When Chipotle opened its first restaurant in 1993, the idea was simple: show that food served fast didn’t have to be a fast-food experience. Chipotles website says that, over 23 years later, our devotion to seeking out the very best ingredients we can remains at the core of our commitment to Food with Integrity (Our Company 2018, 1). However, two E. Coli outbreaks hit Chipotle in 2015, which infected 60 customers. As the FDA was not able to pinpoint the direct cause of this issue, three ethical issues have been identified as the potential causes.
The first issue is Chipotle’s overall concern for ingredient sourcing that are in compliance with FDA standards. In Chipotles2017 annual report, it states that, the Executive Director of Food Safety directs a quality assurance department that establishes and monitors their quality and food safety programs, and works closely with their suppliers to ensure their high standards are met throughout the supply chain (Annual report 2017, 9). The combination of the quality assurance department and food safety programs is the efficient approach which may prevent ingredient sourcing risks. It is important for Chipotle to clarify what they want and what their customers value. Finding the balance between ethical standards and financial intelligence is critical to a companys success.
The second issue is if Chipotle employees are being properly trained to prepare and serve foods in correlation to FDA standards. According to the notes of consolidated financial statements from 2015 to 2017, it declares that, pre-opening costs, including training, rent, wages and other restaurant operating costs, are expensed as incurred prior to a restaurant opening for business, and are included in operating expenses on the consolidated statement of income (Annual report 2017, 52). The annual report shows that pre-opening costs are $16,922,000, $17,162,000 and $12,341,000 separately from 2015 to 2017.
However, from these notes, it is hard to tell whether training expense is enough or not for Chipotle. Furthermore, there is no explanation for the decrease of pre-opening costs from 2016 to 2017. In my opinion, it is better to declare expenses in training that has occurred, which will help stakeholders have direct and clear insights into efforts of training that Chipotle has made. The third issue is if the board has performed their responsibilities in corporate governance guidelines. A well-defined and enforced corporate governance provides a structure that, at least in theory, works for the benefit of everyone concerned by ensuring that the enterprise adheres to accepted ethical standards and best practices as well as to formal laws (Rouse 2008, 1). From Chipotles 2017 annual report, Chipotle adopts the Board Performance Self-Evaluation Process to consider whether and how well each committee has performed the responsibilities in its charter and whether the committee members possess the right skills and experience to perform their responsibilities (Annual report 2017, 95). The adoption of this process will help Chipotle keep overseeing the annual operation and committee responsibilities which makes sense for preventing Chipotle from ethical dilemmas in the future.
In conclusion, I believe that Chipotle did act unethically in their previous business practices. However, their annual reports from 2015 to 2017 show some improvements and efforts they have made. In order to prevent another E. Coli outbreak, Chipotle must make it a priority to ensure the safety of their foods. In order to fix their ingredient sourcing issue, Chipotle must focus on their quality assurance department and food safety program. To be considered ethical, Chipotle must give their employees the tools to succeed and generate great products. Whats more, the board must continuously perform the responsibilities in corporate 4 governance guidelines. Last but not least, Chipotle must be willing to spend more on food safety, quality assurance and training expenses, and find a better way to realize financial intelligence.
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