Business and Society
Business and Society
The American Red Cross was established in 1881 by Clara Barton as an independent organization supported by public donations and volunteerism. The organization’s primary mission is the provision of relief to disaster victims and help people to prepare for, prevent and respond to emergencies and disasters (ARC, 2012). According to the article, the organization has been criticized in the recent past because of critical and key ethical issues surrounding its operations. The organization, a non-profit humanitarian initiative, has been widely criticized for the way it handled two disasters in the American history (Gilliard & Khandekar, 2011).
These disasters include the 9/11 attack in 2001 and the 2005 Hurricane Katrina. ARC was criticized for being inadequate and poorly managed to respond to these two events. Furthermore, allegations of fraud, bribery, and theft by the volunteers and employees have become a key concern. It has also faced internal leadership challenges that have resulted in high executive turnover, overcompensation of exiting leaders and possible corrupt practices among its board of directors and the executive management (CDS Global, 2011). As a consequence of the bad publicity, the American Red Cross faces difficulties in marketing itself as a prominent, ethical, and transparent not-for-profit public organization. Therefore, the ethical questions posed include whether or not ARC can be trusted with public donations as they could not collect the online donations during the 9/11 attack. In addition, are such donations used as intended based on allegations of fraud, bribery and theft of the funds by the volunteers and the employees, cushioned by inadequate leadership to respond to emergencies and disasters?
Q1.
ARC’s ethical dilemma stems from various reasons bordering on integrity in the organization and its inability to handle these issues, especially from its leadership (Thorne, Ferrell & Ferrell, 2010). Additionally, the organization’s ethical dilemma may stem from its failure to adapt to changes in the society’s moral fiber. Evidently, ARC trusted its leaders, employees, and volunteers implicitly. However, moral standards and work ethics have been changing over the years, as many employees, and leaders become more corrupt for self-interest at the expense of organizational goals, mission and public trust. Public organizations are run by in-kind donations and need high ethical values is not negotiable. ARC has been accused of mismanagement of funds, inadequate response to major disasters, improper screening for volunteers and blood donation controls, and the organization’s history of awarding large severance perks for ousted executives, regardless of the length of their term (CDS Global, 2011).
The organization can only guarantee that such problems do not occur in the future through effective and efficiency leadership that prioritizes ethical practices. Leadership must ensure that proper procedures and protocols are reached and met. However, the case study presents a systematic and clear pattern of inadequate management and lack of an ethical culture, right from the top management (Thorne, Ferrell & Ferrell, 2010). Organizations, especially charitable ones like ARC, must spell out their ethical positions for all who engage in their activities, right from the employees, volunteers, and the top level management. These groups of stakeholders must be trained on ethical practices. Moreover, the ARC should establish inventory controls, cash controls, and checks and balances within its structures and procedures so as to ensure that misconduct shall not be a pervasive challenge (Thorne, Ferrell & Ferrell, 2010). Additionally, the organization must create a transparent relationship with its stakeholders by being open about funds received, how the money is spent on relief activities (Thorne, Ferrell & Ferrell, 2010). They should ensure that there is consistency at the top and create a structured job description for the senior managers.
Q2.
One of the possible ethical issues in the culture of the organization that resulted in the problems is the management of funds and volunteers during some of the historical disasters in the American history. For instance, most of the funds during the 9/11 disaster were mismanaged. By the end of October 2001, the ARC had received more than half a billion dollars in pledges. However, it only distributed less than a third of these funds and stated that half of it would be used to increase its capacity to respond to catastrophes.
Additionally, the organizational communication culture was criticized during Hurricane Katrina. The ARC raised over two billion dollars in private donations to fund massive rescue and relief efforts for both Hurricane Rita and Katrina (Gilliard & Khandekar, 2011). However, its communication structure in response to the disasters and how they spent the funds failed to impress the public, a situation that prompted a Congressional audit to ascertain how the organization used the funds. The leadership could not offer conclusive and satisfactory answers as some resigned before the set Congressional Committee could probe them (Gilliard & Khandekar, 2011). Another ethical issue was the unsafe practices in screening of blood donations as the organization lacked the capacity and transparent procedures to ascertain that collected blood was safe.
Q3.
The CEO’s position has a lot of influence on changing the ethical conduct in any organization, especially at the ARC. The main issue is that the CEO’s severance perk is too high that any sacked or resigning CEO would not be bothered by the events in the organization concerning ethical practices. The CEOs would perform exceptionally well if their severance package is pegged to their ethical performance in the organization. The ARC should stop high turnover rates of CEOs as constant change in leadership creates an environment for unethical and unaccountable leadership. It should stop the large compensation and severance perks for its CEOs (Thorne, Ferrell & Ferrell, 2010).
References
American Red Cross. (2012). About Us. The American Red Cross. Retrieved from
http://www.redcross.org/aboutus
CDS Global, (2011). American Red Cross Case Study. CDS Global Solution, Inc.
Retrieved on 1st July 2016 from http://www.cds global.com/media/pdf/case_study_american _red_cross.pdf
Gilliard, D. J., & Khandekar, R. (2011). American Red Cross. International Business &
Economics Research Journal (IBER), 3(1).
Thorne, D. M., Ferrell, O. C., & Ferrell, L. (2010). Business and society: A strategic approach to
social responsibility and ethics. South-Western Cengage Learning.
