KFC Ethical Audit Report

Kentucky Fried Chicken (KFC) founded by Colonel Harland Sanders since in 1952, he opened his first restaurant in the small front room of a gas station in Corbin, Kentucky. Today, KFC becomes successful and one of the well-known fast food restaurant in the world. KFC have operated more than 5200 restaurants in US and over than 15000 outlets around the world. Every day, more than 12 million customers are served at KFC chains in 109 countries and territories around the word. At the same time, nowadays are different compare with previously, customers are educated increasingly daintily their foods in term of healthy and nutritional attitudes and behaviour. (Butod M, 2009) In addition, the firm’s ethical behaviour also could be influence product sales and consumer’s overall image of an organization. (Schroder M.J.A, 2005)

1. Fast food already proves to be one of the foods lead to obesity epidemic and unhealthy and obviously it contravention to KFC mission which sell the in fast, friendly environment that appeals to pride conscious, health minded consumers. (www.KFC.com) KFC Corporation also encountered many of criticism about variety of ethical dilemmas from various stakeholders. These stakeholders has divided into two group which is primary stakeholders are including customers, employees, shareholders, and investors and secondary stakeholders are including media, trade associations, and special-interest group. (Ferrell O.C, 2008). The different ethical dilemmas facing by KFC as the following:

I. KFC discovered providing unhealthy foods for their customer. KFC using Tran’s fatty acids to fried the chickens and baked goods. Tran’s fatty acids also called hydrogenated oil that by-products of hydrogenation of liquid vegetable oils in the manufacture of margarines and according to the FDA, this kind of oils could be raises the bad blood cholesterol and increases the risk of coronary heart disease and diabetes. (Fonda D, 2006) Furthermore, many study report can proved that fast food like fried chickens and french fries would be lead to obesity epidemic especially children and youth also could triggered the related illness.

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KFC for the sake of lower the costs and gains their profit with disregarded the consumers healthy because using trans fat can saves money on account of partially hydrogenated oil can use again and again in the deep fryer. (Kramer M.J, 2006) These actions not only make KFC be landed in an awkward predicament but also influence the reputation and revenues of KFC. KFC receives many critics from their loyalty customers and some of them even reject eating KFC again, so their net profit also will be decreasing because of the decline of customers. It also will make the shareholders lose their higher returns and damages the goodwill and confidences to KFC. Besides that, there has also happened a similar case which is their foods do not conforming to standard by KFC chains around the world such as nutrition scientists found that KFC in America usage overage chemical acrylamide that is carcinogen in the french fries (Martin R, 2002)

II. KFC chains tendency to employs the inexpensive teenage workers. Labour activities criticized that fast-foods chain often offering the lowers wages and unfair working condition to employees for those who are in dire need of employment such as no health or retirement benefits or even hiring the child labour. (Hogan D.G) Many outlets of KFC employees are students and around 20-28 their aged, most of them is part-time but worked like full-time staff within lowers wage. Employee unethical behaviour also could destroy an organization’s of ethical business value like what matter happened of KFC which three employees KFC taking a bubble bath in the sink used to clean dishes and recorded the processes of happen and cause heated reaction. (www.ethisphere.com)

High employee turnover rate KFC also impact the food hygiene and quality indirectly because employee insufficiency of training and has not yet grasp the technique of making foods and do not achieve the term and conditions of foods and environment hygiene standards suppose to have, such as a KFC outlet in London was discovered has cockroaches, blood and mice at surrounding when the environmental health inspectors visited to the outlet. They also found that black sticky grease caking bread roll containers and trays of raw as well chicken racks were covered in congealed fat and food warming units were dirty chicken even used dirty cloth to wiping food preparation surfaces. (Sky News, 2009) They clearly show that approached the foods and environment without or lack of experiences by the employees brought the company facing lack of business ethics to consumers issues which they ignoring the foods health which is will be directly affected customers healthy such as a cases happened in KFC outlet at Villawood store, a healthy 7 years old girl was crippled and brain damaged from salmonella poisoning after eating a Chicken Twister from KFC. (ANI, 2009)

III. KFC misleading customers about the way it treats chickens. KFC claim that chickens raised for KFC suffered no pain or injuries and that humane treatment of the birds is ensured. (Milloy S, 2003)But, People for the Ethical Treatment of Animals (PETA) who focus on animal right and issues released a video segment of the poor treatment of chickens by their suppliers which slaughterhouse workers jumping up and down on live chickens, drop-kicking them like footballs and slamming them into walls, apparently for fun. Furthermore, chickens beaks seared off with hot blades, deformities caused by genetic engineering, overcrowding of coops and broken bones from being bred to be top heavy. Furthermore, chickens throats are cut and dumped in a tank of scalding water while the chickens are still conscious during the slaughter. (Moore H, 2006) PETA criticism that KFC purchase about 700millions above chickens each years to the supplier and they responsibility to ensured that chickens protected from the worst abuses for workers and should demand that suppliers implement controlled-atmosphere killing method which puts the chickens to sleep by removing the oxygen from their environment and replacing it with an inert gas like nitrogen. (Donald G, 2004)

