Ethical Leadership: What It Is and Why It Matters

Analyze whether the code of ethics is lacking in the area of corporate social responsibility 

My company of choice is McDonald’s, whose code of ethics deeply emphasizes Corporate Social Responsibility in various areas that include: 

Sustainable Supply Chain: McDonald’s proves its commitment in enhancing a sustainable supply chain by sourcing its products from sustainable operations and verifying sustainability and operations to help reach certain sustainability goals. 

Nutrition and Wellbeing: McDonald’s offers its customers a wide range of menu choices that are aimed at fitting their dietary preferences and needs. 

Environmental sustainability – McDonald’s is continuously invested in innovations that aim at improving the company’s environmental footprint. They have also gone the extra mile of partnering with other organizations to help increase awareness of environmental issues. McDonald’s commitment to the promotion of environmentally responsible practices is seen in the company’s key suppliers and their operations as well ("Codes of Conduct | McDonald's", 2019) . 

Analyze whether the code of ethics is lacking in compliance with the legal mandates. Describe the implications of being non-compliant with the legal mandates 

The McDonald’s code of Ethics is fully compliant with the legal mandates because it is in line with the expected ethical behavior, it provides multiple channels to report unethical behavior, and the system prohibits retaliation in the event of any criminal/unethical behavior reported. The legal mandates require that a company shows commitment to a sustainable supply chain, environmental sustainability, and the health and wellbeing of the community, all which are seen in the McDonald’s CSR program. Chapter 24 of the attached company’s Code of Ethics (COE) looks into the ethical issues in which the company is concerned (McDonald’s, 2008). It is in this chapter that McDonald’s management has outlined the different reporting channels that the employees can use to report any unethical behavior, all in compliance with the legal mandates. 

Had McDonald’s failed to operate in line with the legal mandates of the company’s Code of Ethics, then they would expose themselves up to the harsh and greatly enhanced penalties listed under Chapter 8, coupled with reduced public and investor trust. The consequences are an undesirable effect in the company’s profitability and its longevity as a functioning business in the long run. Other consequences of violating the guidelines outlined in the legal mandates are the loss of future deals with the government, inconsiderable fines, and, in extreme situations, criminal prosecution and civil charge for the company. 

Describe two legal or ethical safeguards your chosen company has in place or could put in place 

The first evident legal ethical safeguard that McDonald’s has put in place is the fact that the company has allowed for multiple reporting channels in case of any ethical violations. This legal safeguard ensures that any employee who knows of a wrongdoing within the company, even if it is perpetrated by the management team, is able to report without any fear of retaliation from the concerned parties. The second legal safeguard of the company is seen in the fact that it employs independent auditors to give a guarantee of the actuality and objectivity of their financial and ethical reports ("Codes of Conduct | McDonald's", 2019) . 

Analyze whether the code of ethics facilitates the development of an ethical culture 

McDonald’s Code of Ethics greatly facilitates the development of an ethical culture in that it has a clearly defined set of rules in place, which give the essential guidelines as far as the company’s expectations and the penalties that result for failure to meet those expectations. The COE also provides for independent auditing and also outlines multiple channels for reporting violations of the code without those reporting risking reprisals or alienations from those they are reporting or having to shine a spotlight on themselves. In this way, it is easy for the employees at McDonald’s to uphold an ethical culture in the company. 

Explain how an employee would raise an ethical concern in this company 

McDonald’s COE has given the necessary provisions for an employee to raise ethical concerns in the company, where the employee could call the ethics line, speak with their manager/supervisor, or contact the Global Compliance Office by fax, phone, mail, or e-mail. 

Describe three resources available to the employees 

An employee at McDonald’s having an ethical concern is provided with a couple of resources through which they can raise their issue. These resources, which are in no particular order, include: 

The business integrity hotline, which allows for anonymous calls within the company. This resource makes it possible for the employee to raise any ethical concerns that they might be having without their identity being revealed. 

The legal department is also committed to upholding the company’s ethical culture, and an employee can get in touch with them through various platforms such as fax, phone, mail, or e-mail. 

The Employee Assistance Programs also aim at giving the employees a chance to uphold ethical practices and report any violations of the same. 

The Business Integrity Hotline 

Discuss which resources you would most likely use 

Out of the different resources availed by McDonald’s, I would most likely use the Business Integrity Hotline because I fell like this is the most convenient way for me to make a report without involving the management in any way, who could be very close with the person I was reporting or even be the party I was complaining about. Also, the Business Integrity Hotline allows for anonymous reporting, and this is the best way for me to alleviate uncomfortable confrontations at work or any fear of reprisal. 

Include the code of ethics you analyzed by copying and pasting the code into a separate document (Attached) 

Develop a policy that instructs the employees how to address unethical conduct observed at work by doing the following: Discuss the factors that an employee would need to consider before deciding to blow the whistle about unethical conduct observed at work .

