Free Management Essays - Management Ethics: McDonald’s case of beef flavouring in French fries
Summary
The following is an exploration of management ethics issues in the case of McDonald's and its lawsuit of mislabelling of French fries. The discussion first explores the company's dynamics, followed by a description of the suit on hand and evaluation of the same. Lastly, the researcher offers some suggestions for alternative actions by the organization.
Table of Contents
Introduction- Company Background 4
Management Ethical Dilemma 5
Evaluation of Organizational Response 6
Suggestions for alternative resolutions 8
Bibliography 10
Appendix 12
Introduction- Company Background
Started as a drive-in venture by the brothers Dick and Maurice "Mac" McDonald's in 1937, the small enterprise successfully captured the nation and spread across the globe decades later had been McDonald's Corporation. Initially the brothers focussed on hot dogs, shakes, sandwiches, ribs, barbecued beef, hamburgers and a handful of other items. However, later in 1948 realizing the high demand of hamburgers accounting for 80 percent of the business, they had decided to concentrate on selling of burgers and focussed on reviewing their business model to "Speedy Service System". With the first franchisee signed in 1952 McDonald's paved way for its growth across the nation. But it had been the ideology and efforts of Ray Kroc that created the McDonaldization of the world. By the end of the 1970s, McDonald's had over 5000 restaurants and in 1984 its earnings reached over $10 billion in sales with new restaurant opening every 17 hours across the world. McDonald's expansion continued to take place with each CEO (chief executive officer) integrating a blend of his own management style and elements. The latest one had been Catapulco (who passed away recently) who had been entrusted with one of the biggest challenges of reviving the empire from its downward trend since the 1990s when McDonald's faced numerous adverse consumer trends.
The 1990s saw the emergence of health consciousness among consumers who shy away from fat filled food like fried products and opt for healthier diets. Fast food chains like McDonald's learned to adapt by integrating healthy food and through marketing campaigns managed to appeal to its consumers to support their enterprises. However, they could not change the essence of their business - hamburgers and fries. Increasing aggressive competition forced the company to integrate quality, service, cleanliness (QSC) evaluation system, and adopt a strategy of "Made for you". In 2002 the organization however reported a net loss for the first time since going public in 1965. Even then at the time the McDonald's chain system had been ranked at top of the Top 10 Largest Chains Based on 2003 Systemwide Sales by Nation's Restaurant News (See Appendix). Today, the corporation has diversified its strategy to "Plan to Win" and challenged with the task of wining consumers through exceptional customer experiences within and outside the organization (Marino and Jackson 2004).
According to its 2005 Investor Fact Sheet (McDonald's Official Website 2005) the corporation has total revenue of $19,065 millions for the year 2004 with a net income of $2,279 millions. Systemwide restaurants have increased significantly to 31,561 (2005 Investor Fact Sheet 2005) claiming social responsibility commitment to "...protecting and building this trust (consumer trust must be earned) by giving back to our local communities, supporting Ronald McDonald House Charities and being a leader on issues like food safety, animal welfare and the environment." (2005 Investor Fact Sheet 2005).
Management Ethical Dilemma
As a global company, McDonald's has gained considerable popularity and responsibility which includes social and ethical ones. One of the most important events in the history of McDonald's management has been the class action suit lodged against the company for concealing the beef flavouring in French fries ingredient list. The "French fries" lawsuit has its origin from McDonald's July 23, 1990 press release which stated the fries were cooked in pure vegetable oil. However, in 2001 Eric Schlosser’s book Fast Food Nation had implied the natural flavouring in fast food restaurants may have been derived from beef. A consumer Hitesh Shah curious confirmed this fact with one of the McDonald's employees Megan Magee who acknowledged that McDonald's add beef tallow to water while potatoes for French fries are being cooked (AP and Kiro 2001). This has initiated a series of outrage from vegetarians and non-beef eaters. At first McDonald's had denied the fact, and claimed that its products are cooked in vegetable and corn oil. This provoked a series of unexpected development in India and in the US where the Asian communities dominated. The protests had been to force the corporation to acknowledge its wrongdoing and unethical behaviour. The suit filed by Harish Bharti continued through 2002 when the Corporation finally conceded defeat and made efforts to amend the situation by distributing $10 millions for damages to petitioners under legal directives (Guy 2003). Twenty groups of litigates had made claims on McDonald's claiming that the organization has intentionally misrepresented the content of beef tallow in French fries and hash browns. The case ensued with the list of groups increasing and including vegetarians, animal-rights groups, and religious groups like Hindus and Sikhs (Guy 2003).
