, Chicago in 1961. Two years later the net income of McDonald’s rose above $1 million marks. This business ascendancy saw McDonald’s turning into a public establishment with “per earnings ratio” going the range of 10-22, and stock price ranging from 15 – 33.5 in the year 1965 (MCSpotlight, n. d., p. 2). Half a century in operation, McDonald’s boasts of about 35,000 restaurants in approximately 118 nations globally with a workforce of 1.7 million pocketing almost $5 billion in annual net profit.
- #4 Slide # 3 In1970 Ray Cesca, the global purchasing director of McDonald’s Corporation admitted that their action in Costa Rica caused deforestation by using cattle raised on once rainforest vegetation to produce their beef. The raring of cattle for McDonald’s profit making venture had no respect for human existence, lands are captured with opulence and landowners were at the mercies of the Corporation. One Geoffrey Guiliano, an actor of Ronald McDonald, resigned and publicly apologised, revealed "I brainwashed youngsters into doing wrong. I want to say sorry to children everywhere for selling out to concerns who make millions by murdering animals“(MCSpotlight, n. d. p. 5). Ray Kroc donated $250,000 to presidential campaigner Richard Nixon which was deemed to be a scandal, this donation became a subject of investigation in what is known as the “Watergate corruption scandal” (Stephens, Vance, & Pettegrew, 2012; Machenroth, n. d.; Okoro, 2012; Kermis & Kermis, n. d.; MCSpotlight, n. d. p. 3). Subsequently, a group by name London Greenpeace between the years 1986 – 1990 produced leaflets agitating against the wrong doings of McDonald with the allegation that McDonald’s has caused poverty in the third world, produced and sold food that is unhealthy to consumers, swindled teenage workers through exploitation, caused destruction to the Amazon forest through grazing of cattle in the forest for their beef products, and causing harm to animals through torture (Bahat, 2014; Brightside, 2016; Nayab, 2014; BBC New, 2005). McDonald’s could not sue the entire group as it was just an association, to cause a legal battle, instead they sued two of the activists Ms. Steel and Mr. Morris for libel, nonetheless, according to (Bahat, 2014; Brightside, 2016; Nayab, 2014; BBC New, 2005), the high court ruled in favor of McDonald’s and award a fine of £60,000, as damages, this fine was later reduced on appeal to £40,000, the same appeal court revealed that some portion of the leaflet was true.
- #5 Slide #4 McDonald's with its monocracy threatened McMunchies owner in UK a sandwich bar with legal suit for breaching trademark law. Ronald McDonald a retired Scottish school-teacher and the chief of the McDonald family in Scotland were sued for using the trademark name “Mc” by McDonald's in order to claim global dominance and the name "McDonald" a name that the Irish and Scottish family have used for ages. In Denmark, the Supreme Court ruled against McDonald's assertion that a sausage stand name "McAllan's" was breaching its trademark. A Jamaican fast-food provider “The McDonald's Corporation Limited” was sued for breach of trademark by McDonalds’ a business that have been in operation in Jamaica in early 1970's. With the aid of the McLibel Trial, the Jamaican company got a favourable judgment barring McDonald's from operating in the country so long as the court case was not over. Four children suffered food poisoning (E.Coli 0157 food poisoning) from McDonald's burgers in Spain and England. The families of these children sued McDonald's as well as their supplier McKey's (MCSpotlight, n. d. p. 10).
- #6 Slide #5 Though McDonalds’ is bedevilled with a lot of unethical issues, their motto of Quality, Service, Cleanliness and Value (Q.S.C. & V.) epitomise its ethical beliefs, which many pundits may think it is just on paper. Their labels are clear and concise. In 1986 McDonalds’ introduced the nutritional information which became the first of its kind in UK restaurant group business throughout the country for customer benefit (MCSpotlight, n. d. p. 6). In the year 1994 McDonalds’ Corporation was awarded the highest Royal Society grade for the Prevention of Accidents (RoSPA) “Quality Safety Audit scheme” safety of stakeholders should always the priority of business owners as life lost can never be replaced. McDonalds’ achieved the “Most Parent Friendly” restaurant by Tommy's Parent Friendly Campaign in the UK for two successive years (MCSpotlight, n. d. p. 9). .