IV. The ethics of KFC advertising which misleading the consumers to believe that fried chicken can compatible with low-carbohydrate weight loss programs and eating two of fried chicken breasts were more healthful than one of the sandwiches sold by Burger King. (Mayer C.E, 2004) Nowadays, consumers are concern for nutritional information in food advertisements in decision making choice for eat, so KFC advertising would be misled customers believed that KFC is healthy for them, but in fact, it raised obesity epidemic rate due to fried chicken contains higher trans fat, cholesterol, sodium, and calories. (www.ftc.gov…) In addition, fast food chains now including KFC aggressively advertise the concept that bigger is better which offering super-size portions of french fries, soft drinks and so on or special combo consists of more and large of fast food item. (www.answers.com) KFC also concerns advertising for children and youth to sell their food like gets a toy with purchases of a meal or limited edition gift as bait. These raise the query from consumers to KFC of the ethic of promoting unhealthy foods to their customers. (Joseph O, 2007) KFC also accused by National Consumer Council (NCC) because have not labelled the nutritional information on their menu and menu boards and it important to customers of healthy option especially related the rise of obesity and diet-related illness. (Sharkey G, 2008)

2. According to Freeman, stakeholders define as “any group or individual who can affect or is affected by the accomplishment of that organization’s goals.” (Key S, 1999) Stakeholders therefore become the crux an organizations successful or failure for their business. KFC for the sake of satisfy the consumers demand which solving the using trans-fat to cooking dilemmas and compromised FDA with replacing trans-fat oil with healthier soybean oil for partially fast-food such as finger-lickin’ chicken and corn on the cob was zero grams trans-fat per serving. (www.kfc.com) KFC also signs up with FSA to providing healthier meals programmes which with reduce salt and saturated fat levels in their products to increasing the healthier options on the menu and labelled nutritional information are available to customers. (www.caterersearch.com) According to the Kant theory, always act in right attention for those who are ethical people and ethics is a duty rather than is a consequences. (Bowie N.E) KFC lack of business ethics because they understanding earlier that using the trans-fat oil will harmful to customers healthy but still ignoring that until attack by publics. Although KFC chains claims that will make the transition but only 5500 restaurants put into practice and KFC have 15000 outlets around the world.

Therefore, how many people suffered illness because of eating KFC and how many of consumers still risk one’s health because of eating KFC? KFC have not applied utilitarian theory in the organization which maximizes the benefits or minimizes the cost by an action for all parties involved but excluding harm by an action and these benefits of an action may include pleasure, health, and satisfactions. KFC only is calculated to the organization and shareholders profits and ignore the foods quality that would direct affect the customers healthy. According to the due care theory, manufacturer’s have a duty to take special care to ensure that customers interests are not harmed by the product that they offer them. KFC should label the ingredients on the foods menu or warning to special group of customers who are unavailable because of will raise their illness-hazard. (Velasquez M.G, 2006)

From an ethical perspective, KFC have duties toward their customer that duty to inform consumers truthfully and fully of a product or service’s content because consumers had have right to know and the right to safety which to have easy access to truthful information that can help in product selection to protected from harmful products. A corporation’s ethical responsibility in advertising is to inform and persuade consumer stakeholders in way that are not deceitful. KFC advertised that healthful of eat fried chickens breasts act against the advertising ethics. American Association of Advertising (AAA) has a code of ethics which against the false, distorted, misleading and exaggerated claims and statements as well as picture that are offensive to the public. Therefore, KFC called a halt to that advertising after criticism by Federal Trade Commission. (Weiss W.J, 2009)

Although advertising is supposed to provide information to customers but many of organizations make advertised aim to sell products and services. Ethical issues arise whenever corporations target advertising in manipulative, untruthful, subliminal, and coercive ways to vulnerable buyers such as children and minorities. These such as KFC target children markets which buy meals can get toys to attract the children, but more of them for the sake of gets the extras toy and compelled their parent buy the meals and not that they like to eating the meals. Critics of questionable advertising practices argue that advertisements tell half-truths, conceal facts, and intentionally deceive with profit and ignoring the consumer welfare like American today; about 64% of adults are considered overweight due to eating fast-food. Customers need understandable information on food nutrition such as how much fat is in food, on standard serving sizes, and on the exact nutritional contents of foods but advertising always misleading labels. (Weiss J.W, 2009)

KFC supplier and worker using the cruelty methods to treat the chickens causes strong negative reaction from community which criticisms the slaughterhouse worker act immoral and for the sake of profitability and disregarded the animal rights. KFC officials also make immediate responses that would fire out workers are involved and increased inspects to the slaughterhouse to confirm they will not repeated the behaviour and would be end their partnership if recurring. (Mcneil Jr, 2004) Different philosophers also have differences opinions on the animal rights issues. According to the Peter Singer in Animal Liberation, all animals are equal and have rights or deserve moral consideration because animals have conscious that capable feeling pain or pleasure, at least humans have moral duty to not cause them suffering without good reason. Warren also agree with that animals have rights but weaker than human rights. Nevertheless, Kant’s view humans have rights and duties because we have self-consciousness that gives a person moral standing and rationality whereas animals are not, so animals do not have rights and duties. (White J.E, 2009)

