CSR: Examination of McDonald's Performance - Iloka Benneth Chiemelie

Introduction

Numerous definitions exist for illustrating what corporate social responsibility (CSR) is all about. This paper will start with the definition presented by Morrison, who defined the concept of “social responsibility” as encompassing related social issues such as human rights, human development and environmental protection issues. The author went from “social responsibility” to “corporate social responsibility” by stating that the social issues mentions where previously seen as a public policy matters which were expected to be handled by the government. However, this basic view has been replaced by new concepts which states that both the organization and its employees have a role to play in the society they undertake their business operations in (Morrison 2002).

A broad definition was conceptualized by the European Commission’s Green Paper, which defined CRS as a concept whereby an organization voluntarily decides to enhance the growth of the society and provide a cleaner environment (European Commission Green Paper 2001).

Other definition brings to light the importance of other stakeholders outside the shareholders by defining CSR as: the acknowledgement by organizations to be accountable not only to their financial performance (Lom 2005), but also to the impact of their activities on the society in which they operate in.

In recent years, business ethics has been associated with CSR, but the fact is that they are two contrasting concepts. For instance, there have always been organizations contributing to the general development of the society by either building hospitals and schools, or providing training and employment. As a definition, business ethics deals the functionality and behaviour of a company. It is used to lay down guiding principles for the conduct of directors and employees, which are influenced by the values and ethical standards that are inherit in the organization’s culture (Chartered Institute of Personnel and Development 2002). However, CSR on the other hand are underlying desires of an organization to contribute towards the growth and development of the society. Business ethics serves as the background or foundation from which the CSR activities or programs are designed and managed.

From the above definitions, it can be seen that the concept of CSR is geared towards ensuring environmental sustainability, in which the needs of the present generation will be meet without compromising the ability of the future generation to meet their own needs.

 Introducing McDonald’s

In 1954, Ray Kroc, a milk-shake salesman, discovered an opportunity for profitability in this market and negotiated to go into franchise deals with McDonald’s; by taking the exclusive right to franchise McDonald’s in the entire USA. Mr Kroc made an offer of franchise at a price value of $950, during a period where the ice-cream and restaurant franchise where sold at a market value of $50,000. With the deal concluded, Mr Kroc made a service fee of 1.9 per cent for every sale for himself, plus another royalty fee of 0.5 per cent for McDonald’s. in 1961, McDonald’s was sold out for $2.7 million. This sale opened the gate for internationalization of the company.

The first international venture was established in Canada in 1967. Shortly after that, the license for McDonald’s was purchase by George Cohon to operate in Eastern parts of Canada, with the first restaurant opened in 1968. Cohon proceeded to open 640 outlets all over Canada, and this made McDonald’s Canada more lucrative than any other McDonald’s franchise outside of the US.

Claudio (2001) attributes McDonald’s success to the company adoption of franchising. Through franchising, the corporate value has been transferred to both local and international markets, making McDonald’s the success story of franchising across the world. Currently, the company has over 20,000 restaurants in more than 100 countries, and about 80 per cent of these restaurants are franchise based.

Examining the CSR activities in McDonald’s

The analysis of McDonald’s corporate social responsibility performance is gathered from CorporateRegister.com (2008). As an introduction, the company was applauded by Corporate Register for its tremendous efforts in contributing towards the growth and development of the society they operate in. The details of the company’s CSR performance as are discussed below.

Employment experience

Employee training and development – from 2004 to 2007, a review of McDonald’s employees’ perception was undertaken to understand the influence of such investments on the growth and development of the employees. The finding is that on average, 80% of employees think that the training they received has been useful in developing their personal skills and improving their overall performance in the organization (CorporateRegister.com 2008). From the analysis presented, it can be seen that the company has been in developing the society by developing its workforce and citizens. Thus, it can be stated that their CSR activities are worthwhile in relation to the developing of human capital. However, it can also be argued that the company might have been investing heavily in training its workforce for its own personal benefits. This is because; the training programs will equip the workforce with necessary skill and enhance their productivity – which will directly impact on the company positively.

