Business Ethics: KFC Ethical Issue

Introduction

According to Mohr (1996), corporate responsibility is supported by the concepts of multidimensional definitions and social marketing (Andreasen, 2001; Sacks, 2000). In the multidimensional definitions concept, the focus is on the major responsibilities expected from companies. These major responsibilities include economic, legal, ethical and philanthropic dimensions (Carroll, 1991; Gilbert, 1996). These responsibilities must be performed in order to benefit not only the company operators but also their employees, customers, the community and the general public in the global market (Hoffman et al, 1994). Kotler (1991) notes that the social marketing concept of corporate responsibility stresses those companies should operate in a way that maintains or enhances the well-being of its customers as well as its society (Farmer & Hogue, 1985; Sims, 1994).

One of the most important factors to be considered by an organisation is to ensure that they always follow ethical standards by providing quality products or services among customers. Ethics is something that is not only acquired and applied in the setting of the society (Ferrell & Fraedrich, 1997; Joseph & Esen, 2003). In every aspect of life, be it on business, community, religion, or politics, ethics is important (Lovell, 2002). In a way, a person’s ethical background is tested in times of pressure and uncertainty. One way of establishing good ethics is by caring for others (Stephen, Harrison & Philip, 1996, Ferrel et al, 2002). Furthermore, this concept is centred on fairness, honesty, and respect (Forsyth, 1992; Clarkson, et al 1998). In the workplace, where people normally interact with one another, ethics is also an important factor (Goodwin, 2000; Wright, Szeto & Lee, 2003), especially in building good working relations with others. And in the organisation, ethics means that the company should always ensure that the stakeholders are provided with quality products and services that adhere to ethical standards (Velasquez, 1998; Smith & Johnson, 1996)

There are many ethical issues that an organisation face and one of the organisations (Velasquez, 2005) which faces major issue is the Kentucky Fried Chicken. Primarily, the main objective of this paper is to provide a discussion about the issue faced by KFC and the ethical problems that the company encounters.

Overview of Kentucky Fried Chicken

Kentucky Fried Chicken is one of the well-known fast food restaurants in the world. The industry was founded by Colonel Sanders. The corporation is based in Louisville, Kentucky and now regarded as the most famous chicken restaurant chain. It can be noted that each day, nearly eight million customers avails the products and foods offered by this fast food chain. KFC has more than 11, 000 branches in more than 80 nations and territories all over the world. An in quite a few US cities, Kentucky Fried Chicken is teaming up with its sister companies which are the A&W and All-American Food.

KFC is among the most popular fast food brands in the world. Started out in the fifties, KFC now boasts of operating, franchising, and serving a worldwide chain of around 11,000 fast food restaurants that prepare, package and sell a menu of ready to eat foods. However, despite of the established brand of KFC Corporation and contrary to its previous achievements; it seems that there is a need for the management to redefine its image and follow some ethical standards (Solomon, 1997) in providing foods. The growing and bustling population of today is obviously different from the population of the previous decades in terms of health and nutritional attitudes and behaviors. People today are more concerned with their health and figures than ever before. Obviously, the reason for this increased awareness is because of the fact that information is everywhere and every reports and research about nutrition seem to link fast foods with the growing number of obesity. Furthermore, there is also a number of emerging diet programs that promote and encourage the public to be figure conscious.

This is a problem for Kentucky Fried Chicken since it has already gained the negative reputation of a food industry which continuously serves unhealthy and greasy food; while their competitors have already made some transformations on their menu reduce fats in their products. In this regard, KFC and other company needs to do something about and shift its positive image back and adhere to the business ethical standards to ensure that their corporate social responsibility are not being compromised (Smith & Thompson, 1991).

Overview of the Business Ethics Issue

Being one of the most popular fast food restaurants and with millions of people patronising the products and foods offered by the company, it is important the company adheres to ethical standards (Lozano, 2000; Velasquez, 2005) specifically in terms of providing healthy foods. However, it has been observed that Kentucky Fried Chicken is using oil which contains Tran’s fatty acids. This kind of oil is noted to increase cholesterol and even increased the risk of having heart disease. As authorities discovered this, the case was being carried over by the consumer group Center for Science in the Public Interest and told the company to use healthier cooking products than the one they are using.

