Comparative Study of Spur and KFC

Responsibilities of the Directors and Integrity

The directors are responsible for the preparing consolidated and separate annual financial statements of Spur Corporation Ltd. This will need to include a summary of significant accounting policies and additional explanatory notes which need to be in line with the International Financial Reporting Standards as well as the requirements of the Companies Act of South Africa.

The directors are also responsible for preparing the directors’ report. The directors are also responsible for such internal control as they need to ensure that the financial statement doesn’t contain any errors or misstatement whether or not it may be due to fraud or just a mistake, which is where risk management comes in. The reporting needs to be supported by the audit committee. The board of directors needs to acknowledge its responsibility to ensure the integrity of the integrated report. They all need to ensure that they have applied their minds to ensure that all the material issues and information is correct and that it presents the integrated performance of the group fairly. This integrated report has been prepared in line with best practice pursuant to the recommendations of King Code III. King Code lll is the core of ethics and corporate governance.

The board is also the focal point and custodian of corporate governance and ethics.

¾ The director’s responsibilities listed:

• They are responsible for developing and adopting strategic plans and ensure that they line up with the interests and expectations of the stakeholders however they also ensure that these plans result in sustainable outcomes for Spur and ensures that it doesn’t cause risks that haven’t been carefully assessed by Spur’s management.
• Spur’s directors also make sure that Spur is perceived as a responsible corporate citizen by having regard to the financial features of Spur and how Spur effects the environment and society.
• They monitor operational performance and management.
• They also make sure that Spur has efficient and independent board and statutory committees.
• They approve financial targets and objectives.
• They make sure the business has efficient risk management and internal controls
• They ensure: that IT governance is managed, that there is efficient management for risk that will affect Spur’s reputation, that there is legislative and regulatory compliance and the integrity of integrated and interim reports and they approve the integrated report, including the annual financial statements.
• They monitor Spur’s solvency and liquidity and they consider corrective responses when indicators of financial distress arises.

Social Issues

South Africa has a past of inequality due to apartheid. Therefore, businesses are encouraged to help the country of South Africa to uplift those who were previously disadvantaged. The Spur group encourages their franchisees to better their broad-based black economic empowerment (“B-BBEE”) status as part of their obligation to their transformation. If their franchisees don’t have an acceptable level certificate of B-BBEE, then there is a chance that they may not get a liquor licence, they may not get leases in strategic locations like casinos or airports and/or landlords might penalise them.

The B-BBEE status of suppliers can have a major influence on those franchisees. Spur Corporation’s tries to cause transformation among the suppliers of the outsourced distributor. They have come up with a solution to help their franchisees to better their B-BBEE status level. Apartheid also caused tension between the different races in South Africa which hasn’t been fully remedied and there is more racial sensitivity in South Africa than in some other countries. So when a video of a racially charged argument, between two Spur customers, was release on social media, it went viral and caused some consumers to boycott the Spur Steak Ranches in anger at the brand.

Spur misjudged the extent of the impact the video had on their results and because they failed to see it coming, they didn’t handle it as well as they could have. This resulted in Spur loosing some of their customers to their competitor. People in society all have different tastes and preferences. Spur tries to fullfill the needs and wants of various types of people. Their menu tries to offer something for everyone from the famous steaks, ribs and burgers for the red meat eaters, to their popular Cheddamelt schnitzels for the chicken lovers, Spur also has delectable desserts for people with a sweet tooth as well as special Kids’ Meals for the childen.

A big percentage of South Africans are poor so it is in Spur’s interest to cater for them and increase their sales and number of customers. Spur has weekday specials which present good value-for-money deals, like the Unreal Breakfast and Classic Monday R50 Burger. Students may also be drawn to these good deals as they too have little money to spend. When families with small children go out, they look for a place that can provide for their children’s needs. Spur does this with not only the option of a Kids’ Menu, but also an area where they can play and have fun, with climbing walls, jumping castles and X-Boxes and some of their restaurants. There is also a Secret Tribe Loyalty Club, a Birthday Party Combo Meal, free balloons and activity sheets. They also entertained the children for hours and market their brand through digital applications like Spur Tribe Dash, Spur Colour Me 3D and Spur Birthday Jam.

Fairness

Spur Corporation tries to achieve fairness in its work place. They use remunerations to attract, retain skilled employees and to also motivate them. This encourages them to consistently contribute to the success of the company. Therefore, remuneration is targeted at the upper quartile of benchmarked remuneration levels for each individual’s area of expertise and responsibility. Spur aligns employees and shareholders interests by structuring remuneration packages. This ensures that the employees are fair and not put their interests over the business’.

Spur tries to be fair to their employees by balancing guaranteed remuneration, short-term and long-term incentives for both executive and senior management. They use multiple ways to decide performance standards.

Remuneration levels are fair as they are influenced by performance and don’t consider unfair discrimination. Spur give performance feedback irrespective of race and gender which takes place on an annually.

Spur tries to be fair to their customers by giving their customers good quality and good sized portions which is worth their price.

Transparency

Spur are transparent with their food and safety standards as their customers have full view of Spur’s cooks when they cook this creates an atmosphere of transparency, openness and honesty.

