The American Red Cross: Benefits Of Business Ethics

The American Red Cross (ARC)
Tyneca M. Allen Dr. Jack Huddleston
HRM 522
January 26, 2014

Determine the impact of this event on ARC’s “benefits of business ethics” (employee commitment, investor loyalty, customer satisfaction, and bottom line). The impact of this event on ARC’s “benefits of business ethics” (employee commitment, investor loyalty, customer satisfaction, and bottom line) in short, a stakeholder obligation to fulfill its charter’s expectations and deliver these promises effectively and efficiently. Charitable donations fund the nonprofit’s operations and volunteers comprise 95 percent of its workers. The ARC staff and volunteers need to be well managed by capable directors and executives within ARC (Ferrell,
Fraedrich, & Ferrell, 2011). Improvements to the ARC as an organization must begin with executive leadership and flow downward to every level of the group. Congressional oversight and interaction with federal, state, and local organizations must continue to be reviewed and modified to suit current needs (Ferrell, et al., 2011). According to Ferrell, Fraedrich, & Ferrell, (2011), disaster relief cooperation in the form of partnering with private corporations to provide efficient and effective responses to victims of disasters should be continued. Joint marketing practices between the ARC and private businesses should also continue, as long unethical interactions or associations do not compromise the mission of the ARC. Close monitoring must be carried out by the many stakeholders of the ARC, including donors, staff, volunteers, and society in general.
Determine and discuss the role that ARC’s stakeholder orientation played in this scenario. The role that ARC’s stakeholder orientation played in this scenario was the lack of social responsibility and corporate governance. Ethical issues related to the role of the board of directors, shareholders relationship, internal control, risk management, and executive compensation (Ferrell, et al., 2011). ARC has had to address allegations of fraud, bribery, and inadequate and even theft on the part of volunteers and employees working for the organization. The ARC also has faced a number of internal challenges due to high turnover, as well as charges of overcompensation and possible corruption among its board of directors and upper management (Ferrell, et al., 2011). The frequent executive turnover has significantly weakened the organization’s ability to carry out its federal mandate. “The constant change in leadership is debilitating and does nothing to address the real problem, which is years and years of underinvestment in telecommunications, technology, and other infrastructure to help the organization with its mission,” said Paul C. Light, a professor of public service at New York University (p. 328). The slow response to the attacks on New York City’s World Trade Center and the Pentagon calling the office of the Red Cross was criticize from the very beginning of the incident.
For more than a day afterwards, failed to activate the specialized teams. In the days and weeks following the attacks, the ARC was continually criticized for its management of the financial donations (Ferrell, et al., 2011). The communication of how much of the funds would go to the actual relief of the victims and their families, failure to communicate appropriate points of contact for each agency, and electronically accepting the donations capacity during the incident should have been handled differently. Effective planning would help with future communication on events as
such. The orientation comprises three sets of activities: (1) the organization-wide generation of data about stakeholder groups and assessment of the firm’s effects on these groups, (2) the distribution of this information throughout the firm, and (3) the organization’s responsiveness as a whole to this intelligence (Ferrell, et al., 2011). This was not accomplished because of the lack communication of leadership and local chapters.
Determine and discuss the ways in which ARC’s corporate governance failed to provide formalized responsibility to their stakeholders. Ways in which ARC’s corporate governance failed to provide formalized responsibility to their stakeholders was that the top managers put their own self-interests before those of important stakeholders. Corporate governance establishes the processes for preventing and detecting misconduct, for investigating and disciplining, and for recovery and continuous improvement. Effective corporate governance creates a compliance and ethics culture so that employees feel that integrity is at the core of competitiveness (Ferrell, et al., 2011). ARC lacked structure of the board of directors, auditing and control, integrity of financial reporting, and organizational ethics programs. The agency’s reputation has been tarnished by the history of awarding large severance packages for ousted executives. Leadership troubles have extended into the local chapters as well, indicating systemic problems. The nonprofit running about a $200 million deficit and eliminating 1,000 jobs in 2008 alone (Ferrell, et al., 2011). The American Red Cross Code of Business Ethics and Conduct was updated, now all employees and volunteers are required to read and sign the document and have an anonymous and confidential Concern Connection Hotline to ask questions regarding potentially illegal, unsafe, or unethical conduct (Ferrell, et al., 2011).