Tran’s fatty acids have been the topic of much debate among nutrition scientists. They are by-products of hydrogenation of liquid vegetable oils in the manufacture of margarines and hydrogenated fats to formulate commercially prepared baked goods and fried foods (Lichtenstein, 1995) like what have been accused to KFC.

Gram for gram, they are believed to be twice as damaging as saturated fat. The Nutrition Action Healthletter, published by the Center for Science in the Public Interest (CSPI), reported in 1997 that in clinical studies Tran’s fat raised people’s blood cholesterol about as much as saturated fat did. Because trans-fatty acids are not listed on food labels, they are invisible to consumers. The CSPI found that the trans-fat content in most chains’ French fries equalled or even exceeded the amount of saturated fat. That means a big order of fries has as much bad fat as a signature burger. With the negative effect of this to the people, KFC has been faced with problems in terms of following business ethics and finding ways to find solutions to these kinds of issue.

The Role of Business Ethics in the Issue

There is no doubt that business ethics plays a more and more important role in modern economy (Schwartz & Gibb, 1999). Business ethics is primarily an applied ethics. It takes ethical concepts and applies them in specific business situations(Cotton, 1998; Davis, 1990). Like political economy, but unlike the philosophy of business, business ethics is a normative discipline (Jones & Pollitt, 1998). It makes specific judgments about right and wrong. It makes claims about what should be done and what aught not to be done (Cowton & Crisp, 1998). It is less concerned with explaining or describing ethical events or analyzing ethical concepts to achieve a deeper understanding of their meaning and justification (Brown, 1990; Webster, 1995). Consequently, there is no clear moral compass to guide leaders through complex dilemmas about what is right or wrong (Shaw & Barry, 1995; Frederick, 1992). Attention to ethics in the workplace sensitizes leaders and staff to how they should act. Perhaps most important, attention to ethics in the workplaces helps ensure that when leaders and managers are struggling in times of crises and confusion, they retain a strong moral compass. However, attention to business ethics provides numerous other benefits as well (Walters et al., 1997, p. 8).

The right thing to do isn't always clear in business (Kirrane, 1990). Thus the company needs some common principles to guide the behaviours. It is much easier for a company with good moral conducts to build its reputation and win respect from all aspects of a society.

Lewis’ (1985) research provides valuable information concerning how contemporary authors and business people define 'business ethics'. A synthesis of definitions reveals a definition emphasizing a majority of opinions about what is ethical for managers. Thus, business ethics is more than just virtue, integrity, or character. It involves the application of one's understanding of what is morally right and truthful at a time of ethical dilemma (Lewis 1985). Many studies have been done on business ethic. DeGeorge (1982, pp. 12-15) divides ethical study into three related phases: normative ethics, descriptive ethics, and meta-ethics.

When it comes to a specific industry, say here Fast food industry the author think that the business ethic is the moral rule that should be obeyed by all the managerial persons and ordinary staffs in dealing with the internal and external affairs with accordance to its operational principle (Boatright, 2000). For a tertiary industry, the building of business ethics is rather important because the leading position and importance of the role of person is rather obvious in the service industry (De George, 1999). For some business ethic issues such as lacking of a sense of responsibility, fanatical money worship, the dilution of profession values and rules (McNair, 1998), delinquency, abuse of power and employing all the methods including illegal ones to earn profits, the improper ways to deal with them or the ignorance of them will definitely lead to business failure and even crimes. In the contrary, the building of a good responsibility and legal system of a hotel, which is representative of business ethic spirits, will effectively solve these problems (Donaldson et al, 2002).

