The Amrican Red Cross Case Study

8 August 2016

The American Red Cross (ARC), founded in 1881, is an independent organization, supported by public financial donations and volunteerism. Its mission is to “provide relief to victims of disasters and help people prevent, prepare for and respond to emergencies. ” Despite having a great visionary and doing great cause, ARC was, and still is, facing lot of unethical issues. High rate executive turnover, slow response to disasters, mismanagement of donations and funds, and no background screening on their volunteers are few of the examples. Ethical culture

Ethical culture of an organization is the guidance or principles to determine if one’s action is right or wrong. It is usually created by the top management. In the American Red Cross case, there were questions regarding of the leadership of the organization. The problem began with high turnover rate in the executive level. The organization saw a frequent change in the president and chief executive officer position. The constant change in leadership is debilitating and does nothing to address the problem. Instead of fixing the problem by strengthen the core of the organization, they chose the easy way out.

The Amrican Red Cross Case Study Essay Example

They kept firing and hiring new candidate for the top management. ARC spent a large amount of time and money to search for the right person. In the case of Healy and Everson, the board spent two years and eighteen months and came up empty. Also, it was frustrated to see there was no punishment for the top managers’ wrong doing. The organization sent out large severance packages for ousted executives, no matter how short the term they served. When employee saw there was no punishment for their unethical behavior, they repeated and cashed out when their time was over. The American Red Cross did not have a robust ethical culture.

And, the problems were created because of it. Problems with Handling Donation Money After the September 11 attacks on the New York City’s World Trade Center, the ARC was called upon to help the victims. There was a huge amount of donations poured in at an unbelievable rate. The organization received $543 million in donations. Instead of distributing these donations to the victims and their family, the ARC kept more than half. Its reason was to spend these donations on the organization and make it better prepared for the future catastrophes. It raised lot of attentions from the media and the donors.

Donors felt their monies were not rightfully used. They felt the ARC did not keep their promise to provide aids to those in needs. Instead, the ARC used the donation money for its needs. After a U. S. congressional hearing in November 2001, the ARC announced all the monies would go to the September 11 victims and families following by the resignation of Healy, the ARC’s president. Another disaster struck during August and September of 2005. The ARC was once again called upon to assist the victims of Hurricanes Katrina and Rita. Katrina was one of the strongest and costliest hurricanes ever recorded in the Atlantic.

Rita was even a larger storm. The ARC raised more than $2 billion in private donations to help relive for both of the disasters. But, the ARC failed again to deliver these funds to those victims and their family. The public was left unhappy and frustrated by the poor and untimely effort of the ARC to help the victims. The ARC did not take advantage of the assistance of FEMA. Instead, it questioned FEMA’s ability to carry its duties. During their disaster relief, FEMA and ARC officials blamed each other for not following their roles and responsibilities and failed to communicate with each other.

Along with the failures in communication between FEMA and the ARC, accusations about improper management of donated funds and criminal-background volunteers stirred up the attention of the public. The ARC did not apply ethical standards when it comes to hiring volunteers. They did little to none when it comes to background screening for their volunteers. Volunteers reported the disappeared of rented cars, electricity generators, and more than 3000 air mattresses. Some of these volunteers had arrest warrants or other felony charges in their backgrounds.

They were working around computers and systems that allow funds to be added to debit cards for immediate use by the hurricane victims. These funds could be easily misused by dishonest volunteers. Ethical Dilemmas There were multiple reasons that contributed to ARC’s ethical dilemmas. First, it happened at the top level. Top executives committed fraud and received undeserved benefits. Punishments for such actions did not exist. They repeated and committed these unethical behaviors. Second, the organization mismanaged the money from donations.

Victims and their families did not receive the funds they need in time or in full amounts. Lot of these donating monies were cut off and used for other purposed. The organization did not complete their duties and follow their main purpose. Last but not least, the ARC’s impartiality was impaired. It made an unethical decision when they partner with big corporate companies. The ARC’s policies prevented the organization to use such cause to benefit itself and the companies it partner with. It is its duty to scrutinize the corporate donations and make ethical decision with these donations.

In conclusion, the American Red Cross has an obligation to fulfill its charter’s expectations and deliver these promises effectively and efficiently. The ARC staff and volunteers need to be well managed by ethical and capable executives. These executives must always followed their duties and perform their job at the highest ethical level. Relationships between the organization and private corporations should be continued, but, must follow the framework of ethic. These relationships will provide great opportunities to help aiding the victims in needs as long as there will be no unethical interactions or associations.

Organization Structure and Compensation ARC’s history of awarding executives with big bonus and severance is the main reason contributed to unethical behaviors among chief executives at ARC. Bernadine Healy received $1. 9 million in salary and severance pay upon her departure in late 2001. Marsha Evans received a total of $780,000 in 2005, included a $36,495 unpaid bonus. These were the prime examples how ARC’s structure and compensation operated. They had a very favorable punishment for those executives who committed unethical behaviors.

Instead of taking away their money in fines, the organization gave these executives more money. As a result, these unethical behaviors were repeatedly happened over again from time to time. Conclusion In this case study, the American Red Cross was known for its high turnover rate in executives, mismanagement of funds and volunteers, and unethical corporate partnerships. The image of an organization that helps and supports the victims of disaster were negatively affected by these unethical behaviors. It is up to the organization to turn around and fix these issues.

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