Recommend steps that ARC could follow to improve their stakeholder perspective. Steps that ARC could follow to improve their stakeholder perspective are assessing organizational commitment to social responsibility and identifying resources and determining urgency primarily.
Assessing the Corporate Culture-To identify the organizational mission, values, and norms that are likely to have implications for social responsibility. The Red Cross also provides 24-hour support to members of the military, veterans and their families – in war zones, military hospitals and on military installations around the world; collects and distributes more than 40 percent of the nation's blood supply and trains more than 9 million people in first aid, water safety and other life-saving skills every year (PR Newswire, 2012).
Identifying Stakeholder Groups-To recognize stakeholder needs, wants, and desires. Managers can identify relevant stakeholders who may be affected by or many influence the development of organizational policy.
Identifying Stakeholder Issues-Understanding the nature of the main issues of concern to these stakeholders. The level of power and legitimacy determines the degree of urgency in addressing.
Assessing Organizational Commitment to Social Responsibility-To arrive at an understanding of social responsibility that specifically matches the organization of interest.
Identifying Resources and Determining Urgency-The prioritization of stakeholders and issues, along with the assessment of past performance, provides for allocating resources. By consolidating the North Central New York and Southern Tier regions into one area, the Red Cross Central New York chapter can be more efficient in its finances, staff placement, and service delivery. This will make them able to operate in a centralized way to determine if it can meet needs across great distance (Collins, 2012).
Gaining Stakeholder Feedback-Stakeholders’ general assessment of the firm and its practices can be obtained through satisfaction or reputation surveys. To gauge stakeholders’ perceptions of the firm’s contributions to specific issues. More formal research may be conducted using focus groups, observation, and surveys.
The importance of these steps is to include feedback from relevant stakeholders in formulating organizational strategy and implementation (Ferrell, et al., 2011).
The Internet is efficient and cost-effective and is being used by the ARC to communicate more. They now have a website and a blog and a Facebook presence. ARC rely on online media to communicate with the world at this point. American Red Cross has really embraced social media and proud of the free flow of information and discussion rather than taking the approach that dialogue is a bad thing. Their social media policy is pretty cutting-edge and one of the best in class among non-profits (Debra Hughes interview, 2012). Giving reports to the public as to how the progress of the disaster. For example in this report during the super storm Sandy; "This is a large amount of money to be spent in such a short period of time, but as has been seen in other disasters, recovery is a marathon, not a sprint," McGovern said. "For example, the Red Cross recovery work for Hurricane Katrina lasted five years, work in Haiti is now in its third year, and the Red Cross is still helping people in Joplin after a 2011 tornado there. However long it takes, the Red Cross is committed that money donated for Sandy will stay in those communities to help the people affected by this disaster,"(PR Newswire,
2013).

Reference
Collins, N. (2012). Area Red Crosses merge, gain new leadership, forge new direction. Business Journal (Central New York), 26(34), 6.
Ferrell, O. C., Fraedrich, L. (2011). Business Ethics: Ethical decision making and cases: 2011 custom edition (8th ed.). Mason OH: South-Western Cengage Learning.
Interview: Debra Hughes of the American Red Cross. (2012). Managing Intellectual Property, (219), 91.
PR, N. (2013, January 29). American Red Cross Issues Three-Month Progress Report on Superstorm Sandy Response and Recovery Work. PR Newswire US.
PR, N. (2012, December 19). Busy 2012 for American Red Cross with 113 Large Disaster Responses in 42 States. PR Newswire US.