Determine the impact of this event on ARC’s “benefit of business ethics” (employee commitment, investor loyalty, customer satisfaction, and bottom line).
The American Red Cross is classified as a not-for-profit charitable organization whose mission is dedicated to providing services to those in need. It plays important roles in society by placing public service above profit. They use a network of donors, volunteers and employees around the world to relieve suffering by servicing five areas: disaster relief, blood donations, providing support for American military families, providing health and safety services and giving support through international humanitarian services. Although they exist as a not-for-profit enterprise, business ethics are still essential to the success of any organization. The American Red Cross has received the highest ethical performance from its employees and volunteers because they give a responsible to the society (American Red Cross, 2011).
In September of 2011 terrorists attacked the World Trade Center and The Pentagon. Almost 3,000 people die and more than 6,000 were injured and in need of help. The American Red Cross raised more than 500 million dollars in response to the 9/11 attacks. There was a problem because they only distributed 154 million dollars in aid. The question than became where the money went. The American Red Cross claimed the money that was donated went into a big pool of money that was distributed by the company’s corporate governance (The Socialist Worker, 2005). In addition, The American Red Cross urged people to donate blood even though the blood was not needed at that time and a good amount of it was destroyed. In the end, The American Red Cross was criticized by donors and the government for not distributing the donated money directly to the 9/11 victims.
In 2010, Haiti was struck with a huge earthquake that killed over 300,000 people, injured another 300,000 people and left over 1 million people homeless (Wikipedia.org, 2010). Immediately after the earthquake, The Red Cross stated that they planned to start building homes, providing access to clean water and sanitation systems, deliver health care and educate communities how to not spread diseases. In response to the disaster, thousands of committed volunteers and employees rushed to Haiti’s aid as well. Due to people’s trust in The American Red Cross and their wanting to help, even after 9/11, they donated money again to The Red Cross. According to the Chronicle of Philanthropy, over 240 million dollars was privately donated to The Red Cross for Haiti relief.
In total, over 400 million dollars was raised by the Red Cross for Haiti relief. Out of that money, only 148.5 million was spent in the first year towards the victims of the Haiti earthquake. Despite the promises of the Red Cross to distribute the money specifically to Haiti victims, two years after the earthquake they still have over 70% of the donated money in a bank and have not fully assisted the earthquake victims. While 300,000 did benefit from clean drinking water and sanitation provided by The Red Cross, millions are still homeless and the country is still battling diseases that are preventable if proper health care was in place and donors still question where their donations went.
Determine and discuss the role that ARC’s stakeholder orientation played in this scenario.
The American Red Cross states that it aims to communicate with stakeholders so that they understand how the company operates. The American Red Cross can’t have strong communication with the public unless it has a strong sense of internal communication. They do not have good communication with their stakeholder because the public still does not know where most of the money went. “One of the motto’s of the American Red Cross is to prepare for the worst while providing the best. In this case study, the American Red Cross has a track record of financially preparing for the worst but being unable to follow through by helping and supporting the victims in need. Unethical decision making has pulled the American Red Cross away from its central values and created an organization which lacks communication, consistency, and beneficial consequences” (Business Society, and Government 4, 2012). This report showed that the American Red Cross does not communicate to the different chapter, which leads to a lack of trust and ethics amongst stakeholders. As a result, donations are down and board members do not govern the company well.
Determine and discuss the ways in which ARC’s corporate governance failed to provide formalized responsibility to their stakeholders.
The American Red Cross is led by a Board of Governors that have the powers and responsibilities of governing and directing, and of overseeing the management and affairs of the organization. The American Red Cross demands the highest ethical standards from its employees and volunteers. The American Red Cross has handled issues, ranging from natural disasters to local chapter fraud (The American Red Cross, 2011). In one instance with 9/11, The American Red Cross had to fire its CEO and has now emerged a stronger organization (Epstein, K, 2009). First, the corporate governance failed to provide formalized responsibility to their stakeholders by not communicating properly with various chapters within the company.
Since the governors of specific chapters did not know exactly where to distribute funds and aid, the donor’s money was not sent to their specific relief that the donor wanted to help. Secondly, the governance is accused of not spending all of the money donated to the American Red Cross for the specific disaster. This is seen when they received over 400 million dollars for the Haiti earthquake relief and only spent 148.5 million in Haiti. Finally, the corporate governance of the American Red Cross failed to provide formalized responsibility to their stakeholders by not distributing the donated money specifically where the donors wanted it to go. I became a victim of this because I also donated money to the American Red Cross for the Haiti earthquake relief fund. After I researched the American Red Cross scandals, I feel that my money did not get to help the specific victims that I wanted to help.
Recommend steps that ARC could follow to improve their stakeholder perspective.
The ARC could improve their stakeholder perspective by making policies that would improve the effectiveness of the corporate governance and incorporate business ethics and social responsibility in their business mission so that stakeholders and donors will renew their trust in the American Red Cross. There are a few other things the ARC can do to improve their stakeholder perspective. They should have more responsibility and awareness of business ethics. The American Red Cross should improve social responsibility programs by closing the gap between the corporate governance and the stakeholders. The American Red Cross should reassess its overall mission, values, and ethical practices to see if they align with the implication of social responsibility. The organization has lost some of these important moral values that stakeholders feel is important. Another thing the American Red Cross can do to improve stakeholder perspective is to identify specific stakeholder groups and addressing their individual needs.
This is crucial because if the stakeholder’s concerns are not addressed, then the issues of the consumer/donor groups lose trust and interest in the organization. The American Red Cross has taken some steps to change how the company is run. In 2012 America was hit with another natural disaster, Hurricane Sandy. The damage caused by Hurricane Sandy totaled nearly 65.6 billion dollars and killed 253 people in seven countries. This time The American Red Cross has raised 131 million dollars for Hurricane Sandy relief. Out of that, about 110 million dollars has been spent already to help Sandy victims (The American Red Cross, 2011). American Red Cross Spokeswoman Patricia Billinger told The Huffington Post the organization is doing everything that it can to make sure victims of Sandy receive aid. During the relief, spokeswoman Billinger also stated that the ARC is only supposed to supply food and run shelters for people who need it. She went further to state that “everyone who needs help has not received it, but they are trying to get to every neighborhood as soon as possible to provide more help.” This is definitely a step in the right direction.
1. The American Red Cross, http://www.redcross.org/what-we-do Webarchive, homepage, 2011
2. The Socialist Worker, http://socialistworker.org/2005-2/562/562_04_RedCross.shtml Webarchive, 2005
3. Congressional Report for Congress; Haiti Earthquake: Crisis and Response Congressional Research Service, 2, 2010
4. Wilson, H. Expecting to Provide the Best While not Preparing for the Worst. Business Society, and Government 4, 2012
5. American Red Cross as a Disaster Relief Organization. Give Well. American Red Cross as a disaster relief organization, Webarchive, 11 Nov. 2012
6. Holguin, Jamie. Disaster Strikes in Red Cross Backyard. CBSNews. CBS Interactive, http://www.cbsnews.com/8301-18563_162-516700.html>. Webarchive. 11 Nov. 2012
7. Epstein, K. CASE STUDY: American Red Cross-Triage.
Contribute The People and Ideas of Giving. Webarchive. http://www.contributemedia.com/trends_details.php?id=107. 2009