Benefits that ethical consideration can bring

As Cheung (1996, cited in Cheung, 1998) has said, ethics education should be emphasized in order to help managerial persons to think not only beyond self interest in decision-making, but also to consider the interests of society. It has been said that although many of leaders of today have outstanding capabilities and aptitudes (Gamage & Pang, 2003), only those company leader comprising strong values in ethical management are said to ultimately succeed (Butcher, 1997).

It is definitely necessary for a fast food chain like KFC to take ethical considerations into account when they are making decisions .So ethical considerations should doubtlessly be an influence on the decision-making processes. This will be well demonstrated and proved by the major functions of ethical systems of a hotel. In other words, if a hotel wants to exert the following functions, it should give some weight to ethical considerations.

Generally, the successful realization of an organizational objective mainly depends on the degree to which the staffs recognize and accept this goal. The ethics of a hotel represent the fundamental values of all staffs, which are shared by each other. So the building of the fast food chain ethics and emphasise on it will bring in good guidance which is an important precondition to improve the management of a fast food industry. Because of the unique nature of the industry, there are more opportunities than in any other industry when ethics becomes an issue at stake (Stevens and Fleckenstein, 1999).

A fast food chain industry with good business ethics can usually arouse a sense of responsibility and belong among its staffs and even the general publics that may be very conducive to the coordination and realization of company goals. There are two ways to motivate staffs---material motivation and spiritual motivations. So the pure material motivations will ultimately increase the expenditure. If a company wants to motivate staff more, it has to pay more. What is worse, if you lower down the incentives, it will result in unsatisfaction and resentment. Take ethical issues in the decision in all walks of a company will be helpful to the working atmosphere. The building and accumulation of a hotel ethics will be embodied in the details and in other words, every decision. Some research results show that negative beliefs lead to negative attitudes and negative behaviours (Challenger, Margaret Kathleen, 1995).

Ethical Stance

The ethical stance that can be adopted by the company is perhaps the one pertaining to the assurance of providing healthy products by using alternative oils which do not contains Tran’s fatty acids. The company’s ethical stance should not be based on short term goals. Kentucky Fried Chicken may have said that they are not using these kinds of oils to adhere to ethical standards of protecting the health of their customers but these efforts do not directly address the problem. The company is still encountering negative issues brought about by its negligent behaviour.

The traditional ethical stance of the company is to prevent actual problems on health and nutrition. However, there is an obvious lack for long term plans that will also maintain these developments even in years to come. Kentucky Fried Chicken should then realize that the company does not only have a responsibility to their current customers but to future generations as well. The scope of responsibility as cited in this discussion should include the provision of respect for others, honest and pure intentions as well as protection from harm (Hill, 2003). The management of the company should be responsible (Michalos, 1995) in maintaining that healthy and nutritional foods which future generations will need as well so as to survive. According to Martin Golding, the moral community also includes future generations, implying that though this generation is still nonexistent, people today should act for their benefit (Partridge, 1981).

According to Stapledon (1996), corporate governance under a good ethical management can be defined as a system that is used in order to direct and control companies. As a matter of fact, this idea applies to all business sectors all throughout the world such as the banking institutions, financial corporations and other types of businesses such as the retailing industry. In particular, corporate governance refers to the examination of the control of a company as utilized by its directors. In accordance to theory, the directors of public companies are held responsible for their action by their shareholders (Davies, 1999). On the other hand, the authority of the shareholders to influence the behavior of the company directors is limited in practice and is rarely exercised. This then provides directors of considerable power to take action as they see fit. However, this is not always the case as it appears to be relatively different form that of the government in which the action of the officials is slightly restrained by certain actions of the people it governs.

Good ethical management through a societal marketing approach, as a term, has come to imply good, in the non-moral as well as the moral sense. In its moral sense good ethical management has come to be seen as promoting an ethical climate that is both morally appropriate in itself, and consequentially appropriate in that ethical behavior in business is reflected in desirable commercial outcomes (Francis, 2000). Thus, the links here are with due diligence, directors' duties, and the general tightening of corporate responsibility.