They are open with their strict food health and safety processes. There are even hygiene and safety audits in these franchises to ensure everything is transparent and up to order. They are also honest and transparent about how often they are audited on their website. There are also numerous cameras record Spur’s cooks prepare meals. Spur tries to be transparent their customers thus Spur labels correctly and proves nutritional analysis. Their food claims are substantiated by real nutritional analysis.

Accountability

Spur took accountability and apologised after an uproar from consumers. They issued an apology for the incident that took place in Johannesburg. A video of a white man and a black woman having a racially charged argument went viral and upset many South Africans. Spur released a statement apologising whole-heartedly for the way in which they handled the confrontation.

They admitted that their reaction did not meet their own high standards and that they should have handled to better. They also admitted that they let not only the South African public down in this regard, but also themselves as a brand with high expectations for themselves. They learned from their mistakes and are taking steps for the safety of their customers and staff at their restaurants. Following the incident, Spur gave their key personnel the necessary conflict resolution skills. Spur tries to take every complaint sincerely, even the complaints that seem unusual or even absurd.

However, there was an incident where a customer had made a booking and their booked table was given away and instead of taking accountability, they wrongly tried to sway the blame onto the customer which ended up ruining their whole specially planned evening. This was a mistake which could have easily been remedied if only the manager had taken accountabilty for their mistake.

Comparative Study: KFC

Responsibilities of Directors and Integrity

Shareholders and others are free to report any matters of concern to the Board. Directors have free access to the management and employees at KFC. Important members in management go to Board meetings to show information regarding the business’ results, plans and operation, which fall, under their areas of responsibility.

KFC has a yearly self-evaluation process, which was introduced by the Board. The Nominating and Governance Committee leads it. The valuation concentrates on the contributions that the Board makes to the business and highlights those parts in which the Board thinks a bigger contribution may be created. KFC’s Audit, Governance and Compensation and Nominating Committees also have yearly self-evaluations.

The directors responsibilities: Directors must make business judgments and decisions which they truly believe are in the best interests of Kentucky Fried Chicken but are also constantly in line with their fiduciary duties. The directors should frequently go to meetings of the Board as well as of every Board committee on which they serve.

KFC directors are presumed to stay away from all action; position or interest, which may conflict with the business’ interests even if it only looks like it, may be a conflict. KFC requests information from their Directors every year in order to look for possible conflicts of interest. KFC’s Directors must be conscious of their fiduciary duties to the business. Directors in KFC are motivated to go to the General Counsel to get advice when they are in a position where they are facing a possible conflict of interest.

Social Issues

KFC has a Corporate Social Responsibility Program, Add Hope, where customers donate R2 through KFC. Many children in KZN struggle with hunger and malnutrition, this negatively affects these children’s health and education. In KwaZulu-Natal, there are 28 Add Hope beneficiaries. Add Hope channels funds towards feeding children and giving them better nutrition in their early childhood, this can improve and help their physical, cognitive and social development. Add Hope can show these children their potential. KFC pays many of their employees minimum wage in countries or just very low wages. This shows that KFC mainly focuses on their customers and shareholders interest to keep customer loyalty by having low prices.

Fairness

KFC has formal stock ownership guidelines with regards to the highest senior executives and managers, these guidelines set a minimum ownership expectation. This ownership culture has been maintained since KFC’s formation. The Board members that are not in management are expected and encouraged to own a good number of Yum! shares and are expected to not give away or sell their Yum stock as it is seen as compensation until they leave the Board.

The KFC Board looks for members who possess various professional backgrounds in order to unite a broad range of experiences and expertise but who all have a reputation for integrity and don’t discriminate. The directors must have past experience where they had a high degree of responsibility in top positions. Their criteria must have leadership qualities and they must be chosen centred on their contributions they offer to the Board as well as management.

Transparency

There was a video of chickens being washed with hosepipes on the ground. This caused outrage, but KFC said that it was being prepared for disposal and that they never intended on giving those chickens to customers. However, some KFC employees were sharpening the knives, which they use to cut the chicken, on the pavement and KFC claims quality standards… however it is hard to find these quality standards they claim and seems to not be on their South African website. All I could find were tabs saying ‘What’s so Good’, ‘Our Menu’, ‘Our Stores’, and ‘Our News’ and a few other marketing tabs. Even when KFC was talking about their quality standards, not once did they actually mention what they were.

Thus, the public doesn’t know what this corporate conduct is at KFC South Africa or whether KFC’s employees know these corporate values, which might be shared through an internal platform. It’s also not certain how often these values are communicated throughout KFC’s supply chain. They then went on to say that they were going to conduct an investigation, but this investigation wasn’t made public knowledge. Then KFC later went on to say that they have dealt firmly and resolutely with the owner of the franchise and the other people involved. However, they didn’t actually reveal in anyway what these firm steps taken were, and some people felt this was not good enough and that they deserved more, especially since the action of the business has an impact on its customers. To many people it seems that KFC doesn’t place much value and focus on transparency.

Accountability

KFC South Africa created an ad that spoofed Mick Fanning’s, an Australian professional surfer’s, July shark attack during a competition which was help with South Africa promotion of KFC’s Jacked Up Double Crunch sandwich. The video showed a Fanning- lookalike wrestling a shark whilst surfing. It went viral and was criticized by many including Fanning’s mother, Elizabeth Osborne. It was deemed disrespectful and insensitive to people who have been traumatised and injured by shark attacks. KFC south Africa took responsibility and admitted their mistake and withdrew the commercial across all channels.