Community development

Another finding is that McDonald’s has been raising millions of dollars for charity activities and supporting the less privileged in the communities they operate in. since 2004, the company has been investing an excess of US4 5 million per annum on charity activities till date. The capital investment on its market is in excess of US$ 1.1 billion (CorporateRegister.com 2008). Such a tremendous great deal of effort in advancement the social welfare of the less privileged in the community is something that is commendable. The company has clearly shown their commitment towards helping the people in the society and improving lives. In terms of capital investment, the company has also contributed tremendously to the capital growth of its markets by investing heavily. Such an investment has also improved the livelihood of people as it offers new employment opportunities – directly supporting lives in the society as the employees make use of the money earned to sustain their dependent families. However, the issue of capital investment should not really be considered as a social responsibility in my own view. This is because, the business of McDonald’s is to maximize profit and increase market share – thus, it is not surprising to see the company investing in order to meet these set goals, as it can only be achieved through proper investments.

Environment responsibility

The areas highlighted in terms of environmental responsibility is the company’s reduction in its Kilowatt consumption of electrical energy and adopting a more recyclable and simple packaging (CorporateRegister.com 2008). In effect, it is understood that such environmental responsibilities have benefits for both the communities and the company itself. For the community, I will reduce the level of CO2 gas emission and also reduce greenhouse effects as well as reduction of the impact on global warming. These new strategies are also beneficial to the company in the sense that reduction in energy consumption and packaging materials will effectively reduce the production cost and directly increase the profitability of the company. Subsequently, it can be seen that there activities can be argued as self-cantered, with the main objective of reducing costs in order to maximize their profit.

From the analysis above, it is clear that the subject of corporate social responsibility is very complicated in terms of understanding activities that really represent social responsibility from the company. This is because, most of the activities undertaken by the company which people might perceive as a sign of social responsibility can in reality be programs designed by the company to enhance its productivity, reduce production cost and increase profitability. This was illustrated in the case of McDonald’s above, whereby the company was found to have invested numerous resources (both capital and human) on programs that seems to be designed towards improving the society they operate in, but can actually be programmed by the company to enhance its own system.

However, it must be stated that irrespective of the criticism on what constitutes social responsibility and how it can be measured in relation to organizational goals, it should not be misunderstood that the activities presented above in relation to CSR in McDonald’s are actually worthwhile in the sense that they are designed to improve social welfare and these activities have been successful in doing so as illustrated by the number of employees who agree to that statement.

Conclusion

The issue of corporate social responsibility is becoming a common debate in modern literature. This is because, critiques argues that it is expected of the organization to return some values to the society they operate in as these societies are the building block of their economic and business growth. Thus, researches presented a definition of corporate social responsibility as “voluntarily” donation of some parts of the company’s resources towards ensuring sustainability in the community. The word “voluntary” presents complicating images in the sense that the company doesn’t have to be forced to do it, or follow set guidelines. These complicating images now means that it is virtually impossible to measure the social responsibility performance of corporations as some of their activities which might seem as a social responsibility can actually be designed to ensure productivity in the company and not for the benefit of the community in mind. As such, it is recommended that there should be set guidelines and measurement approaches to understand what constitutes social responsibility in organizations and measure the performance of each organization in relation to meeting set social goals.

However, it must be stated that while the activities might be beneficial to the organization’s growth, the focus should be on how it impacts on the society. If the impact is beneficial for the society and the organization, then it should be accepted as social responsibility – because, corporations need to make more profit in order to help the community at large. In conclusion, corporate social responsibility has complicated measurement approaches, but the focus should be that it should be designed to improve the community at large.

REFERENCES

Chartered Institute of Personnel and Development. 2002, ‘‘Corporate social responsibility and HR’s role’’, Perspectives, Autumn, available at: www.cipd.co.uk

Claudio, V. 2001, “McDonald’s: Think global, act local – the marketing mix.” British Food Journal, Vol. 103 No. 2, pp. 97.111.

CorporateRegister.com. 2008, “McDonald's Corporate Social Responsibility - 2008 CR Report.” Available at:http://www.corporateregister.com/a10723/mcglob08-csr-us.pdf [Accessed on: 03/04/2013].

European Commission Green Paper. 2001, ‘‘Promoting a European framework for corporate social responsibility’’, COM (2001) 366, available at: ec.europa.eu/enterprise/csr/index.htm.

Lom, A. 2005, ‘‘Balancing act’’, The Daily Telegraph, 8 December.

Morrison, J. 2002, The International Business Environment, Palgrave, New York, NY.