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Arguably the most important aspect of an organization is its
emphasis on ethical behavior. The key premise was that by ‘doing the
right thing’ internally and externally, businesses created a good
working atmosphere, while also benefiting society and the environment.
The problem is that many ethical issues are subjective and based on
one’s values and beliefs. As a result, they are often difficult to
enforce and easy to neglect. The result of this is that ‘when the costs
are added up, the social balance sheet contains enormous debts to
society’ (McEwan, 2001).
It is the notion of an organization’s ‘debts to society’, which led
to the branch of ethics known as ‘corporate social responsibility’.
This refers to ‘the economic, legal, ethical, and philanthropic
expectations placed on organizations by society at a given point in
time’ (Carroll and Buchholtz, 2000). This theory of responsibility to
society is based around two headings, stated by Wells (1998). Social
Responsibility deals with ‘the purposes for which companies should act’
(Wells, 1998), and Corporate Responsibility is the ‘liability attached
to a company for actions done in its name’ (Wells, 1998).
Corporate Social Responsibility has increased in importance over the
last 15 years, as globalization has led to increased pressure to meet
society’s ethical demands and expectations. This pressure is a result
of an increased number of stakeholders who ‘can affect or are affected
by, the achievement of the organization’s objectives’ (Beauchamp,
2004), as well as the increasing influence and power of the mass media,
which is able to pick up on even the smallest issues and re-present
them globally. As a result, ‘in a technological age, where news spreads
fast and everyone is expected to do his/her part to take care of the
world, Corporate Responsibility is a business necessity’ (Allen, 2004).
One example of this is McDonald’s, which published its first
Corporate Responsibility Report in 2002 and this was followed up with
an updated version in 2004. Yet despite this move, many critics of
McDonald’s still believe that this, like many Corporate Responsibility
Reports, is simply a medley of generalities and assumptions, that do
not provide hard metrics of the company, its activities or its impacts
on society and the environment’ (Hawken, 2002), and is ‘peripheral to
the core interests of an organization’ (Strategic Direction, 2002). As
a result, there is a need to analyze the claims made towards McDonalds,
and whether they have been resolved within the two Corporate
Responsibility Reports.
McDonald’s celebrated its 50th anniversary on April 15th 2005, and
over those 50 years it has become the world market leader in fast food,
with an annual turnover today of ‘approximately $40 billion worldwide’
(Smith, 2003). It has maintained a high level of performance throughout
those 50 years and today is as successful as ever. For example, 2004
was the first year in the past 17 in which McDonalds tailed positive
same store sales every month…while January 2005, total sales increased
by 8.5%. Its trademark Golden Arches and Big Mac burger are today
recognized in ‘30,000 outlets, found in 119 countries, serving 47
million customers a day’ (McDonald’s Corporate Responsibility Report,
2004). Over the 50 years, ‘the McDonald’s Corporation has traveled from
pioneer of a new and uniquely American eating experience, to icon of
the global appeal of American capitalism, to perhaps one of the most
despised corporate symbols in the history of private enterprise’
(Baker, 2005).
The first McDonald’s restaurant opened on April 15th 1955, in Des
Plaines, Illinois by an entrepreneur called Ray Kroc. Kroc had been
attracted by a limited menu hamburger stand that turned out
high-quality fast food at low prices, run by a pair of brothers, Dick
and Mac McDonald. McDonald’s served more than 100 million hamburgers in
the first three years and ‘the 100th McDonalds restaurant opened in
1959’ (Smith, 2003). Its success was unheralded, and the now famous
marketing strategy was established by Kroc in 1963, with the Ronald
McDonald clown character. McDonald’s television advertising was so
successful that ‘by 1971 the Ronald McDonald clown character was
familiar to 96% of American children’ (Baker, 2005). This exceptional
marketing strategy has remained competitive today, as highlighted in
Morgan Spurlock’s documentary ‘Super Size Me’ (2004), when more
children recognize Ronald McDonald than a picture of Jesus or the
American President George W. Bush.
The success of McDonald’s was not just within the USA, but also
globally, which became important when the US market became saturated.
‘The first British restaurant opened in 1974’ (Baker, 2005) and today
there are more than 1200 restaurants in the UK, employing 73,000
people’ (Caterer-online.com, 2004). Success has also been found in a
number of other countries, including Japan, Australia and Germany. In
2002, of McDonalds annual worldwide sales of £25 billion, ‘35% came
from Europe and 15% from Asia, Pacific and Middle East’
(Caterer-online.com, 2004).
