Ethics Program of McDonalds Corporation - Case Study Example

Report on the Ethics Program of McDonald’s Corporation 1. Introduction 1.1 Organisational Background McDonald’s is one of the world’s most well-known brands, and one of the world’s largest employers. The restaurant empire began as a modest drive-in cafe in California in 1948; in 1954, a travelling restaurant supply salesman named Ray Kroc visited the small hamburger stand and saw an opportunity. The following year Kroc bought the rights to the name from the original owners Mac and Dick McDonald, and opened the first true McDonald’s restaurant in the Chicago suburb of DesPlaines, Illinois (McDonald’s, 2012a). International expansion began in 1967 with new restaurants in Canada and Puerto Rico; today, there are more than 32,000 McDonald’s operating in 117 countries, who provide employment for nearly two million people worldwide (McDonald’s, 2011b). 1.2 Sources of Information 1.2.1 Personal Experience in the Organisation Because McDonald’s employs so many people – and more to the point, makes a priority of offering job opportunities to young people, the elderly, people with disabilities, and others who might otherwise encounter challenges in finding work – it seems that people who are veterans of a least a little time as a McDonald’s worker are very common. My own experience was probably typical; I worked for a total of about two years for McDonald’s as a crew member, a job I appreciated partly because of its flexibility with regard to my school schedule. My knowledge of ethical issues in the organisation was in the context of a regular line employee; management- and career-oriented workers receive more detailed training and instruction than the orientation and information given to workers at the more casual level. 1.2.2 Other Sources of Information Unless otherwise noted, descriptions and analyses of McDonald’s ethical performance are drawn from personal observation and experience. A number of other sources of information, duly noted as text references and in the attached reference list, were used to develop this report. Company background information and details of McDonald’s codes of conduct and ethical guidelines were accessed through McDonald’s Corporation’s website and included links. A general code of ethics used as a standard with which to compare McDonald’s is found in the 2011 Edition of the OECD Guidelines for Multinational Enterprises. In addition, several academic and business case articles were accessed to give further depth to the ethical principles and practises described by other sources. 1.3 The Ethical Standard 1.3.1 Description The OECD Guidelines for Multinational Enterprises are a set of guidelines that “...provide non-binding principles and standards for responsible business conduct in a global context consistent with applicable laws and internationally recognised standards.” (OECD, 2011, 3) While Guidelines are quite detailed – the PDF form of the booklet available from the OECD website runs to 95 pages – the basic ethical standards are described in the “General Policies,” which are a total of 17 rules that enterprises either “should” or “are encouraged” to follow (OECD, 2011, 19-20). Pertinent provisions in the General Policies include: Prioritise sustainable development. Recognise human rights. Support local communities. Create opportunities for employment and career training. Follow sound corporate governance principles. Publish and promote company policies through proper training and information. Do not discriminate against employees making proper complaints about the company or its practises. Avoid harming public health, safety, or the environment. Avoid improper involvement in local politics, and respect local laws. Practise responsible supply chain management. These basic guidelines are compared to McDonald’s own published ethical guidelines in the following section. 1.3.2 Relevance of the Standard to McDonald’s Corporation The relevance of the OECD guidelines to McDonald’s Corporation is fairly obvious. While the guidelines are considered non-binding and technically apply only to enterprises either operating or headquartered in OECD countries, they are considered “best practises”; a company that does not follow them, particularly a well-known company like McDonald’s, would almost certainly harm its public reputation (Crane & Matten, 2007). And since McDonald’s is in fact both headquartered in and operates in OECD countries, the OECD guidelines do apply. 2. The Ethics Program at McDonald’s 2.1 McDonald’s Codes of Conduct and Ethical Practises McDonald’s has an extensive collection of Codes of Conduct, which are categorised as Codes of Conduct for Directors, applicable to members of the Board of Directors; Codes of Conduct for Financial Officers; and the codes which are applicable to this analysis, Standards of Business Conduct for Employees (McDonald’s, 2012c). The Standards of Business Conduct actually have two parts, a global standard and where applicable, an additional set of standards for individual countries; currently, there are 37 countries covered by different published standards in a number of languages, including Australia (McDonald’s, 2012c). The Code of Conduct addresses a number of areas in line with seven principal company values (McDonald’s, 2012c): We place the customer experience at the core of all we do. We are committed to our people. We believe in the McDonald’s System. We operate our business ethically. We give back to our communities. We grow our business profitably. We strive continually to improve. Within the section of the Code of Conduct specifically identified as “Ethics,” McDonald’s addresses seven topics (McDonald’s, 2012c): Protecting company assets Avoiding conflicts of interest Use of electronic communications Proper handling of company records and communications Respecting applicable laws Special considerations for international business Anti-bribery rules and guidelines There is no difference between the ethics guidelines in the US/global version of the Code of Conduct and the Australian version, although for several countries there are differences where there are important cultural or legal considerations that must be addressed. In China, for example, McDonald’s provides different Codes for Chinese employees and expat workers (McDonald’s, 2012c). 2.2 Other Elements of the Program For regular line employees (such as myself), the McDonald’s Code of Conduct and ethics guidelines are provided to new employees during the initial training and orientation period, which is conducted during the employee’s first month on the job. Except for parts that are particularly relevant to line staff, specifically, the proper use and protection of company property, records, money-handling procedures, and company communications – which in this context refers mainly to communications with media or government officials – the ethics guidelines are not discussed in great detail. Instead, employees are provided a copy of the Code of Conduct (which they must acknowledge receiving by signing for it) and are referred to the company’s website and intranet for more information. During the orientation period and periodically throughout the employee’s term at McDonald’s, other issues beyond the ethics guidelines are discussed with the employees. In particular, complaint and dispute resolution procedures, rules against discrimination, the sexual harassment policy, and health, safety, and environmental guidelines are given close attention, and communicated to employees in detail. A common method of providing this training is through hypothetical scenarios, which help the employees to better understand situations in which the company’s guidelines apply. 