The Osi Group Scandal

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In an ethical viewpoint, despite violations in legal aspects, the OSI Group subsidiary in China has also go against some ethical philosophies that commonly exist in the civil society as well as the business environment. In a consequential based moral perspective, the OSI Group seems to have gone against the Utilitarianism. They may have thought that using the rotten meat to do their business would decrease the cost and increase the revenue of the company which mainly served as the best interest of the shareholders as well as the management. However, from a neutral standpoint, it had affected many parties related to the company which will be elaborated below, especially on end-buyers which were the major stakeholders of this company. Even from a non-consequential duty-based philosophy, the OSI Group went against the Kantianism because the act of using rotten meat was a wrongdoing in the first place.

The relevant stakeholders that were largely affected by this case would be the consumers, suppliers, food industries, regulators, government, and foreign meat suppliers. End buyers might suffer from symptoms of food poisoning because of eating expired food. They might feel cramps in the stomach, dizziness, as well as diarrhea. As for the suppliers, in fact, they have supplied expired meat for which they might also have violated some of the food safety regulations mentioned above although indirectly. Besides, they would be wrongly accused of distributing expired food which they knew nothing about as a consequence of the act done by the Shanghai Husi. Consequently, as a matter of time, the food industries will have to face the criticisms thrown by the consumers and society as a result of the carelessness in the food-quality screening processes and therefore lose the faith from the consumers in this industry. Whereas for the regulators and government, they may face a very deep embarrassment as a result of not being able to strictly get their job done in regulating food safety matters. Unexpectedly, the foreign meat suppliers reported to have been affected by the food safety scandal especially that had ties with the OSI Group. This referred to McDonald’s branches around the Asian countries such as Hong Kong and Japan. This was because twenty percent of their resources were supplied by Husi[1]. Therefore, the sales and profit in the Japan McDonald’s branches had dramatically decreased.

As for the OSI Group itself, as indicated in the article, the OSI Group earned a revenue of US$6.1 billion as of October, 2014. According to one of the online sources[2], as of July 2015, the OSI Group had suffered a loss of nearly one billion dollars since the scandal which was a decline of approximately 16.4% in just 9 months. However, not many financial numbers were publicly revealed because the OSI Group was a privately-held company. So far, that was the only financial number known. However, we may analyze the financial data on the comparable food supplier that suffered pervasive impacts of this scandal. From the condensed consolidated financial statements of McDonald’s corporation, we can see the decreasing financial performance through decline of comparable sales of 8.3%[3] in APMEA countries as of March 31, 2015 since December 31, 2014 (see Exhibit 1). This was assumed to be the negative impact from the scandal in China.

Generating Alternatives

After addressing the key issues and analyzing the impacts as well as the financial performance of the organizations affected, it is really crucial in this state for the management to generate alternatives and take some actions. In this written report, there will be some alternatives proposed by the writers.

Alternative A

The first alternative available is to apply the whistleblowing policy in the subsidiary companies, especially in China. This is, in fact, enforcing the corporate governance in terms of the organizational policy. It is stated in the article that McDonald’s and Yum gave rewards to the whistleblowers if anything seemed bizarre. This too should be implemented in the OSI subsidiaries because it will be very effective in order to eliminate unnecessary illegal acts. It is not stated in anywhere in the article that the OSI Group would enforce the whistle-blowing policy. It is believed that this kind of system will raise the awareness of the employees of their behaviors as well as their peers’ so that if anything seems out of ordinary, they will report to the higher authority which otherwise, they will have automatically gone against the company policy. This will slowly be a culture in the organization for the employees to speak up when any wrongdoings are found.

Alternative B

The next alternative available is the translation of the operating document in the Chinese language. Writers see this as an available alternative as it could be one of the main causes of this scandal happening. It may be minor but this too might help reducing and preventing cases like this to happen again in the future.

Alternative C

The OSI Group might also want to instruct the American managers to visit and audit the foreign subsidiaries more often because employee wrongdoings will not go further if those can be detected early through frequent audits and monitoring. Besides, it will also be effective to ensure whether the operational activities as well as the financial disclosures comply with the established policies of the company. This would also be one of the biggest solutions if, by chance, the OSI Group would go back to the decentralization business model. Meanwhile, it will still be effective otherwise. If not directly, the managers can do video monitoring too in order to inspect the operations of the subsidiaries all over the world.

Alternative D

The next available alternative is for the OSI Group to train and educate the workers even more intensively about the company policies, procedures, and operations. This can be done locally in China as well as in the parent company in the US. Therefore, the OSI Group should provide a group of operation-and-management-specialized people in order to make this happen.

Key Decision Criteria

Concerning this issue, writers have decided to see some criteria that are affected in the OSI meat scandal in China in two perspectives, such as short-term implementation and long-term implementation. For short-term implementation (assume 1 year of implementation since the scandal), writers will see whether the alternatives can increase sales, market share, or ROI. Besides, it will also see whether it is consistent