ETHICS IS IMPORTANT FOR EVERY COMPANY TO RUN THEIR BUSINESS

McDonald's Business Ethics

Bayu Faranandi Angesti

29115614

Abstract
When it comes to determining a set of rules, guidelines or principles to follow in the business industry,
many will agree that it is difficult for everybody to agree on one due to the complexities of dealing with
human nature. Therefore, to a certain extent, the field of business ethics tries to come up with solutions to
handle problems that arise within the business environment. On the contrary belief, one should not be
confused with the meaning of morality and ethical theory. Morality has got to do with principles or rules
that are used by people to decide between wrong and right (Jennings, 2008). Meanwhile, ethical theory
tends to provide guidelines that justify an action to be right or wrong when settling human conflicts
(Jennings, 2008). This paper is going to discuss about McDonald's business ethics. I have chosen
McDonalds as my business due to the fact that it is an extremely popular international franchise,
therefore it is easy to study, in addition to the fact that there have been a vast number of issues with the
company throughout their existence as a business.

1. INTRODUCTION

Ethics define moral guidelines that govern good behavior. To behave ethically would be to behave
morally correct. Within a business, this would involve making decisions based on the morality of the
result. Business ethics is a form of applied ethics or professional ethics that examine ethical principles and
moral or ethical problems that arise in a business environment. It applies to all aspects of business
conduct and is relevant to the conduct of individuals and entire organizations. Business leaders make
ethically significant decisions every single day, and they always do so according to some theory of ethical
behavior whether they think of it that way or not. A basic understanding of the most important ethical
theories can help a business owner think clearly about ethical problems and make well-informed
decisions. Strong believers in laissez-faire capitalism often argue that business decisions should be made
solely on the basis of self-interest to the extent allowed by the law. In most personal interactions, this type
of behavior would be seen as unethical, but champions of free market economics argue that self-interested
behavior produces wealth and creates new jobs. Because a business leader has no way of knowing which
altruistic actions would most benefit society as a whole, the best way he can contribute to society is by
doing whatever benefits his own business. This theory of business ethics could be used to justify nearly
any business decision. However, enlightened self-interest is a variation of the theory based on the idea
that self-interest can lead to the same decisions as altruism in some circumstances. For instance, a
business owner who implements a sustainability program may save money by reducing expenses.

Duty to Principles or People

A pure free market economy is a hypothetical concept, as real markets are always subject to
regulations and restrictions. Most business ethics theorists accept the idea that a business leader may have
some ethical obligations beyond self-interest. However, much debate exists about who or what the
business leader might be obligated to. If a company has investors or stockholders, the business owner has
a legal duty to act in their financial interest. Some would argue that he also has an ethical duty to operate
in the best interests of the community, the environment, his employees or other stakeholders. Some
business leaders consider themselves to have a personal duty to uphold moral principles they believe in,
such as religious teachings

Compassion and Consequence

Theories of ethics based on abstract moral principles have been criticized by some thinkers for
neglecting the question of human compassion. No business based solely on compassion could succeed
financially, but that doesn't mean compassion should never be a factor in ethical decision-making. A
doctor who sees a needy patient without charging for services or a business owner who hires a troubled
teenager to give him a second chance could be seen as acting with compassion. Another way to look at
ethical problems is to think about the potential consequences of a particular course of action. Business
practices that create environmental problems might bring an immediate benefit for stockholders, but with
serious long-term consequences.

Virtue and Vice

Virtue ethics is an ancient ethical theory that has made a comeback in recent years. A practitioner
of virtue ethics tries to act so as to embody certain virtues such as honesty or courage, while avoiding
vices such as dishonesty or cowardice. In real-world decision-making, no ethical theory is sufficient for
all situations. The best approach is to examine each situation according to all the major ethical theories.
For instance, before making a major decision, a business leader could ask himself several questions about
his planned course of action. Is it in the best interests of the company? Does it fulfill the duty to act in the
interests of investors or stockholders? What is the likely impact on the community, employees and the
environment? Any decision made after thoughtfully considering these questions is likely to be an ethical
one.

II. Case Description

McDonalds being the world's largest hamburger chain fast food restaurant owes the environment
a lot in terms of its Corporate Social Responsibility. The environment in this case implies its customers,
business partners as well as the public at large. The firm has played a large role in the past towards
conserving the environment. In addition, McDonalds continues to develop a sustainable supply chain for
the benefit of its suppliers and distributors thus ensuring that there is continuous flow of business.
McDonalds CSR revolves around sustainability. This is because the firm identifies that through
sustainability, it will be able to get constant products that it uses to make the hamburgers as well as other
fast food products. Sustainability also helps McDonalds in the sense that it will be able to sustain its
distribution networks, thus benefiting a whole chain of distributors and suppliers.

