Business Ethics of McDonalds

Title: Business Ethics and Corporate Responsibility: 2000 words.

This assignment requires you to undertake an analysis of one case study organisation i.e. McDonalds (Fast Food)

Summary.

In considering the position of McDonald’s on issues of sustainability and environmental responsibility, this discussion argues the following: whilst the corporation conforms to the contemporary public conventions of corporate social responsibility, it still falls short of a truly ethical position. This is not solely because of ethical failings on its own part, but rather the overall patterns of consumption which it encourages. The second question under discussion is that of responsibility towards employees over the issue of long working hours, and freedom of choice. In this respect, it is argued here that employees are owed a debt of care by their employer, as part of the ‘psychological contract’ between them. Ultimately, it is good business, as well as ethical practice, to respect and foster such relationships.

Introduction.

This paper examines the ethical position of the McDonald’s corporation with regard to two areas of its business: human resources management within the issue of long working hours, and environmental sustainability. This problem is discussed here with reference to the relevant ethical framework and theories as set out by Fisher and Lovell in Business Ethics and Values, (2006). A lack of space prohibits a detailed reprise of all of the ethical theories which exist to interpret business behaviour: it may be argued though that those of Teleological ethics, Virtue ethics and Utilitarian ethics are of particular relevance in this context. The idea that ethical systems are either consequentialist or non-consequentialist, that they exist to assess whether or not they bring a desired state closer to proximity, is also considered important here. (Fisher and Lovell 2006: p.100)

1. Identify and evaluate your chosen organisation’s approach to environmental sustainability. You should show awareness of different ethical perspectives on these initiatives and the conflicting pressures the organisation faces.

According to its own environmental responsibility report, McDonald’s focuses its efforts on three areas of concern: energy efficiency, sustainable packaging and waste management, and green restaurant design. (McDonalds 2008). It has also initiated a Social Accountability programme and Environmental “scorecard” for its supply chain, with the intention of improving ethical standards amongst its direct and indirect suppliers.

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Whilst this all appears highly laudable, it must be realised that Corporate Social Responsibility and/or Sustainability Reports are essentially a forum where aspirations and commitments – as well as actual achievements – may be circulated. As a vehicle, they are becoming de rigueur for corporations with global reach, and especially for those with scale in consumer facing businesses. As Brewster reports, by 2007, 69 of the top one hundred UK FTSE companies were publishing their own CSR reports; they have in essence become a genre in themselves. (Brewster 2007). The real environmental achievements they convey in general, or about McDonalds specifically, is far more problematical to adduce.

For example, its energy efficiency effort is fundamentally predicated on its own operations, and therefore does take into account what is arguably its greatest source of environmental impact: the carbon footprint of its customers. McDonalds is a footfall based business which relies on the mobility of its customers to generate revenue: it does not sell its products in any other way. It can be argued that the public do not have to travel specifically to McDonald’s premises, since they are predominantly sited for convenience, discretionary and opportunistic purchases near other businesses, such as shopping centres, retail parks, transport hubs and leisure facilities. The fact remains however that, apart from those fortunate enough to live conveniently close to an outlet, everybody presumably must travel – predominantly by carbon producing means – in order for McDonald’s to stay in business. The qualification ‘presumably’ is added here because positivist data on this kind of movement is not available, and McDonald’s themselves – perhaps understandably – do not refer to it. It has to be conceded that there is something of an ethical trade off implicit in these transactions however. At present, the public expects the environmental effort to occur entirely on McDonald’s side of the relationship, whilst its own ethics are not brought into the equation: whilst this demand for its products continues, the corporation will presumably continue trading within its own – largely self defined – ethical parameters.

McDonald’s is also characteristically circumspect in its assessment of the ethical supply chain model, conceding that it doesn’t have “direct control” over such issues, despite using its “size and brand” as a positive influence and “encouraging improvement”. (McDonald’s 2008). There is little to indicate that McDonald’s applies anything but the usual criteria when qualifying suppliers, i.e. the industry standards of value, geographical location, staff, stability, knowledge, and quality. Within this, it is obliged to pursue a strategy of cost leadership, in order to deliver either comparable or better products at a better price. (Waters 2007: p.63) Despite its best efforts, McDonald’s remains an emblematic bete noir of corporate practice, as evidenced in the approval of Jose Bove, who was lionised after dismantling a McDonald’s restaurant in protest against globalisation. (Harney 2005)

2. Imagine you are a non-managerial employee in your chosen organisation. You discover that one manager (not yours) is putting pressure on employees in the UK to work more than the maximum hours allowed by law. Identify at least three different ways in which you could respond to this situation and discuss the ethics of each response, then select the response you would choose and explain the reasons for your choice.