Despite the obvious global success of McDonald’s, it reported a loss
in 2002 for the first time since the 50s and experienced the rare
phenomenon of some outlets closing. For example, in October, ‘pre tax
profits slumped from £83.8 million to £23.6 million’ (Sweeney, 2004).
Since its global expansion efforts in the 70s, McDonald’s has been
shadowed by a wide variety of ethical issues, which ‘has spawned an
entire industry of anti-McDonald’s protesters’ (Baker, 2005). These
people have created events, such as ‘Anti-McDonald’s day’ every year on
October 16th, and are the first to hit McDonald’s stores in London
during the notorious anti-capitalist May Day riots. However, the
incident which has done the most damage to McDonald’s ethical
reputation was the ‘McLibel’ trial, where the company expected a quick
conclusion to its action against activists who had distributed a
pamphlet, What’s Wrong with McDonald’s?’. Instead it ran for two and a
half years and became the longest ever English trial, upon its
completion in June 1997 (McSpotlight.org: The McLibel Trial, 2005).
One of the main ethical criticisms consistently faced by McDonald’s
over the last 30 years relates to the food offered in its stores.
Critics claim that McDonald’s is a major contributing factor to the
ever-increasing levels of obesity in the U.S. and other developed
countries. Medical studies show that ‘waistlines are expanding faster
in the UK than in any other European country…with 1 in 5 adults
dangerously overweight’ (Walsh, 2003), while in 2001 it was reported
that 300,000 deaths a year in the U.S. are related to obesity compared
to 400,000 through cigarette smoking’ (McMans Depression and Bipolar
Weekly, 2004). McDonald’s contribution is a result of the unhealthy
nature of fast food. For example, a meal of a Big Mac and medium fries
would provide you with ‘910 calories, as well as 46g of fat, 13g of
which are saturated’ (McDonald’s.com, 2005). Considering the fact that
this is half the Recommended Daily Allowance for a female adult, it is
clear that McDonald’s does not meet U.S. dietary requirements. Apart
from obesity, ‘diabetes, high blood pressure, heart disease and some
forms of cancer are related to a diet high in fat, saturated fat, salt
and sugar’ (Inside the McLibel trial, 1995). The impacts of a
McDonald’s diet were clearly shown in Morgan Spurlock’s controversial
film ‘Super Size Me’, where he ate nothing but McDonald’s for one
month. Although this was an extreme example, the impacts on Spurlock
were dramatic. ‘Spurlock gained 25 pounds, raised his cholesterol by 60
points, dropped his libido and turned his liver into pate’ (McMans
Depression and Bipolar Weekly, 2004). He also experienced headaches and
depression, and actually became addicted to the products.
The impact of a McDonald’s diet on children is also a major ethical
concern, as an increasing number of children are faced with obesity
problems. ‘Every month, 90 percent of the children between 3 and 9 in
America visit a McDonald's’ (Schlosser, 2001). McDonald’s has been
criticised for exploiting children with advertising. They have
traditionally aimed themselves towards children with collectable toys
in ‘Happy Meals’, as well as colorful advertising campaigns and
promotions in schools. Most criticized is the use of the Ronald
McDonald clown character, which has been seen as a ‘cynical
exploitation of children to use a clown to drum up business’ (Inside
the McLibel trial, 1995). These marketing tactics contribute to the
increasing unhealthy diet of many children.
Stakeholders in a corporation may not only be human because animals
are also seen as an important part of society and deserve the same
treatment as humans. McDonald’s has been criticized for the way it
treats animals before they are killed and turned into fast food. ‘The
corporation is the world's largest promoter of meat-based products, the
largest user of beef and the second largest user of chicken’
(McSpotlight.org: McDonald’s and Animals, 2005), and thus is faced with
the usual claims aimed at slaughterhouses. It is claimed that ‘chickens
were crammed into sheds with less than one square foot of space per
bird and no daylight’ (Inside the McLibel trial, 1995). As a result,
‘44% had leg abnormalities and other health problems’ (Inside the
McLibel trial, 1995). This treatment was not just reserved for chicken
but also other animals involved in McDonald’s fast food products. 40%
of piglets were held in indoor breeding units, and half had tails
docked for no apparent reason’ (Inside the McLibel trial, 1995).