The Customers are the external stakeholders, due to the fact that they arent employed amongst
the franchise, but they still buy their products, and may involve themselves in company events. Even if
McDonalds isnt a daily usage in their life, they are still a stakeholder. The Customers interests revolve
around what McDonalds has to offer them in terms of product (eg: food that caters to their needs). The
Customers are what keep McDonalds functioning, as they provide them with money to help the business
operate and expand. The Suppliers are also internal stakeholders, as they will work alongside McDonalds
and supply various ingredients and essential products for the McDonalds stores. If McDonalds didnt
have a supplier, they wouldnt have any products for their customers. Suppliers interests with the
company revolve around the quantity of the orders and purchases the McDonalds franchise requests from
them. The larger and more frequent the request, the more money they earn. Trade unions are external
stakeholders as they work outside the business. Trade unions are people who are in charge of assuring that
the working conditions, salary and working process are all suitable for the employees of the business.
Trade Unions have an interest in McDonalds as some of their staff from each franchise will pay to be a
part of their union; therefore, they earn lots of money. The Government is involved with McDonalds, as
they are external stakeholders that hold an interest and influence on McDonalds. This is because
McDonalds offer lots of opportunities for the unemployed to get a job, due to the vast number of global
franchises. The Government also pass new laws that could affect the way McDonalds functions. If
McDonalds were not intact with the law, the business could suffer extreme consequences. The
Government will be involved in any major decisions McDonalds needs permission for, such as building
another franchise. Communities are external stakeholders, and are widely involved with the company, as
they are interested when stores are planning to build near them, and what jobs they can offer within the
company.

Situation Analysis

In each and every country, McDonalds has thrives to develop a menu that fits the tastes and
culture of the people in those countries. This has made McDonalds unique in its delivery of fine and
quality fast food products. Its CSR strategies have helped it to identify the needs of the people within
these destinations and develop fast food solutions that best fits their needs. McDonalds is thus mindful of
its customers' diverse needs.

In addition, McDonalds strives to promote healthy diets that benefit its customer. Research
reveals that fast food products are not good for the health, especially for the heart as well as the liver.
However, McDonalds disputes this by developing and making fast food products that are free from
cholesterol, fat that causes cardiac diseases.

The firm has also won several awards in environment conservation and employment sensitivity.
McDonalds has no gender inequality whilst employing its staff from the regions where it has expanded.
The company hopes to have trained and retrained all its employees in their respective fields by the end of
2012 . According to an employee at the fast food restaurant in Europe, McDonalds is perhaps the best
employer and always listens to the needs and demands of the staff; "the employment environment is one
to die for."

McDonald's core values are all aimed at promoting the Corporate Social Responsibility of the
firm. This is achieved through giving value to the customers, the supply chain as well as the other
business partners with whom McDonalds does business. McDonalds indeed acknowledges the fact that its
customers are the reason behind its success and existence. Therefore, the customers are very much valued
within the company. The company thus strives to create a warm and welcoming environment for its
customers.
 Secondly, McDonalds values its employees and states that it is committed towards the career
growth and development of its employees through a comprehensive training plan. This is perhaps the
greatest CSR that McDonalds has. McDonalds believes in empowering and valuing the employees for
increased commitment from them and their continued success.

McDonalds also maintains high business ethics and thus conducts its business with high ethical
standards. The company conducts its business with high integrity, honesty and fairness for all its
customers and suppliers. McDonalds also values the community in which it operates and strives to give
back to the society through sponsoring various community initiatives such as education. McDonalds
believes in making the world a better place. McDonalds being a public company values doing profitable
business with all its stakeholders. The company therefore lays much emphasis on profitable business
while enforcing its business ethics across all its subsidiaries. This is achieved through maintaining high
ethical standards.

McDonalds always strives to excel in whatever field it undertakes to operate in. constant
improvement is achieved within the company through continued training and innovation. Thus,
McDonalds has grown to become the world's largest fast food chain of restaurants through its
commitment towards achieving its CSR as well as maintaining good business ethics. According to
Richardson , McDonalds has achieved much success through its good will initiatives worldwide, hence
many customers identify with the positive side of the company.

Impact on the stakeholders

The Customers will both be positively and negatively affected. Physically and emotionally, they
will be positively affected by these changes provided by the McDonalds corporate. They will be
consuming healthier, more sanitary McDonald products; therefore both increasing their heart rate, and
lowering their blood pressure, and in general, improving their health by a significant amount. And
emotionally, the amount of mood swings and other personality disorders will decrease, as their body will
be generating healthy, natural ingredients. However, in spite of the fact that the price of McDonalds
products may rise; these decisions will significantly increase the overall health of their customers.
Therefore, their products would be worth paying for, and it would be a wise company decision to change
their product ingredients, in order for this to happen.