3. Today, business communities are concern to issue of corporate social responsibility (CSR). According to Keith Davis, social responsibility as businesses which some decisions and actions taken for reasons should without firm’s interest. CSR is voluntary business integrating social, ethical, and environmental concerns within measures of revenue, profit, and legal obligation that no longer of stakeholder expectations. William C. Frederick (1960) also claim should be “utilized for broad social ends and not simply for the narrowly circumscribed interests of private persons and firms” which resources are available to business. KFC management clearly understand that emphasis on healthy, quality, and socially responsibility of products an organization provided becomes the key point to attract customers and either convenience or product consistency no longer the unique selling points. (www.carersblog.com)

Corporate social responsibilities (CSR) become a crucial part of successful in achieving the organization goal. According to Whooley, marketplace, environment and community are the challenge of CSR management which will affect the reputation of organization. (Jones p, 2005) KFC is committed to conducting its business in an ethical, legal and socially responsible manner. They believe that have responsibility to understand and minimize the impact of business on the environment without compromising operational standards or shareholder value. Therefore, energy usage in restaurants, waste management, packaging and sustainable building design as the challenging for KFC in CSR of environment such as KFC in US, they successful reduced the energy consumption in annualized savings 60000 metric tons of CO2 and it benefited the shareholders because of saved in energy costs (www.yum.com) In addition, KFC advocated recycle which 50% of KFC box packaging make from recycled paper and 95% of cardboard use behind the counter can also recycled. (www.kfcholdings.com.)

KFC also encourages the global diversity which receiving and research and development different skills, cultures, perspectives and experiences of KFC associates are around the world to drive great marketplace performance. This diversity including all people has equal rights without gender, background, country or colour of skin who are employment by KFC chains. Besides that, KFC supports more than hundred of community activities and charities across the global such as hunger relief, group of mentally disabled children and young adults and so on to carry out social responsibility. (www.yum.com) CSR become a virtual industry with KFC Corporation proclaiming long list of activities. The challenge for KFC is to be strategic about CSR and develop programs that provide the greatest benefit for themselves and society which to make demands on corporations that best utilize their capabilities and resources. (Boatright J.R, 2009)

4. “Good ethics is also good business because it allows businesses to avoid outside restrictions.” (Stewart D, 1999) Thus, the recommendation for KFC Corporation that should be ensures providing healthy products with avoided using edible oil without contains Trans- fat acids. KFC should be having long term ethical stance which obeyed the ethical stance to protecting the health of their customers as well as they can and maintain it to future generation to assurances achieving the company’s goal and morality businesses at the same time. Ability of KFC to use the ethical management in the organization can improved the image of the corporation. KFC can based on the concept of societal marketing which identify the need, wants, and interest of its consumers and provide the desired satisfactions more efficiency such as improves the well-being of the customers and society especially in term of health nutrition. The responsibilities of KFC organizations to the society also always need to concern that follow the ethical matter during their business ongoing because nowadays , consumers perception are vary than before, they further regard to manifested an organization’s on moral and responsibility behaviours, so it will directly influences towards companies growth and profitability.

KFC should honestly to their customers on the issues of foods ingredients and give real information in advertise. Today, ethical elements become a crucial role and indispensable an organization become successful. If customers know cheated by organizations, they will boycotts that company products and it may lead the company failure achieving their company goals. Ethical theories can define that what rights and wrong, duties ought to do and responsibility needed. Therefore, organizations management considers to ethical can easily gain good reputation and respect from customers, yet, attainment of goal.

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Appendix I:

Figure is represent the firm is identifying the stakeholders.

Source from:

Jay Polonsky M.(1995)’Stakeholder theory approach to designing environmental marketing strategy’ Journal of Business & Industrial Marketing, vol. 10, no. 3, pp 29-46

Appendix II:

Figure is represent that – firms modify behavior and stakeholders modify expectations

Source from:

Jay Polonsky M.(1995)’Stakeholder theory approach to designing environmental marketing strategy’ Journal of Business & Industrial Marketing, vol. 10, no. 3, pp 29-46

Appendix III: Stakeholders analysis:

STAKEHOLDERS

INTERESTS

CUSTOMER

~Good quality of product

EMPLOYEES

~Provide adequate condition of safety and

health

SHAREHOLDERS

~Maximize their wealth

MEDIA

~Analyse the company

SUPPLIER

~Acting fairly in supplying and receiving

goods

GOVERNMENT

~Protect for every stakeholder

COMPETITOR

~Fairness in the market

FINANCIAL INSTITUTION

~Lend the money and give the low interest

to the company

Source from:

1) De George, Richard T…,(1999), Business Ethics. Prentice Hall,Inc. 5th ed.

2) H.Shaw W., Barry V., (2004). Moral Issues in Business, Thomson Wadsworth., 9th ed