3. Analysis 3.1 Comparison with the Standard There are two ways to compare McDonald’s ethics standards with the OECD guidelines. The first way is to take McDonald’s published ethics guidelines at face value, that is, the guidelines are those labelled “Ethics” in the company Code of Conduct, and other matters that may be considered ethical issues are regarded as something else by the company. In that respect, McDonald’s falls short of the OECD standard. The company meets the standard in terms of practising good corporate governance and respecting local laws, but the company’s guidelines do not address issues the OECD guidelines do, such as respect for human rights, sustainable development and environmental consciousness, practising sound supply chain management, or respecting employees’ legal recourse to resolving disputes or complaints involving the company. On the other hand, looking at what McDonald’s specifically calls “ethics” in this way is inappropriate, because much of what is in the OECD guidelines is addressed in the company’s mission and values statements, and in the information provided to employees through training and beyond. McDonald’s does recognise human rights through very strong policies regarding discrimination and sexual harassment, and has a clear dispute resolution policy that states employees may raise grievances without fear of prejudice. Through McDonald’s normal employment processes, the company does provide employment, and makes a priority of offering opportunities for less-advantaged workers. Overall, although the ethics standards of McDonald’s are not organised or approached as systematically as the OECD guidelines, the conclusion is that they are nominally reflective of the standard. 3.2 Personal Observations of Ethics in Practise One characteristic of operations at McDonald’s is that almost every activity that could occur in a workday, from the normal routine of cooking and serving food to customers to the occasional problems such as an unhappy customer, a personal dispute between two employees, or an injury to one of the workers, is handled according to a strict, written procedure. That being the case, an “ethical problem” very rarely arises, at least at the level of a local store; whatever happens, there is almost certainly a prepared set of instructions on how to deal with it, and these instructions are presumably written in accordance to McDonald’s Code of Conduct and its mission and values statements. An area in which ethics does become a part of the daily routine for McDonald’s employees is in promoting a “sense of community”. It begins with the initial interview for the job; the point is stressed that McDonald’s is striving to be a “good corporate citizen” in the community, and the strong implication is that the company is providing more of a benefit to the community by hiring a local person – especially a student in need of a flexible job, in my case – than they are receiving by acquiring a human resource. This perspective not only reflects an ethical alignment with the standard of the OECD guidelines, but is an effective recruiting and marketing tool as well (Matten & Crane, 2005; Pollitt, 2010). Thus the need to be respectful and supportive of the community is stressed to the employees. Even though the restaurant is part of a global giant, the owners, managers, and regular staff are all local people (Vignali, 2001). To the McDonald’s employee, the message is that the customers are neighbours, and should be treated in a friendly, supportive way. That, however, is somewhat of an ideal that is not matched by attitudes at McDonald’s, in my experience. Since the customers are “neighbours,” any everyday social prejudices and personal dislikes the employees had simply carried over into their relationship with customers at work; and this was probably aggravated by the perception of many people that, no matter how attractive McDonald’s tried to make the job, it was still a rather low station in life. Many customers tended to look down on us, and as a result, much of our attitude towards and conversation about them – although, fortunately, only in the back room or in things like Facebook chats – tended to be something rather less than “friendly and supportive towards our community”. So it would probably be fair to say that while McDonald’s values and training generally leads to ethical practise, it does not really lead to an ethical mindset, at least in terms of social relations with other people. 4. Conclusion McDonald’s is one of the world’s most recognisable brands, and its global reach and familiarity presents a challenge to the company to maintain high standards of ethical integrity in order to remain popular and profitable. McDonald’s ethical guidelines, which are described by the company’s Code of Conduct and augmented by information provided to employees through the training process, compare very closely to a global standard, the OECD Guidelines for Multinational Enterprises. In day-to-day practise, McDonald’s does follow ethical standards at the level of a local store, which is greatly helped by extremely detailed job procedures and instructions that cover almost every contingency. However, the positioning of McDonald’s as a “neighbour” only goes so far in instilling a sense of community among its employees in customers; the relationship is still very transactional as opposed to relational (Vignali, 2001), which suggests that some ethical risks will always be present. References Crane, A, and Matten, D 2007, Business Ethics, 2nd Ed. Oxford: Oxford University Press. Matten, D, and Crane, A 2005, “Corporate Citizenship: Toward an Extended Theoretical Conceptualization”, Academy of Management Review, vol. 30, no. 1, 166-179. McDonald’s 2012a, “McDonald’s History”, McDonald’s Corporation, 2012. http://www.aboutmcdonalds.com/mcd/our_company/mcd_history.html. McDonald’s 2012b, 2011 Annual Report, McDonald’s Corporation, Oak Brook, Illinois. McDonald’s 2012c, “Codes of Conduct”, McDonald’s Corporation, 2012. http://www.aboutmcdonalds.com/mcd/investors/corporate_governance/codes_of_conduct.html. OECD 2011, OECD Guidelines for Multinational Enterprises, OECD Publishing. http://dx.doi.org/10.1787/9789264115415-en. Pollitt, D 2010, “Golden jobs under the McDonald’s arches”, Human Resource Management International Digest, vol. 18, no. 1, 36-38. Vignali, C 2001, “McDonald’s: “Think global, act local” – the marketing mix”, British Food Journal, vol. 23, no. 2, 97-111. Read More