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The American Red Cross, which is also referred to as American National Red Cross, is a humanitarian organization based in the United States of America. It offers emergency assistance and relief support to disaster victims. The American Red Cross is affiliated to International Federation of Red Cross and Crescent Societies. Apart from disaster relief services, ARC also offers domestic support to needy and poor people as well as hosting refugees and collection and distribution of blood donations. For many decades, the organization has been carrying out its duties in a very responsible and efficient manner. However, in past few years, it has faced various challenges which defeated it to tackle effectively.
Impacts of the Event on ARC’s Benefits of Business Ethics
The American Red Cross has undergone a series of management challenges. These challenges dragged the organization deep into problems which greatly affected various aspects of its operations, especially its business ethics. Firstly, the management malpractices resulted into reduced donations form well-wishers. The donors, who are actually the only source of support for the organization, were reluctant to continue supporting the ARC because they had little trust in the organization. Secondly, ARC suffered from poor public image as a result of its unprofessional management and ineffective response in times of disasters. In the recent past, the ARC has not been responding to disasters and other related emergencies as it was expected by members of the society, especially donors. Similarly, there was incredible decrease in assistance offered to disaster victims by ARC.
Various concerns were raised whenever there were suspicions of improper management of the organization resources. For example, a representative in the US Congress, Billy Tauzin, raised concerns over allegations that ARC misused September 11 donations to fund other activities within the organization that did not require immediate response.
Roles of ARC’s Stakeholders’ Orientation in the Scenario
The stakeholders of American Red Cross organization played a very important role in this scenario. In my view, it is the stakeholders who fought for reduction in powers of the ARC executives, for instance, the power of the chief executive officer to appoint individuals to the organization’s board of directors. Stakeholders fought for reduction of such executive powers which gave room for misuse and abuse of the office.
According to Dulles, the stakeholders pushed for appointment of an external agency to investigate the conduct of American Red Cross and make appropriate recommendations that would help the organization’s management be effective (Dulles, 1971). Through their active participation in the management of the organization, stakeholders of ARC were able to advocate for development of a Code of Business Ethics and Conduct in 2007. The document was to be signed by all employees of American Red Cross. The stakeholders also published the Business Ethics Rules and Policies which outlined how and where the society’s resources would be allocated. Furthermore, the stakeholders greatly contributed to the development and establishment of the Confidential Concern Line, which provided that any person with any information pertaining to misconduct of the American Red Cross staff members would report such cases.
The stakeholders also acted as a watchdog over the operations of the American Red Cross. They raised issues and called for changes in the organization’s conducts whenever there was need for the change. Some of the issues that were effectively influenced through stakeholder involvement include how to address conflicts of interests amongst employees, media inquiries and treatment of volunteers among others.
The stakeholders also played an important role in ensuring that the organization’s capacity to receive and manage donations was increased. For instance, when the World Trade Centre was attacked by terrorists, the American Red Cross called for more donations. It went further and introduced the electronic systems for receiving donations. This led to huge web traffics on its website. ARC was thus forced to develop new technologies for handling the swelling number of electronic donations (Gilbo, 1987). For example, some of the work had to be offloaded to other service providers in the technology industry. In my view, this enabled the organization to learn how to be well prepared for future disasters.
Ways in Which ARC’s Corporate Governance Failed to Provide Formalized Responsibility to Their Stakeholders
The corporate governance of the American Red Cross failed to provide formalized responsibility to their stakeholders in various ways.
First, there was great mismanagement of the organization’s resources by its top executives. In 2001, after the September 11 attacks, the ARC was accused of misappropriating the donations that were collected to help the victims.
Secondly, there was poor communication between the ARC and its stakeholders as well as between the board members and middle level management. This led to inadequacy in sharing vital information between the organization and its stakeholders and within the employees.
Thirdly, the ARC was hit by inappropriate conduct of its officers, for example, Mr. Everson had a sexual relationship with a subordinate staff. The ARC also had underinvested in telecommunications, technology and other important infrastructures that would help it realize its missionary goals.
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There was massive misappropriation of the ARC’s funds, for example, Escoto squandered nearly one million dollars (Miller, Vandome & McBrewster, 2009). Additionally, the ARC was not able to effectively manage the ethical challenges it was facing, for instance, compensation of executives and increasing employees’ misconducts.
Furthermore, the ARC spent too much time and money on recruitment of executive officers who later on failed to deliver on their duties as it had been expected of them. On the other hand, the executives did not give adequate concern to training and development of the ARC’s volunteers. The ARC had very poor response in assisting victims of disasters, for instance, the organization’s slow response to help victims of the September 11 bombings at World Trade Centre and survivors of hurricane Katrina.
In my opinion, these cases of mismanagement of charitable donations by the ARC demoralized donors and well-wishers. It raised questions on the ARC’s commitment in helping people as well as its ability to prevent fraud in management of its donations. This resulted into mistrust among donors hence withdrawal of donations.
Steps that ARC Could Follow to Improve Stakeholders’ Perspectives
The ARC can improve their stakeholders’ perspective in various ways, some of which include showing social responsibility, being accountable for its actions and promotion of corporate partnerships. The organization should also show concern and compassion for disaster victims and other stakeholders.
To my mind, the ARC, as a charity organization for assisting victims of disasters in the community, should implement proper management approaches that would help it be effective and efficient in delivery of relief support to disaster victims.
Additionally, American Red Cross can form collaborations with other charity organizations, for instance, its sister organization – the International Federation of Red Cross and Red Crescent Societies. This will help it gain publicity and recognition from international associations and be trusted by donors from the international community. Besides, the ARC should increase transparency to assure donors that their donations are being used responsibly. In the recent past, there has been tremendous growth in not-for-profit organizations that provide support to disaster victims. In order to maintain a strong donor base, therefore, American Red Cross has to ensure transparency in its dealings and hence win and maintain donors’ trust.
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Last but not least, the ARC should develop efficient schedules of activities whenever it is preparing for and responding to disasters. Appropriate compensation schemes for the executives also should be developed. This would help the organization solve discrepancies in salaries amongst its staff. According to Dulles, when Bernadine was exiting the organization as Chief Executive Officer, he was paid approximately twenty million US dollars (Dulles, 1971). In my opinion, this money could have been put into better use such as in assisting disaster victims or training and development of junior staff.