As these cumulative positions suggest, the ethical dilemma is essentially one about self-determination and the freedom of the individual to make a choice, according to their own self-interest. This freedom is removed if legislation applies a universal limit on working hours: however, it is also removed if the individual experiences coercion concerning the working of longer hours. This discussion also takes amount of contemporary developments in legislation and politics on the subject of long working hours. A lack of space prohibits a detailed reprise of all of the ethical theories which exist to interpret business behaviour: it may be argued though that those of Teleological ethics, Virtue ethics and Utilitarian ethics are of particular relevance here. The idea that ethical systems are either consequentialist or non-consequentialist, that they exist to assess whether or not they bring a desired state closer to proximity, is also considered important here. (Fisher and Lovell 2006: p.100)

The Economist reports that full time employees in the UK work amongst the longest hours in Europe, averaging 43.3 hours as against 39.3 hours in the Euro area as a whole, whilst French workers averaged only 37.7 hours. (The Economist 2003). There are, however, variations concealed beneath this simple picture. The long hours culture as a whole is supposedly in decline, with only 33 per cent of employees putting in over 45 hours a week: in 1997, this figure was 39% . These statistics are based on male employees, a great many more of whom now fall into the 31-45 hour category. (The Economist 2003). In June 2008, Britain agreed an extension of it’s opt-out from the EU’s 48 hour a week ceiling, simultaneously agreeing to wages regulation on temporary staff: under the latter, these workers receive the same pay as their full time counterparts after 12 weeks employment. (Taylor 2008) The opt-out, in the words of Lord Mandelson, the business secretary, was ‘essential to Britain’s labour flexibility’, and to minimise the risk of losing jobs to China and India. (Eaglesham and Warrell 2008). However, in November 2008, the influential EU employment and social affairs committee voted to end the opt-out, and this decision now hinges on a forthcoming meeting of the European parliament.

There is, however, little unanimity on the issue, even in the British cohort of MEPs. Stephen Hughes, a British labour MEP on the committee, said he voted against the government (i.e. voted to abolish to opt-out) because, in his view, the government had ‘got it wrong’ and ‘…positioned itself far too close to the CBI…’, i.e., the Confederation of British Industry. The deputy director general of the latter, John Cridland, commented that individuals should consider their own circumstances and make decisions about working hours accordingly, adding that ‘…We call this common sense and it doesn’t need amending by Brussels.’ (Eaglesham and Warrell 2008). Essentially, there are two related ethical issues here. In the first instance, those raised by the alleged coercion of employees into prohibited working practices, and in the second, those implicit in the dilemma of intervention in a parallel working arrangement. There are three possible responses examined here, characterized as those of agency, as in offering personal support and advice, facilitation, as in a mediatory role, and direct formal intervention.

From the point of view of an agency type response, much depends on the circumstances under which the information was received, and also its probity. Hearsay cannot form the basis of a worthwhile ethical judgment, and should definitely not be employed as the justification for any practical action. In a sense, the ethical responsibility here is limited to one of agency, since this commentary is being made from the perspective of a third party, outside the working relationship in question. It could, therefore, be deemed unethical to intervene in what is essentially a contract between two other parties, whether that contract is in the legal, or the psychological sense. However, if called upon to advise an actor in the immediate context of the dilemma, it would be equally unethical to withhold such advice. An intermediate response might be that of facilitation, or the act of encouraging and supporting the damaged party in taking positive action, and eliciting informed advice. This has the benefit of relieving the third party of direct responsibility for the intervention, but also means they have the ethical collateral of having responded.

If on the other hand, the matter is viewed from a company perspective, the ethical situation does shift towards a responsibility for some form of action. From a virtue ethics perspective, it is simply inadmissible that an organization can function counter to its own policy, governance, and the relevant statutes. For it to retain a legitimate claim to self-determination of its own affairs, it has to be seen to exercise responsibility: the corollary to this is some form of intervention by outside agencies. At this point, the problem begins to assume utilitarian proportions, since the consequences of not taking some positive action must now be added to the equation. If the company or one of its representatives is effectively breaking the law, the likelihood is that the penalties eventually imposed – either formal or informal – will exceed any possible benefits of inaction. ‘Formal’ in this sense indicates legal intervention and penalisation, whilst ‘informal’ indicates the diseconomies of scale which might accrue parallel to this, in terms of damage to brand equity, media censure, and loss of revenues. It must be considered that this will ultimately impact not only upon shareholders and management, but ordinary staff too, if their jobs are threatened by destabilisation. The Kantian idea, as foregrounded by Altman, that a good corporation can have no other responsibility than maximizing dividends for shareholders, may be considered overly narrow. (Altman 2007: p.261) Ultimately however, lower profitability helps nobody. Viewed from this kind of utilitarian and teleological perspective, the ethical consequences of not intervening appear to outweigh those of actually doing so. In terms of a rigorous virtue ethics position, this may seem like a classically flawed piece of what Fisher and Lovell term ‘act utilitarianism’, in as much as it is aimed at producing one beneficial outcome, rather than a holistically ethical one. (Fisher and Lovell 2006: p.129). However, if the malpractice does not cease, then this, ultimately is what will need to happen. In fact, failure to intervene will in itself become unethical, the longer the problem remains unsolved.

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