Assignment 1: The American Red Cross (ARC)

While the Red Cross’ reputation soared immediately following the September 11th attacks in the wake of their good works, the organization was soon the target of public criticism. By late October 2001, the Red Cross was being condemned by victims’ family members, politicians and the media for allocating a portion of its Liberty Fund towards future terrorist attacks, rather than addressing the needs of those who were directly affected on September 11.
The three main operation fund resources are contributions, revenues from products and their services, and investment income from other sources. These funds come from corporate, foundation and individual giving, which includes the United Way, federal, wills and grants. Large donations are received from such corporation as Wal-Mart and the GE Foundation.
The American Red Cross uses the Red Cross Disaster Relief Fund to support the American people who are victims of thousands of disasters across the country each year. The funds assist the Red Cross in meeting the immediate needs, such as shelter, food, and critical mental health counseling. Most recipients have been impacted by natural disasters like hurricanes, house fires, floods, tornadoes, and winter storms.
Business ethics includes the principles and standards that guide behavior in the world of business. The ethical behavior of a company is being judged and determined by its stakeholders. They may not always be right but their judgment affects the company’s reputation in society. There are several benefits of business ethics. Ethics contribute to investor loyalty – ethical conduct results in shareholder loyalty and can contribute to success that supports even broader social causes and concerns. The American Red Cross failed their duty and by not showing their stakeholders that they really cared about the organizations ethical practices and the quality of the people they served.
The employees and volunteers played a major role in the misconduct and unethical practices that were reported to the public in this case. The American public, which is another stakeholder of the American Red Cross were affected by the slow response time to the disasters and the victims of the employees of the American Red Cross. The Executive turnover at the American Red Cross was another negative impact towards the public stakeholders.
The high turnover at the executive level brought public attention to the American Red Cross’ mismanagement of funds that were issued out for high compensation and severance packages that were paid out. This sort of behavior showed lack of commitment to the victims of disaster and preference to their executive personnel.
The American people put a lot of trust into the well-recognized disaster relief organization in this country. This is why the American Red Cross is held to a high level of service when it comes to disaster relief. The employees and volunteers are expected to perform in a moral, integrity and positive manner while conducting all services.
The American people had to take the role in deciding who will lead the organization and become involved in establishing a more effective operating model after the American Red Cross’ leadership failed to lead and meet the expectations of the stakeholders. The people of the United States will play a role and be involved in making sure that the American Red Cross has the right leaders and employees that will serve the people of need with discipline in ethics, morals, integrity and principles that best represents an organization that helps humanity.
For a long time, non-profit organizations have been vigorous, productive and self-sustaining of the government, with the government’s regulation being in a situation to be supportive and adversarial at the same time. The core of any profession is the application of ethics within best practices. This can be deemed to be even more important amongst those who are in the business of serving the public. The case of philanthropic fundraising is viable as a result of the trust and in the faith the actions of non-profit organizations. Trust from the public can be generated through properly understood policies of enforcement and standardization. Instances where applicable laws and government regulation on non-profit organizations occur will usually stem from the violation of ethical conduct especially in the management of non-profit and public monies’ handling. Getting qualified individuals to serve within this committee can be difficult, but it serves as a great step in ensuring that any fundraising activity or fund allocations are carried out.
The American Red Cross failed when they did not carry out or provide formalized responsibility in their operation model. The employees and volunteers were not held accountable for their actions of misconduct and unethical behaviors. In research, there was no indication that ethics was neither a priority nor a requirement within the organization. In fact, there was no formal training provided by management. When top executives assume that their staff and volunteers would naturally behave ethically they fail both the public and employees. In failing to provide this training and upholding policy and procedures the organization saw donation mismanagement, inappropriate management of funds, stealing, and slow response to disaster situations.
The American Red Cross has to create a persona of ethical and transparent operational reputation as a nonprofit organization. Immediate implementations of screening new hires and improve management processes for volunteers by introducing policy, procedures, expectations and follow-up by management. Also, create and mandate ethical training classes.

Secondly, closer monitoring is needed and accommodations to be an ongoing adjustment to current needs of both the organizations environment, as well as the public environment they serve.
Thirdly, financial performance must be measured and transparent in order to have a positive impact on the overall culture of the organization and the trust from the people. The American Red Cross’ business perception was drastically damaged by their actions after 9/11 and Hurricane Katrina.
Finally, they must gain the trust of employee and their commitment to the organization by monitoring and taking immediate action towards the employee or volunteer that behaves in an unethical or fraudulent way. This will result in regaining the reputation of the American Red Cross, which in turn will gain back investors loyalty.

Reference
Ferrell, O. C., Fredric, J., & Ferrell, L. (2011). Business ethics: Ethical decision making and cases: 2011 custom edition (8 ed.). Mason, OH: South-Western Cengage Learning.

Governance (2011). Retrieved April 25, 2013 from American Red Cross: http://www.redcross.org/

Josephson Institute, (2013). Making ethical decisions: the six pillars of characters. Retrieved on April 25, 2013 from http://josephsoninstitute.org/MED/MED-2sixpillars.html.