The spotlight has been on big-name MNCs in China again over the past couple of weeks. As mentioned in a recent post on corporate social responsibility (“CSR”), three big, foreign fast-food chains were accused of paying staff below the minimum wage in Guangzhou.

Despite all the noise the initial investigation created, it has now been reported that McDonalds, KFC and Pizza Hut (both owned by Yum! Brands) have been cleared of the charges…

“but only because China does not extend legal protection to the legion of student workers who man the nation’s fast-food counters…[the restaurants were] paying their workers, mainly students, wages as much as 40% below the local minimum for part-timers of 7.5 yuan (97 cents) an hour.” (Forbes)

As well as reflecting badly on these international corporate giants (a big risk in such a nationalistic consumer environment – as others have found in the recent past), the case has created a new debate about student rights.

Being (technically) innocent does not make life easy for these companies, who have suffered a PR disaster, and who are expected by many to do more (not less) than the minimum required by law. Big foreign brands should take note, and do some risk assessments of their own (especially where franchisees and other partners are involved).

The fallout will continue for some time. One of the first results, according to the New York Times, has been a move by the increasingly aggressive (government monopoly) All China Federation of Trade Unions (ACFTU) to unionise the miscreants. It seems McDonald’s (taking the PR initiative?) may be first in line, hot on the heels of fellow US super-brand, Wal-Mart (see here).

The ACFTU is planning to get 80 percent of foreign companies to sign up by the end of 2008, and anyone running an MNC in China might want to plan for the day when they knock on the door – and to make sure, well in advance, that the Union rep (or the undercover reporter that precedes him) will not find any low-hanging fruit in which to stew the company at China’s most efficient court – the Court of Public Opinion.

See related news:

China Clears Fast-Food Giants Of Wage Violations
Forbes – NY,USA
Brands have been cleared of charges that they underpaid part-time workers in China, but only because China does not extend legal protection to the legion of …

McDonald’s to Allow More Unionizing in China
New York Times – New York,NY,USA
SHANGHAI, April 9 — A year after Wal-Mart Stores unionized all its stores in China under pressure from the government, McDonald’s is cooperating with …

FOCUS-China trade union moves against foreign firms driven by …
Forbes – NY,USA
BEIJING (XFN-ASIA) – China’s state-controlled trade union’s targeting of multinational companies to sign up workers is being driven by financial and …

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