McDonald's response to the situation had been at first of denial but later on took a different direction as the company declared it will only follow the directives of the Court. At the same time it has been alleged to have attempted to hire researchers of anti-vegetarian groups to counteract the claims made by the vegetarian groups (Nelson 2003). Not only this but taken over by greed, organizations like North American Vegetarian Society (NAVS) and Vegetarian Resource Group (VRG) have also submitted to the monetary proposals made by McDonald's (Nelson 2003).
Evaluation of Organizational Response
McDonald's French fries lawsuit has not been a new one. Multinational corporations like McDonald's reaping millions in profits are the target for speculators as they deem these companies are responsible for the deterioration of society and environment. They have cause for concern as Schlossser (2001) indicated in his book how mega fast food chains have taken over the traditional meals and society from the individuals. With new restaurants opening every 17 hours, McDonald's has captivated and created an empire to swallow the consumers of the world and their rights too. The class action suit over the beef flavouring in French fries has its roots in organizational ethics. According to Maurice Punch (1996) corporate deviance has not gained much attention for investigation because of the assumption and held beliefs that organizations operate in a neutral technocratic environment characterised by legal and social frameworks. The general belief that all organizations are ethical and only turn criminal because they are forced to and for a commendable cause have been proven otherwise in the case of McDonald's. There is little doubt that Punch's assumptions that managers working within organizations are constrained by the environment in which they operate are true. Yet all the while they are also restructuring it to better serve purpose. Punch writes individuals "in a social and moral context where deviance may be embedded in the daily practices and understood meanings or routine organisational reality" (p. 46) tend to harbour misconduct and engage in deviant behaviours because they feel they are isolated and out of reach of the "intricate pattern of the ordinary". McDonald's empire has grown to such an extent that it has political, economical and social powers over the infrastructures in which it operates. Not only this but with a top position in one of the largest industries - the sandwich industry, McDonald's management assumed it has no obligation whatsoever to the society in which it operates. Instead, from the press releases and denial of the inclusion of beef tallow in its French fries ingredients (Nelson 2003) indicate McDonald's seem to have the notion that it is not answerable to anyone and no one is entitled to question its business activities.
McDonald's actions can be explained through Punch's (1996) rationale that business organizations turn deviant because they operate in a competitive environment. The company's business size is complex and tends to channel its responsibility to lower level staffs that have no knowledge of legal or ethical implications of the tasks they undertake. Furthermore, even if McDonald's staff had been aware of any discrepancies it would have denied existence because it needs to maintain an image and perception with the consumers.
More importantly, its actions throughout the case had stemmed from McDonald's attempts to sustain its profitability even if it means compromising its ethics. This had been critical for the sustenance of the company which had undergone serious financial crises and competitive downturn in the recent years (Marino and Jackson 2003).
In conjunction with this rationale, the researcher is of the opinion that ethical and unethical decisions are the responsibilities of the business executives and top management who are influential in their capacity to the lower staff. Their values and ethical choices greatly shape the organization. For years, McDonald's top management has been able to deliberately mislead its consumers through mislabelling products and through their influence over employees. Since ethical behaviours are learned according to Stead et al (1990) it has been clear that McDonald's employees have been taught to keep this fact a secret especially in nations where religious principles strictly forbid beef intake of any form (e.g. India and other Hindu cultures).
According to Kohlberg's theory (Kohlberg 1981) of justice and cultural relativism (Gagens 1998) ethical society upkeep its values through moral reasoning. He is of the opinion that individuals develop through six states of moral development divided into three levels called pre-conventional, conventional and post-conventional moral reasoning. In the pre-conventional level individuals are not aware or mature in their ethical perspectives and often unclear as to the degree of violation or punishment. In the conventional level, individuals look for shared understanding of societal norms and values including respect for the laws and regulations. In the post-conventional level, the individuals are more concerned with decision-making related to equality and fairness. Kohlberg's model can be applied to McDonald's moral reasoning.