Ethical criticism is also aimed at the methods for killing the animals.
‘14% of chickens received pre-stun shocks, which caused undue stress,
while 1% (1,350 per day) were decapitated before being stunned’ (Inside
the McLibel trial, 1995).
As well as social ethical issues, corporations must also consider
environmental ethics, which means treating natural resources not just
as commodities, but as part of the ecological whole. It is important
because it affects the image of the company and consumer’s perceptions.
For example, ‘a Wall Street Journal poll in 1991 claimed that 53% of
people avoided purchasing a product because of environmental concerns
about a product or manufacturer’ (Hawken, 2002). The most famous
environmental issue is the suggestion that McDonald’s has destroyed
hundreds of acres of Brazilian rainforest to make way for large-scale
cattle ranching. This not only removes a valuable natural resource, but
also has an impact on global warming, as the rainforest is an essential
mechanism for the absorption of Carbon Dioxide in the atmosphere.
McDonald’s also ‘annually produces over a million tons of packaging
used for just a few minutes before being discarded’ (McSpotlight.org:
Environment, 2005). Traditionally a number of ozone depleting gasses
were used in polystyrene foam packaging. In the 21st century,
McDonald’s uses almost all recycled packaging. However, the company
still faces criticism due to the amount of waste it produces. ‘Each of
McDonald’s US restaurants produces 238 pounds of waste per day and each
of its U.S. regional distribution centres disposes of another 900
pounds of waste per day’ (Svoboda and Hart, 1995). This is not only
expensive to dispose of, but also difficult when considering that
similar quantities of waste are being produced around the world.
McDonald’s also experiences internal ethical issues related to the
working conditions and treatment of employees. ‘McDonald’s employs over
1 and a half million people worldwide, over half of them under 21 years
old’ (McSpotlight.org: McDonald’s and Employment). McDonald’s has
adopted ‘age differentials between adult and younger workers, meaning
that they pay most of their employees less than the normal adult
minimum wage’ (Transport and General Workers Union, 2004). For example,
McDonald’s pays some 16-year olds as little as $6.80 an hour.
McDonald’s employees also experience poor working conditions with
discrimination, illegal working hours, and poor safety conditions.
There is little that can be done about this due to the absence of trade
unions, within McDonald’s, to represent staff. If Milton Freeman’s
theory of stakeholders is adopted, the needs and expectations of staff
are just as important as those of customers.
The range of ethical criticisms leveled at McDonald’s throughout the
world has been well-publicized. However, many of these issues were
first raised in the 1970’s before tighter regulation was imposed and
unethical behavior became a hot topic. After 30 years of criticism, it
is important to look at what measures McDonald’s has taken to improve
its ethical conduct and how far this has been successful.
McDonald’s claims that ‘being a good citizen has been inherent in
the company since its inception’ (Schlosser, 2001). Ray Kroc believed
McDonald’s had an ‘obligation to give back to the community that gives
so much to us’. This was rooted in his founding principles of Quality,
Service, Cleanliness and Value. Since 1955, McDonald’s has continually
made statements about its conduct to try and reassure shareholders and
stakeholders. However, nothing was said or published about what
attempts were actually being made to ‘do the right thing’. This finally
changed in 2002 with the release of McDonald’s first Social
Responsibility Report.
The report was composed of 46 pages, which began with McDonald’s
core values and then looked at the impact of McDonald’s in different
areas, such as community and the environment. It showed that McDonald’s
has invested in the Ronald McDonald housing program to house families
with seriously ill children, and documented the efforts made to reduce
McDonald’s impact on the environment. For example, there was ‘a
commitment to spend $100 million annually on the use of recycled
materials, especially in the building and renovation of its
restaurants’ (Svoboda and Hart, 1995). Overall, the report was ‘a clear
statement of intent about its future works in this area’ (Wood, 2002).
