As a nonprofit institution, the Red Cross enjoys a very distinguished position among other similar organizations due to its historical background, reputation and relief efforts. Traditionally, people relate its image to humanitarian causes all over the world, and millions of people and organizations are always willing to donate large amounts of their money to the Red Cross every time they call for help. However, there have been occasions where donors are not satisfied with what was done with the collected funds and the Red Cross fails to provide complete information about how the money raised is ultimately used.
Although the Red Cross is the best known nonprofit organization in the country and more than 60.000 disasters were attended by them last year , there have been cries of outrage from donors and the federal government due to certain situations that gave clear signs that their money was not being used for the causes they gave it for.
Ferrell, Fraedrich and Ferrel present many situations where the American Red Cross organization business ethics were dubious . For example, a high, and costly, turnover rate gave the impression that the American Red Cross was more worried about management issues than about accomplishing their main objectives . Corruption cases also contributed to deteriorate the organization´s image, when millions of dollars were squandered or stolen by fundraisers, managers and executives, and their huge payroll caused a 200 million dollars deficit to the already troubled organization . The response of the organization to the September eleven disaster was unsatisfying as well, and even though there was a huge response from donors everywhere to raise funds specifically for aiding the victims, the American Red Cross decided to use two thirds of the money for other Red Cross projects, causing great discomfort among fundraisers, donors and volunteers . Other issues, related to misuse of resources, mismanagement of funds and volunteers, and miscommunication between the Red Cross and FEMA , have also mined the credibility of the organization among its stakeholders.
Business ethics can be defined as the principles and standards actors follow in the field of business, and it is oriented and judged by their stakeholders, affecting how an organization is perceived by society. Business ethics affect employee commitment, investor loyalty, customer satisfaction and profits. ACR´s actions affected employee commitment negatively because the reputation of the volunteers became damaged due to a lack of monitoring, mismanagement issues and low recruiting standards for volunteering. It affected investor loyalty because many perceived the Red Cross was funding their own projects with money raised for specific relief efforts, or spent too much on severance packages to high executives. Customer satisfaction was also affected by the fact that the organization´s response in many of the cases was slow and largely ineffective. And the fact that in some cases they had not enough capacity to receive funds electronically, affecting their profits as an organization . On the other hand, all these problems would cause people to stop believing the American Red Cross is fulfilling the role they are supposed to undertake, people would stop donating or start looking for other competing nonprofit organizations as it happened in China last year, when people expressed they preferred giving their money to the victims themselves instead of the Red Cross .
Prior to 2006, the American Red Cross kept most of their documents secret, and stakeholders didn´t have ways to report agency misconduct or to demand formal statements to the organization. The organization also failed to assure their stakeholders they were doing efforts to “institutionalize ethical best practices” . Also, during the Katrina and Rita disasters, agencies had no delimited roles, meaning that the formal rules or responsibilities of their stakeholders were not established clearly, affecting employee commitment, customer satisfaction and accountability. Lastly, there were reports of stolen goods and fraud committed by Red Cross volunteers that were never accounted for, showing that the organization had no cost control, no inventory oversight, and a poor ability to prevent fraud and protect resources.
Recommendations
According to the Minnesota Council of Nonprofits , a nonprofit organization must comply with the following requirements in order to improve their stakeholder perspective:
- They should use their resources toward their clearly stated mission
- They should establish clear and regular performance measurements
- They should always provide information about their decisions and decision-making processes
- They should provide complete financial information, balance sheets and income and expenses statements
- They should hold public meetings in order to inform their stakeholders about their approaches and goals
- They should avoid service overlapping by actively working with other organizations
- They should provide multiple mechanisms for reporting agency misconduct
Bibliography
American Red Cross. (2012). 2012 Anual Report. Retrieved July 12, 2013, from American Red Cross: http://www.redcross.org/images/MEDIA_CustomProductCatalog/m18071523_Red-Cross-2012.AnnualReport.pdf
Charity Navigator. (2012, June 01). American Red Cross Historical Data. Retrieved July 12, 2013, from Charity Navigator: http://www.charitynavigator.org/index.cfm?bay=search.history&orgid=3277
Ferrell, O. C., Fraedrich, J., & Ferrel, L. (2011). Bussiness Ethics: Ethical Decision Making & Cases. Boston: Strayer University.
Minjie, Z. (2013, may 02). Red Cross admits artists' cash not used as intended. Retrieved July 12, 2013, from People´s Daily Online: http://english.people.com.cn/90882/8229812.html
Minnesota Council of Nonprofits. (May de 2010). Principles & Practices for Nonprofit Excellence. Recuperado el 12 de Jully de 2013, de Minnesota Council of Nonprofits: http://www.minnesotanonprofits.org/Principles_Practices.pdf