In a negative aspect, McDonalds will be purchasing their ingredients from a different supplying
company; which will most likely be a more expensive than the previous, as a supplying company that
specializes in offering more natural and healthy products, will mean that it will be more expensive in
comparison to a less healthy, and less natural supplying company. The higher the market the meat, the
higher the price, in comparison to cheap meat, which has a less of a demand in the food market. This will
lead to the next negatively affected Stakeholder; the Suppliers. The original Suppliers of McDonalds will
lose a large amount of company investment, due to the fact that McDonalds will be forced to drop their
supplies, in order to gain a more healthy recognition, and provide better food for their consumers. This
means that these Suppliers will lose a vast amount of their income, and will have to seek another
company that are in need of their supplies. It is possible the supplying company will go bankrupt, as
McDonalds is an incredibly large international corporation, and a majority of the company income will
come directly from McDonalds. Although this would be a massive disadvantage for McDonalds original
supplying company, it would be a necessary change, otherwise McDonalds will carry their negative and
unhealthy reputation, and their customer demographic will decrease.

Trade Unions will be another Stakeholder who will be negatively affected, as the staff will most
likely stop paying the Trade Unions to provide them assistance, due to the fact that McDonalds will be
having an income of healthier ingredients, and will raise the employees salaries with their large income
from their customers. Therefore, the Trade Unions will be losing their customers and losing a lot of their
income. The Governments position as a Stakeholder will be unlikely to be impacted significantly. They
will remain an influence on McDonalds, and most likely earn an even larger income from their franchises
due to their customer increase with their new corporate changes. This will also give them an opportunity
to help employ people without jobs, who are satisfied with McDonalds (possibly) new employee wages.
This also links into Community Stakeholders, who are seeking jobs and would like to work in
McDonalds, or will be satisfied with their franchise in their community; particularly with these new
changes.

Employment experience

McDonalds has a policy within all its subsidiaries and fast food restaurants worldwide of giving
its employees a priority over all other things. The firm indeed identifies that employees are core in the
company's success. McDonalds has in the past devised training programs aimed at employee
development. Moreover, the firm empowers its employees to take up new challenges in the fast food
market.

Furthermore, McDonalds supports human rights which forms part of it global business conduct.
Respect to life and the preservation of human dignity has enabled the company to excel in its core
relationship with its employees as well as customers and business partners. This has enabled McDonalds
to grow through its appreciation of human life and dignity, an area where many other companies have
failed.

Employee's rights are a priority at McDonalds. McDonalds has developed a strategy that allows
the employees relative freedom in working with the firm. There are three aspects of the employee priority
virtues that McDonalds has identifies namely respect, commitment growth and talent enhancement .
McDonalds has created a culture where every employee is respected and valued globally. In addition,
McDonalds is committed towards realizing quality employees through comprehensive training programs
and staff development strategies.

McDonalds identifies young talented graduates and employees then as graduate trainees thus
ensuring that it acquires the right caliber of future employees. These young graduates are drawn from
various hospitality colleges and universities across the globe. According to Mullerat and Brennan,
McDonalds always strives to deliver quality employee training to its employees. Moreover, its
employment policy is not biased against one kind of gender. There is an open approach towards those
employed at McDonalds.

Every employee is thus a priority at McDonalds since the firm realized that its workforce holds
the key to its valued success. This CSR involving valuing and respecting employees has enabled
McDonalds to improve its service provision to its clientele.
III. Conclusion

McDonalds has been able to achieve high success through its identification of the elements that
make it succeed most. These elements include its employees, customers and the suppliers. McDonalds
values its employees and has various training programs to support their bid towards an excellent service
provision. The company draws its success mostly from its employees. McDonalds also hires quality and
highly valuable employee's thus ensuring continued success for the company.

Social Implications refer to those actions of a business that have an effect on society. The areas to explore
are the following:

Ethics in finance

In financial dealing and payments, there are many rules and regulations that are to be required.
An exemplar unethical action involving finance would be bribery, which is a form of corruption,
involving one subject using money to gain an unfair advantage over others. Similar to bribery, is a term
called Insider Trading, which refers to the illegal use of quality information in dealing on a stock
exchange. This is where a person trades confidential, quality information from their company with
another person, in exchange for money.

Another issue would be executive pay, where there is excessive pay for top executives. However,
in US companies, they are now required to deliver an annual report for a single figure for the total pay of
their executives, including salary, perks and pensions. This is a response to a public concern about pay
rises and high-profile cases of failed executives getting payoffs of up to US$100 million, and others
having stock options backdated to give them a share of earlier capital gains. This will provide information
to shareholders on the amount their top executives are earning. Lobbying is a term. The intention is to
encourage politicians to adopt a particular cause or issue, in order to benefit it. Lobbying politicians can
be a form of corruption.