- #7 Slide #6 Several leadership definitions can be found in scholarly books and articles, for this presentation, a few of them that satisfies the objective of the presenter were selected. Some of them includes this one from SIYLI (2016) who thought of leadership as an art in which one leads others to voluntarily put into existence result which hitherto could not have occurred by itself. McDonalds’ founder Ray Kroc used this influential theory to transform MacDonald's restaurant into a malty billion dollar corporation between 1955 and 1994 bringing the total to over 15,000 restaurants operating in 79 countries of 6 continents (MCSpotlight, n. d. p. 7). According to (Dailey, 2010, p.13) Leadership can be said to be an influential process in which an individual directs the actions of a group or another person in order to achieve a common goal. In 1961 Kroc through the power of influence bought all McDonald’s brothers right for $2.7 million, opened the Hamburger University in Elk Grove, near Chicago. Leadership influential roles can be both positive and negative, some positives have been elaborated already but one of the key issues about McDonald’s unethical behaviour is the “Watergate corruption scandal” when Ray Kroc influenced Richard Nixon with $250,000.
- #8 Slide #7 Ray Kroc as part of his social responsibility objectives established the Hamburger University in Elk Grove, near Chicago, U.S. in 1961. (MCSpotlight, n. d. p. 2), in 1970 McDonald's restaurant was opened in every US state. Ronald McDonald Children's eleemosynary was founded in memory of Ronald to raise funds in support of child welfare. Taking care of the vulnerable in society is a social responsibility that is worth mention and should be encourage for implementation in every organization (Cohen, 2009). The McDonald's sponsored Child of Achievement Awards is a boost in child education, a system that motivate children to seek for excellency.
- #9 Slide #8 McDonald’s believes in human potential as one of its key resources, “people are the face of our Brand” (McDonald’s, 2016, p. 2) . It is McDonald’s key objective to make positive impact on the community in which they operates. This vision can be achieve by providing training and educational opportunities to all levels of employees. McDonald’s provide sustainable skills and career opportunities to its entire worldwide workforce to ensure improvement of the economic lives of the society in which they operate. This social responsibility objectives will afford McDonald’s to have a peaceful environment for productive operation. Working together as a team is one of the strength of McDonald’s according to their diversity concept. McDonald’s Founder Ray Kroc argued, “We have an obligation to give something back to the community that gives so much to us.” on his issues about McDonald’s and community issues (McDonald’s, 2016, p. 1). One of McDonald’s global CSR is their collective commitment to putting back some of their profit into addressing educational and other physical activities.
- #10 Slide #9 As part of McDonald’s Triple-Bottom-Line objectives, they have on their 2020 agenda 20% increase in clean energy efficiency at all its operational communities globally Energy efficiency becomes organizational restaurant standards. Waste management and recycling activities worldwide will increase by 50% and ensure environmental regulations are maintained. As part of its good planet activities at McDonald’s, efficient water management is key on its calendar (McDonald’s, 2016, p. 1).
- #11 Slide #10 According to Gibison (2008) “cultural relativism” many multinational companies violate ethical behavior of the external market principles that seeks to care for the society without focusing of the principles of “Organizational Profit making only”. McDonlald’s faces the challenge of obesity through its nutritional inefficiency, McDonald’s did not provide sufficient nutritional information to its customers leading to obesity in some customers. It was also known that McDonald’ did not agree to unionization of workers in its establishment, in some instances when workers of St. Hubert in Quebec unionized, the company was asked to close down with immediate effect. McDonald’s has caused poverty in the third world, produced and sold food that is unhealthy to consumers, swindled teenage workers through exploitation, caused destruction to the Amazon forest through grazing of cattle in the forest for their beef products, and causing harm to animals through torture (Nayab, 2014; WordPress, 2011).
- #12 Slide #11 Lawyers and lawmakers commented on the judicial systems in the aftermath of the libel proceedings, expressing various opinions on how bad the ruling was passed and the need for changes in the English laws on libel aid. Firstly, McDonald sued Steel and Morris for libel in the Royal Court of Justice, London which lasted for six years and was acclaimed to be the longest legal battle which was incongruous to any in the British legal history (Brightside, 2016). To the external stakeholders such as customers, suppliers, investors, and society at large has a bad image for McDonald’s. Though the London court found Steel and Morris guilty of libel against McDonald’s, some of the allegations were upheld, the judge believed that McDonald’s truly tortured animals, exploited teenagers, and sold unwholesome food to the public. The trial led to McDonald’s bad image exposure to the outside world when the company was tagged as a company that commits evil by using animals, nature, and people as a means of making a profit, an attitude that (Drucker, 1981; Cohen, 2009) deem as scandalous behavior and so frowns at. It also introduced another dimension where Steel and Morris appealed to the European Court of Human Right for not getting legal aid from the British government which has resulted in the provision of legal aid by England’s libel law for some libel cases currently (BBC News, 2005).