Although it was an attempt at social reporting, the 2002 report was
‘a low-water mark for the concept of sustainability and the promise of
corporate social responsibility’ (Hawken, 2002), and its generality, as
well as its vague nature meant it was simply a ‘walk around the issues’
(Wood, 2002). It was seen by many as a PR stunt, which was created to
appear like McDonald’s was meeting the requirements of an increasingly
demanding society. The content of the report was criticized because it
focused on issues and areas where McDonald’s had been successful, but
did not mention well-publicized issues, such as obesity. Similarly, it
neglected to mention a number of the company’s major environmental
impacts. For example, the report ‘talked about water use at the
outlets, but failed to note that every quarter-pounder requires 600
gallons of water’ (Schlosser, 2001). This distinct lack of transparency
enabled McDonald’s to cover up any bad issues and only show what they
wanted the public to see.
The key problem with the 2002 Responsibility Report was that ‘due to
its decentralized nature, McDonald’s was unable to provide any of the
data that is looked for as core information in their report’ (Wood,
2002). In its report, McDonald’s stated how much money it had provided
for social improvements, but no figures on what impact these
improvements had. Similarly, there was very little information related
to the measurement of environmental impacts and improvements. This
meant that the report was written as a narrative, rather than a social
report. The effectiveness of the report was also reduced by the fact
that there was ‘no comparative data on past and present performance’
(Strategic Direction, 2002). The final nail in the coffin for the
report was the fact that ‘there was no independent verification’
(Strategic Direction, 2002), which meant that stakeholders could not
even have a guarantee of the accuracy of the report. These negative
factors meant that the first McDonalds Social Responsibility Report was
‘was an impressive statement of intent, but it recognised that the
company was not yet ready to report progress’ (Wood, 2002).
Despite the criticisms of the report, McDonald’s was satisfied with
the result, believing it portrayed the company in a good light and
showed stakeholders that McDonald’s met societies needs. However, in
the 2 years following the reports release, McDonald’s experienced its
worst financial results in almost 20 years. This was a result of
increasing criticism from publications and documentary’s, such as Super
Size Me, as well as an increase in lawsuits from over weight teenagers
in America, who blamed McDonald’s for health problems. The result was
the second McDonald’s Social Responsibility Report in 2004, McDonald’s
current source of ethical information for stakeholders, which
‘introduces a new accountability structure’ (Cochran, 1994).
The colorful report is double the size of the 2002 edition, with 88
pages, and is a significant improvement, addressing many of the ethical
issues which have shadowed McDonald’s for the last 30 years. The report
says that ‘being responsible is one of our greatest competitive
advantages’, even though the issues it tackles are growing ever more
complex’ (Allen, 2004). The 2002 report made little mention of
McDonald’s food, and failed to recognize the ethical concerns
associated with it. However, in the current report, ‘food takes top
billing’ (Allen, 2004), with the first 12 pages of the main analysis
allocated to ‘Food’. The company highlighted efforts to offer healthier
options, including salads on its menu, and revealed how they had
brought in a full time nutritionist to alter the menu. Possibly the
most poignant move was to phase out the ‘Super Size option’ in all
restaurants. McDonald’s have also ‘added new options to Happy Meals for
children, so fries can be substituted for healthy alternatives like
apple slices’ (Allen, 2004), and offers milk, fresh orange and water
instead of soda. McDonald’s new stance also involved ‘promoting the
importance of exercise’ (Allen, 2004). On page 8 of the report there is
a picture and statement by a professor of exercise at Leeds
Metropolitan University, who reinforces McDonald’s stance, aimed at
helping children lead healthier lives.
The section on the environment is also more substantial, with a
variety of figures on packaging and waste. For example, ‘McDonald’s
achieved a 3.2% reduction in packaging during 2003’ (McDonalds
Corporate Responsibility Report, 2004). This is combined with a
section, which shows McDonald’s commitment to improving the
environmental performance of suppliers. This includes a statement that
‘McDonald’s will not purchase beef from rainforests or recently
deforested rainforest land’ (McDonalds Corporate Responsibility Report,
2004), acknowledging one of the specific ethical criticisms aimed at
McDonald’s. McDonald’s also shows its commitment to reducing animal
cruelty from suppliers by increasing supplier accountability and
‘conducting nearly 500 audits at beef, pork and chicken processing
facilities around the world’ (McDonalds Corporate Responsibility
Report, 2004). The content of this report shows that the company is
beginning to acknowledge and account for the unethical stories
recounted by critics. A key example of this is the website ‘Super Size
Me: The Debate’, which was set up by McDonald’s to show how they have
made improvements in their menu and give advice to customers on
products.