McDonald's wanted the society to remain at the pre-conventional level so that consumers remain unaware of the choices available to them. By denying them information and the choices available, they deny the consumers the right to choose. Even though the US society and elsewhere in the world, claim to have developed significantly over the past centuries but the reality is that the majority of consumer societies remain unaware of the products they consume because corporations like McDonald's choose what information they want to reveal so that these corporations can direct the consumer choices to their own benefits. Manipulation, dishonesty, misrepresentation and mislabelling all constitute the corrupted behaviours of top management at McDonalds designed to exploit consumers and to protect their profitability. Even at a later stage of the case McDonald's has continued to reciprocate the damages done to their organization and to protect their profitability by engaging researchers to conduct research and manipulate results to benefit their interests.
Suggestions for alternative resolutions
Given the above discussion, the $10 millions that McDonald's paid as damages as per court directives had been a small amount compared to the disregard for cultural relativism the organization demonstrated by compromising the beliefs, values and ideology of consumers who have believed in McDonald's for decades. Instead of attempting to cover and deny their own misconduct, McDonald's management could have resolved the situation by first publicly declaring the misrepresentation. This could have been done by acknowledging the deliberate mislabelling tactics, and as Punch has rationalized, by declaring had carried out in the spirit of business cause. Alternatively it could have declared a "confusion" created by the mislabelling of its products so that it allows the benefit of a doubt to the consumers.
More importantly is the fact that McDonald's could have shown redeeming behaviours by paying punitive payments to petitioners and amend its conduct by putting in efforts in restructuring its packaging system. Instead the company had engaged in finding alternative research evidence to counteract its petitioner's claims to decrease punitive payment amounts. Consequently, it earned a marred reputation and recognized as an unethical organization.
McDonald's also proved to be an uncaring organization that does not value the stakeholder's interests, values or beliefs when it went behind the back of the law and engaged in bribery tactics to organizations like NAVS and VRG to collaborate with it in an effort to counteract the plaintiffs. Not only has this demonstrate an irresponsible top management but also shown how they have influenced others in its unethical marathon. These approaches could have been avoided and McDonald's could have shown a more empathetic approach.
Bibliography
Akers, K. 2005, McDonald’s Lawsuit — What’s the Story? Compassionate Spirit. Accessed online on 28-11-2005 from: http://www.compassionatespirit.com/McDonalds-Lawsuit-article.htm
Appendix
Author not available, 2005, 2005 Investor Fact Sheet, McDonald's Official Website, Accessed on 28-11-2005 from: http://mcdonalds.com/corp/invest/pub/2005_fact_sheet.RowPar.0004.ContentPar.0001.ColumnPar.0003.File.tmp/2005%20final%20fact%20sheet.pdf
Author not available, Feb 2005, Lawsuit says McDonald's Uses Beef Fat in French Fries. AP & Kiro 7 Eyewitness News . SeattleInsider.com. Available at: http://www.mcspotlight.org/media/press/mcds/seattleinsiderc020501.html
Fort, T. L and Schipani, C. A. 2002, The Role of the Corporation in Fostering Sustainable Peace. Vanderbilt Journal of Transnational Law. Volume: 35. Issue: 2. p389+.
Gatens, M.: 1998, Feminist Ethics, AshgateDartmouth, Brookfield USA.
Guy, S. Oct 2003, McDonald's Vegetarian Lawsuit 'Settlement' Controversy Continues. Chicago Sun Times.
Kohlberg, L.: 1981, Essays on Moral Development, Harper &Row, New York.
Marino, L. and Jackson, K. B. 2003, McDonald's: Polishing the Golden Arches. Cases in Crafting and Executing Strategy.
McCann, H. G. May 2002, McDonald's Apologizes for Fry Labelling, Yahoo! News.
McDonald, G. May 2000, Business ethics: Practical proposals for organisations, Journal of Business Ethics. Vol.25, Iss. 2; Part 2. pg. 169.
Nelson, J. Jan 6, 2003, McDonald's Attacks Vegetarian Leaders. Mcspotlight. Available at: www.vegsource.com/articles2/mcdonalds_lawsuit2.htm
Punch, M. 1996, Dirty Business. Exploring Corporate Misconduct. Analysis and Cases. London: Sage Publications.
Schlosser, E. 2001, Fast food nation. The Penguin Press.
Simola, S. Sep 2003, Ethics of justice and care in corporate crisis management, Journal of Business Ethics.Vol.46, Iss. 4; pg. 351
Stead, et al 1990, An Integrative Model for Understanding and Managing Ethical Behaviour in Business Organisations, Journal of Business Ethics 9, 233-242.
Appendix
