Nuggets of Wisdom about Beefing up Cooperative Compliance

Dr. Jean-Marc F. Blanchard's picture

Roughly ten days ago, Shanghai authorities carried out a raid on Shanghai Husi Food Co. (owned by US-based OSI Group), a supplier of beef, chicken, and pork products to fast food chains such as KFC, convenience store FamilyMart, and coffee chain Starbucks. The raid occurred after undercover reporting revealed the use of expired meat and poor safety practices at Shanghai Husi. Various Shanghai Husi employees have charged the firm used meat that had passed its expiration date, mixed dirty meat with clean meat, doctored expiration labels, falsifying reports, and violated employment law.

Shanghai Husi clients like McDonald’s reacted diversely to the crisis, withdrawing Shanghai Husi products, turning to alternative suppliers, and issuing public apologies. The Chinese government has sent investigators into OSI plants throughout China, seized records and suspected tainted products, and detailed Shanghai Husi staff for questioning. Some have questioned whether the current case is nothing more than another instance of a foreign firm being targeted by Beijing. Whatever the merits of these other cases, there seem to have been real problems at Shanghai Husi. OSI clearly has recognized the need to take operational changes to deal with the crisis. It has moved to improve worker training, centralize control of its overseas operations, and increase oversight. However, it should consider a solution with a more political flavor. It may be counterintuitive but OSI and other foreign firms need to think how they can enhance China’s food safety inspections and food safety infrastructure. This has three advantages. One is to prevent small problems from becoming bigger ones. A second is to make sure that all firms receive attention. A third is to be a good corporate citizen regarding an issue of great salience to the Chinese government and public. This is not the time to chicken out on creative solutions.