The Corporate Responsibility Report is written by McDonald’s
Corporate Responsibility Committee, who ensure that all the political
and social requirements are met by the corporation. This is supported
by a code of business conduct, which has been in place and updated
regularly over the last 35 years. This is the main framework for
employee ethics and it is used to ensure that the internal ethical
requirements are met, such as a safe working environment, equal
opportunities and employee rights. There is also a code of conduct for
the board of directors, which shows ‘their commitment to ethical
practices’ (McDonalds Corporate Responsibility Report, 2004).
The 2004 Corporate Responsibility Report, and codes of business
conduct are all written in a similar style, with emphasis throughout on
‘Responsibility’. This word is used numerous times to show that
McDonald’s doesn’t feel it is an obligation, but that it is their
responsibility given to them by virtue of being in a powerful position.
This word can be applied not only to show external shareholders that
the company appreciates it is responsible for their well being, but
also to reinforce the notion to staff internally that they must be
responsible for ethical conduct in all aspects of their work.]
Despite the marked improvements in ethical conduct, there are still
criticisms that can be leveled at McDonald’s. The 2004 Corporate
Responsibility Report is still limited by the fact that it is
qualitative, rather than quantitative. It does have some statistics,
but there is a need for more, particularly when looking at improved
performance. The employee section is dominated by claims of diversity,
but little is said about how conditions have been improved or pay
structure and age breakdown of staff. ‘As noted in the Lampe-Finn
model, it is little more than a means to maintain the status quo while
creating images of ethical behaviour’ (Lampe and Finn, 1992).
The report uses bright colors and external partners to emphasize its
importance, but really it is merely another piece of corporate
propaganda designed to satisfy the majority of stakeholders with minor
concerns. It attempts to portray itself as being a corporate citizen,
but without the transparency that is necessary to achieve this view.
The only parts of the company which society gets to see are those
chosen by executives to support their opinion of how the company should
be portrayed. There is still an absence of evidence to prove to strong
opposition that change is really occurring. This is probably a result
of the fact that McDonald’s does not have an ethics department or
ethics officer. It simply has codes of conduct, which are produced at
the top level by directors. The result of this is that because the
directors are not experts in ethical conduct, many of the ethical
issues are simply covered over by well-publicized, but unsuccessful
schemes, and many of the needs of stakeholders are not met.
Over the last 10 years, McDonald’s appears to have successfully met
its social responsibilities. Its vibrant 2004 Corporate Responsibility
Report shows that the menu has been enhanced with healthy options,
which reinforce McDonald’s public aim to increase the healthiness of
its customers. The company has increased recycling and reduced waste in
stores across the world, while attempts have been made to improve the
standards of its suppliers. This has led to McDonald’s taking top
position in marketing firm GolinHarris’s second annual citizenship
survey. The most amazing fact is that this has been done in a way that
also meets Friedman’s requirement of meeting needs of shareholders by
increasing profits.
However, when looking deeper into McDonald’s attempts to improve its
ethical conduct, it becomes clear that McDonald’s has ‘offered
progressive rhetoric but not changed its internal practices or impact
on society and the environment’ (Hawken, 2002). Much of its attempts
are descriptive and based around meeting future goals. This has a lot
of potential, but very little is said about what has been achieved at
the moment. The absence of statistical figures means that most of
McDonald’s attempts at ethical behaviour can and will be questioned by
numerous books, documentaries and websites. It is important to remember
that ‘McDonald's publicly embraces "sustainability" as long as it can
make money’ (Hawken, 2002) and many of its ethical attempts are aimed
at persuading the public that the business is ethical, rather than
ensuring that it is.
McDonald’s success looks set to continue into the future. This has
been achieved despite facing constant pressure from critics about its
operating practices. As a result, it seems very unlikely that
McDonald’s methods of publicizing ethical attempts will change,
especially considering the money which would be required. If there was
a shift towards full corporate social responsibility, there is a need
for an ethical officer and ethics department, comprised of experts who
can subjectively analyze the performance of the company and set
accurate objectives. There is also a need for full transparency so that
the public can be assured that the company is ethical. It would need to
reveal ‘the externalities born by other people, places and generations’
(Hawken, 2002). Until any radical internal changes are made, ‘the poet
Henry Thoreau best describes McDonald’s corporate initiative: "Improved
means to an unimproved end."’ (Hawken, 2002).
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