There are six factors that an employee should consider before they make the decision to blow the whistle about unethical conduct observed at work. These include: 

Make a consideration of their influence and power to bring about change. 

Ask themselves about how deeply they feel the issue that they are contemplating to report. It could turn out that the employee is having a personal agenda, and it is important to establish that this is not the case before blowing the whistle. 

It is also important to weigh the benefits and risks of taking action. The employee could be placing reputations at stake. 

Another factor to consider is the timing of the reporting. Is this an urgent matter or could you take some time and consider if you are doing the right thing? 

Are there alternative solutions? If so, do you have a contingency plan in case you do not achieve the desired outcome? The employee needs to keep in mind before blowing the whistle. 

Describe the process the employee should follow if the employee decided to blow the whistle. 

After the employee has kept the above factors in mind and decided to blow the whistle, there are a couple of steps that they will need to follow, and these are as outlined:

The employee should first approach their immediate manager or supervisor (if they are not involved in the case they are reporting).

They should also take time to discuss the matter with close friends and family members for advice.

If the manager does not give a satisfactory outcome, then the employee could take the matter to the next level. However, they should get in touch with the company’s ethics office to get some insight about the state legislation when it comes to whistleblowing. 

If the company does not have a formal procedure of handling ethics complaints, then the employee could consider going outside of your company chain of command . 

Contact regulators outside of the company. 

Leave the company if you cannot find other alternatives. 

Analyze the advantages and disadvantages of paying whistle-blowers based on current laws (i.e. the False Claims Act, Dodd-Frank Wall Street and Consumer Protection Act, and the Sarbanes-Oxley Act). 

The False Claims Act holds that whistle blowers are entitled to 15-30 percent of the monetary damages recovered by the government from the corporation. The advantage of this Act is that its provisions act as a further push to encourage employees to cooperate with the prosecution and report any unethical issues. The disadvantage of this Act is that it encourages employees to lie due to the financial gain. 

The Dodd-Frank Wall Street Reform and Consumer Protection Act was passed in 2010 after the financial crisis experienced in 2008 financial. The advantage of this Act is that the whistle blower gets paid 10-30 percent of the recovered funds under the SEC. the financial benefit helps increase the amount of tips and cases that are submitted to the SEC. The disadvantage is this Act is that the submitted tips rarely results in the payment of funds. The Act can also have a negative impact the financial growth of the company in question. 

The Sarbanes-Oxley Act places accountability on the publicly traded companies for their practices. The advantage of this Act is that it holds the executives of the publicly traded companies accountable and this helps prevent retaliation against the whistle blowers. The Act also makes it possible for the whistle blowers who have been fired wrongfully to get their jobs back. This Act has a disadvantage in that is does not offer protection to the employees of private companies. Also, the Act has a disadvantage in that it does not provide the whistle blowers with any financial incentive (Logsdon & Wood, 2005) . 

Analyze the impact the U.S. sentencing guidelines might have on an organization .

According to the ne w sentencing guidelines stipulated in the U.S., any organization that is charged with federal crimes should face convictions, and it is required to pay significant fines topped with restitution fees. Under these new guidelines, an organization might be forced to take the initiative of developing more severe standards and requirements, and this could help increase the accountability of the organizations (Logsdon & Wood, 2005) . The guidelines also force the organizations to act in a more ethical manner and also take accountability for the actions of their employees. 

Discuss three culpability factors that are used to determine fines under the U.S. Sentencing Guidelines 

There are several main culpability factors that drive the ethical behavior of organizations. Culpability factors could either be aggravating or mitigating factors that raise or lower the culpability score, which consequently affects the sentencing. A business or an individual usually starts off with a culpability score of 5, which increases or decreases depending on the factor in question. Three of these factors include, but are not limited to the prior history of similar conduct, the role in impeding or obstructing an investigation , and lack of internal controls.

The prior history of similar conduct is an aggravating factor that could increase the culpability score. If the company had previously committed a similar offense, then this is viewed negatively, and it could increase the culpability point’s score by two points . 

The role in impeding or obstructing an investigation is yet another aggravating factor. In a situation where there is absence of cooperation with investigators, then this factor could increase the company’s culpability score by three points (O’Dwyer & Madden, 2006) . 

The third culpability factor to consider is the lack of internal controls. A company that does not have the appropriate controls set up to ensure the protection of the company and the education of employees on misconduct or a general disregard for preventing the behavior falls an easy prey to unethical conduct. 

References  

Codes of Conduct | McDonald's. (2019). Retrieved from https://corporate.mcdonalds.com/corpmcd/investors-relations/codes-of-conduct.html 

O’Dwyer, B., & Madden, G. (2006). Ethical codes of conduct in Irish companies: A survey of code content and enforcement procedures.  Journal of Business Ethics ,  63 (3), 217-236. 

Logsdon, J. M., & Wood, D. J. (2005). Global business citizenship and voluntary codes of ethical conduct.  Journal of Business Ethics ,  59 (1-2), 55-67.