A McDonalds executive in Hong Kong has figured out that the best way to ensure transparent
supply chain is to have food suppliers pay him money in order for the fast food company to use their food
products. Joseph Lau was the companys managing director, and was arrested by Hong Kong Independent
Commission Against Corruption due to this act of bribery, which an example of how McDonalds has
been unethical in terms of financial situations. Improving this would require taking action on employees
who use illegal methods such as bribery.

Ethics in human resource management

This law is to ensure that there is no discrimination involved when a job is advertised, Work
surveillance is an appropriate action to a certain extent. It is important to ensure that all staff and
employees treat one another with equal respect and quality behavior, however, there is only an extent to
how far it can go until it is inappropriate for an employee to have their behavior measured. Two
McDonalds employees in Queens are suing the company due to its consistent failure to protect them
from a hostile environment created by their supervisor, Michael Lauria. According to the victims, Lauria
had given them racist comments and sexually harassed them on a numerous occasions.
 A McDonalds representative claimed "At McDonalds, we respect and value everyone. We have
a have strict policy prohibiting harassment and discrimination of any kind in our restaurants. We strongly
deny the allegations in the suit and will defend vigorously. For the company to improve their ethical
behavior in terms of Human Resource management, a solution would be to expand their team, in order to
ensure that each employee is guaranteed a safe and comfortable working environment, and no employee
will go without.

Ethics in production

Within the production industry, one ethical requirement would be to minimize the amount of
animal experimental testing to as low of a point as possible. An international issue that is currently being
faced, is how animals are a common use of help for the development of products; ranging from cleaning
products to new cancer drugs. However, the number of live experiments in Britain has halved in the last
30 years.

The British law states that any new drug must be tested on a t least two different specifies of live
mammal. One must be a large non-rodent. UK regulations are considered some of the most rigorous in the
world. The animals act in 1987 insists that no animal experiments should be conducted if there is a
realistic alternative. Using animals can be extremely unethical, as it can cause them a vast amount of
physical, emotional or mental distress, and animals are completely unable to give their ethical consent to
the experimenters.

Planned Obsolescence is a manufacturing decision by a company to make a consumer/customer

product in such development that it loses its purpose or quality within a small period of time. This will
naturally stimulate a constant demand for the product, as people will need to buy and re-buy it in a
consistent manner. This is extremely unethical for the production department, as it means they will be
earning constant, extremely large incomes because of this product; however, the consumers will be losing
money on a regular basis, by having to buy the product time and time again.

A russian customer sued and won against the McDonalds corporate, where he had sued them for
suffering severe poisoning after eating a big mac. In addition to this, another customer in 2011 had sued
and won against McDonalds after biting into a stone in his big mag burger, and breaking his tooth. The
court found the company guilty of negligence in allowing a stone to pass undetected into the mans
burger. McDonalds will need to improve their production system and have regular health checkups in
order to ensure this does not repeat.

Ethics in sales and marketing

Spamming is a term used to define consistent messaging to a large amount of people, in order to
promote a particular product, event or situation. Email spamming is a combination of email spoofing, and
spamming is when a person has consistent messages coming into their email inbox, due to the fact a
salesman or marketer is trying to generate their sales by consistently promoting it. Although this can be
beneficial for the company, as they are raising awareness for their product(s), it is unethical as it irritates
the people being spammed, particularly if the spam was not wanted.
 Spoofing refers to emails that appear to have originated from one subject, when they were
actually composed by another. Individuals sending junk email or spam typically want the email to appear
as though it is from a real address, which may not really exist. This way, the email cannot be traced back
to the originator.

Raising their own status is a business strategy, where the company design false recommendations
or blogs onto a website that encourages people to look into their company, or their products. These
recommendations either come from paid individuals employed by marketing companies, or are employees
of the business pretending to be satisfied customers. This technique gains recognition from viewers, and
creates a fictional, positive reputation for the company itself. Again, this is unethical, as it means that
these advertisements are in fact lying to the customers, and promoting false situations.

Ethics in intellectual property

Intellectual property is a law that allows people to own their creative work, in the same sense that
a person can own physical property. This law encourages a people to act creatively and develop their
innovation skills, to further advantage everyone, and the owner of the property can control and be
rewarded for its use.

The four main types of IP are the following:

-Patents for inventions- new and improved products and processes that have industrial
application.

-Trade marks for brand identity- of goods and services which establish the distinctions of
different traders.

-Designs for product appearance- a products physical appearance is created by a person with a
particular skill; this is an asset that can be protected by copyright.

-Copyright for material- literary and artistic content, music, films, sound recordings and
broadcasts, including software's and multimedia.

This means that singulars or business organizations that have invested in their time, resources and
talents to create something useful or enjoyable for others, have rights to protect it from being stolen. This
applies to computer software, in addition to music records.
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