- #13 Slide #12 As part of McDonald’s SCR initiatives and business expansion, the Hamburger University was opened in Elk Grove, near Chicago. McDonald’s “Best Of Green” Report Recognizes Environmental Innovations from around the World: Recycling & waste: McDonald’s Pacific Sierra Region developed a waste diversion policy giving rise to restaurants in deploying mixed recycling, or organics recycling, and sometimes both, through checklists. Shift huddles, engagement and educational materials. Sustainable sourcing: McDonald's USA, McDonald's Canada and other franchisees are spending over $6 million technical assistance programs in farming. A collaboration with TechnoServe and Sustainable Commodities Assistance Network to give farmers the needed assistance and training for coffee producers as sustainable as possible. Greening our restaurants: McDonald’s in the U.K. launched a program that recycles restaurant employee uniforms. Employee uniforms will be collected on annual bases by textile recyclers, shredded the uniforms and used for mattress stuffing. Conserving water: McDonald’s water conserving program strategy in India, water conservation program saves an estimated 1.7 million gallons of water on annual bases by installing low-flow urinals in 70 of McDonald’s India restaurants (Barker, 2016).
- #14 Slide #13 McDonald's Celebrates 90 Ground breaking Advancements in Environmental Practices Around the World: This initiative is catalogue of best practices that focus on the environment, also provide tangible and positive impact on company's business and brand. Eight categories such as energy, packaging, anti-littering, recycling, logistics, communications, green building, and greening the workplaces globally. The re-using of condensation generated by the air conditioning system proposed to conserve water. The resulting collection, storage and re-use system provided water for plants and cleaning external areas, and reduced daily water consumption by 15 percent. U.K. restaurant crew at McDonald's created new environmental best practices, resulting in key changes including a 20 percent increase in cardboard recycling. McDonald's and Environmental Defence Fund Mark 20 Years of Partnerships for Sustainability: Approximately 99% McDonald's animal handling suppliers been certified as qualified through animal welfare audits over the past three years. Subsequently, over 4,000 over the past 10 years animal handling facilities have gone through auditing. Again with sustainability issues, 98% of McDonald's whitefish originates from fisheries with favorable sustainability ratings. McDonald's through Conservation International developed its Supplier Environmental Scorecard to measure and reduce water, reduce energy, air, and waste impacts in its supply chain. The scorecard apparently is currently being used by bakery, beef, poultry, pork, and potato suppliers in the company's nine largest markets. McDonald's(R) Funds $100,000 Scholarships to Four Hispanic Students (Barker, 2016).
- #15 Slide #14 The trial verdict of £40,000, that was awarded as damages to McDonald’s was not justifiable, the trial judge upheld some of the charges leveled against McDonald company by the London Greenpeace Group, but there was no charge against McDonald company, no punishment whatsoever was given to McDonald company for some of the allegations that were upheld such as torturing of animals, exploitation of teenagers, and selling of unwholesome food to the public? Could the verdict change if Steel and Morris had had a libel aid? This maybe can also be an unethical behavior on the part of the judge for denying fair judgment as postulated by the appeal court judge Mr. Justice Bell (WordPress, 2011). The beauty of the trial is that Steel and Morris won a moral victory, they did not allow intimidation to undermine their freedom of speech, and it became one of the biggest blunders in terms of public relations in the history of McDonald’s.
- #16 Slide #15 – Recommendations for implementation From the presentation on McDonald’s scenario, it is evident that the actions of Steel and Morris led to a lot of changes firstly, in the UK judiciary when European Court of Human Rights (ECHR) ruled that the trial court breached Article 6 of ECHR (right to a fair trial) as well as Article 10 of ECHR (right to freedom of expression) and based on that ordered the UK government to pay Steel and Morris £57,000 in compensation. Steel and Morris did not retreat because they had no money to fight the wealth of McDonald’s but believed in justice and their tenacity to fight to the end. It was a sacrificial legal war and standing by ones moral beliefs. These eleven steps according to Sun (2011) should guide individuals to avoid ethical breaches, (1) Get your code of conduct, (2) Develop a behavior model to conform to, (3) Disclosure of any act of conflicts of interest, (4) Rescue yourself from any act that will implicate you, (5) Get authorization from your boss when decision is above you, (6) Find another way of doing it without bending the rules, (7) If possible do not involve yourself if ethics can be violated, (8) Focus on what is at stake not the character, (9) Take advantage of the code of ethics, (10) Keep records of key issues, and (11) Be a whistleblower.