The company’s management style should set a proper example of good intent, and provide for those lower in corporate hierarchies the clear message that it is “do as I do” as well as “do as I say” (Francis, 2000). Middle and lower management find it hard to be ethical when it seems that the top of the corporate hierarchy have no commitment. The message of sincerity will always filter down, and no amount of deception will foster the view that a board is ethical when it plainly is not.

Additionally, the commitment to ethical corporate governance by a board will enhance the prospects of an ethical infrastructure within the organization. That ethical infrastructure is a manifestation of the commitment, a means of preventing and resolving ethical problems, and an impressive demonstration of sincerity.

Reflective Essay

One of the responsibilities of an organisation is to make sure that all their actions and business operations adhere to the ethical standards provided by the law. Other than strategies for marketing and management, businesses have considered other elements that play significant roles towards success. One of these important elements is ethics. As business requires social interaction and dealings, the strong recognition of what is morally right or wrong is then essential. In this reflective discussion, various ethical theories will be described. The main purpose of this paper is to identify the role of each theory to business and how these theories can be helpful to modern operations. In my own perspective, I can say that being a company that provide foods, KFC has ethical responsibility to ensure that what they provide to the market are healthy foods.

With the issue faced by KFC, I can say that the company should be able to use an ethical management strategy that will uplift the image of the company. In this regard, the company may use societal marketing strategy. Societal marketing is that branch of marketing concerned both with the uses of marketing knowledge, concepts, and techniques to enhance social ends as well as with the social consequences of marketing policies, decisions, and actions. The purview of social marketing is, therefore, broader than that of managerial marketing. It refers to the study of markets and marketing activities within a total social system. Societal marketing emerged because of the convolution of several factors and forces in the marketing environment. These include affluence, technology, communications media, better informed citizens, increased educational opportunities, and social value changes. The latter can be considered as one of the most powerful single influences.

The concept of societal marketing adheres to the business ethics which states that the task of an organisation is to identify the needs, wants and interest of its audience and to provide the desired satisfactions more effectively than its rivals in such a manner that preserves or improves the well-being of both the consumers and the society especially in terms of health nutrition. In addition, such marketing approach calls upon marketers to give emphasis to three important aspects of their marketing policies. These include company profits, consumer wants and satisfaction and public interest.

I can say that the inclusion of the social responsibility concept to the business sector is not only necessary to broaden the companies’ involvement to social matters. The application of social responsibility to organizations is in fact a main contributory factor to their profitability and to ensure that they always follow ethical matters while doing their business (Suderman, 1999). This is important because the profitability of a business is also related on their reputation and image on the market.

A study has been conducted with regards to the significance of social responsibility to profitability (Mohr & Webb, 2001). Although, further studies are still necessary in order to analyze the correlation of these factors, the findings of Mohr and Webb showed that social responsibility plays a significant role in consumer appeal. The perceptions of consumers however, tends to vary with regards to this aspect. Nonetheless, this stresses the importance of social responsibility not only on benefiting the stakeholders but also in achieving the goals of the companies towards growth and profitability.

At present, I can say that the management of KFC have already realized the growing importance of social responsibility and that integrating this concept cannot be sufficiently supported by the optimization of shareholder value. Furthermore, I can also say that having a business organisation that considers ethical management are business which can easily gain respect and good reputation from the customers. Contrary to the belief that social responsibility undermines businesses’ profitability goal, this actually help in generating profit through customer loyalty and good company image. For Kentucky Fried Chicken, the company must be able to ensure that the products that they offer are healthy and nutritional, so as to ensure also that their gain customer trust, loyalty and respect.

This report has been able to determine the importance of adhering to business ethics and the importance of having a business that adheres to ethical standards. I can say that a company must be able to follow ethical standards to ensure that what they do will always have a positive impact to the society, environment and other external aspects of business. Because of this report, I have been able to realize the significance of business ethics in having a profitable and socially responsible company. The evidences that have been discussed in this report which proved the importance of business ethics will be useful for my future endeavour as an entrepreneur. I can say that this report has made me determined the things that I must do when I have my own business in the future, specifically in terms of decision making process.

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