Across the globe, there are millions of not-for-profit organizations working with communities in order to enrich people’s lives. A not-for-profit organization is defined as an organization that does not distribute excess wealth to shareholders or members of the organization; instead, this excess wealth goes towards helping the organization achieve its goals. While the founders of not-for-profit organizations usually have the purest intentions, there are instances when actions of a not-for-profit organization can be unethical and, ultimately, end up harming its key stakeholders. The American Red Cross exemplifies a not-for-profit organization which, as a whole, has taken part in unethical decision making.
The American Red Cross was founded by Clara Barton in 1881 after she witnessed the services of the Swiss Global Red Cross after World War I. The mission statement of the American Red Cross states: “The American Red Cross prevents and alleviates human suffering in the face of emergencies by mobilizing the power of volunteers and the generosity of donors” (redcross.org). Currently, the American Red Cross has over 650 different chapters which are governed by a board containing 12 – 20 members. The fundamental principles supposedly guiding the everyday decision making of the board members and the chapter presidents are humanity, impartiality, neutrality, independence, voluntary service, unity, and universality. With the help of the American public, the American Red Cross throws itself into emergency situations and attempts to help those in need.
The American public is one of the driving forces behind the American Red Cross. The American Red Cross depends on donations in monetary form and in the form of blood. It is with these donations that the American Red Cross is able to continue expanding and helping various communities. Why are Americans so willing to donate to this organization; what makes it stand out? The American Red Cross classifies itself by saying that “there is no better brand with which to associate your organization than the American Red Cross” (2010, Brand Strengthen Report). Since its beginnings in 1881, the American Red Cross has been able to instill confidence and gain trust from the American public. The American Red Cross is a household name and has been building its reputation for over one hundred years; however, the brand strength has made the American public blind to many unethical decisions the American Red Cross has made throughout the past 15 years.
In order for any organization or company to be successful, there needs to be a strong sense of communication among stakeholders. Stakeholders should have a solid understanding of how the company operates and the company should have, to some extent, transparency. An organization cannot have strong communication with the public unless it has a strong sense of internal communication. The American Red Cross is lacking internal communication and consistency. Over the past few years, board members have experienced a large turnover rate, which leads to leadership difficulties. Without consistency, there is a lack of communication to the different chapters, leading to lack of transparency within the organization. “The American Red Cross just hired its seventh CEO since 2002 and laid off some 1,000 employees in March” (Epstein, The People and Ideas of Giving). The American Red Cross is being hit at all angles; donations are down, board members have little to no idea what they are doing, and they are being fined. In the Case Study, Triage, Harvard University’s John F. Kennedy School of Government was quoted saying: “I don’t think they have a clue about the real nature of their problems or how to solve them. They’re still somewhat deep in denial.” These problems did not surface overnight; the American Red Cross has consistently dealt with extreme situations in a lackluster and almost apathetic way.
In order to successfully deal with disaster situations, the American Red Cross has a Code of Ethics which all volunteers and chapter members are supposed to follow. For the purpose of this paper, I am going to focus on specific aspects of the Code of Ethics in order to demonstrate how far the American Red Cross has strayed. Within the Code of Ethics, the American Red Cross stresses the following points: maintaining neutrality, record keeping, compliance with the law, and not receiving “gifts.” Specifically stated within the Code of Ethics is the following: “Knowingly take any action or make any statement intended to influence the conduct of the American Red Cross in such a way as to confer any financial benefit on any person, corporation or entity in which the individual has a significant interest or affiliation.” All employees and volunteers were entrusted to follow this code of ethics. Unfortunately, the American Red Cross was not able to ensure that ethical decision making and reasoning was taking place.
Looking back to September 11, 2001, the American Red Cross was receiving donations of all sorts in record breaking amounts. Americans were rallying around each other and supporting one another in any way they could. Enter the American Red Cross: six hundred and fifty different chapters, unorganized leadership, and no plan. Money was being donated but not allocated, blood was being given but not distributed to those in need, and victims were being acknowledged but ignored. According to CBS News:
What donors didn’t know was that some of the chapters entrusted with all that money had been identified by Red Cross headquarters just a few weeks before for having poor accounting procedures, inaccurate financial reports and for keeping national disaster contributions that should have been sent to headquarters in Washington.
The issue above circles back to the theme of communication. Yes, the event of September 11, 2001 could not have been predicted, but the American Red Cross set itself up for failure. As soon as one of these chapters was identified as corrupt, headquarters should have pulled it from the organization. Ethically, these chapters were committing fraudand destroying relations between the American Red Cross and the American Public. In the year leading up to September 11, 2001, the American Red Cross had been adding money to a major disaster relief fund. In the adjacent chart, created by givewell.org, the difference between amounts donated and amounts spent are extremely different. It is easy to assume that since the American Red Cross had a disaster relief fund, they would have a disaster relief plan. This was, and is, clearly not the case. Moving forward to 2005, Hurricane Katrina hit New Orleans and left devastation in its path. American Red Cross volunteers rushed to New Orleans by the thousands and, once again, donations were being given at an alarming rate. The public looked to the American Red Cross to work to help the people in need; surely they had fixed the many communicational problems since 2001.
The Red Cross had neither controls on costs nor reliable records of inventory, and nobody routinely checked volunteer’s backgrounds before they signed on. Rental cars disappeared as well as generators, air mattresses, and computers…Mops, paper towels, and bleach would be handed out in neighborhoods that had been demolished. In Mississippi, victims wanted water to drink, but Red Cross volunteers only had bleach. (Epstein, Triage).
The Board of Directors of the American Red Cross had no control over the rest of the organization. Volunteers and chapter members were stealing supplies, victim’s needs were being ignored, and the American Red Cross was going against its entire Code of Ethics. Beyond disappointing relief efforts during extreme disasters, the American Red Cross has continuously been dealing with internal struggles ranging from theft, addictions, and scandals. Looking at the graph below, created by the American Red Cross, it is clear that after natural disasters the public’s opinion about the American Red Cross decreases. Based on the above information, it can assumed that this decrease in support is due to the lackluster effort made by the American Red Cross during disasters.
The actions conducted by various volunteers, chapter members, and board of director members have had a negative impact on the ethical decisions made by this organization. Ironically, the main issue stemming from the day-to-day actions of the American Red Cross is the antithesis to their mission statement. The main purpose of this organization is to help victims; yet, in the past 15 years, it seems that the American Red Cross has deprived more individuals than it has helped. Based on the various rights established in by Donaldson in Ethics in the Global Market Place, “corporate duties establish that multinational corporations…do have obligations derived from rights where such obligations extend beyond abstaining from depriving directly, to protecting from deprivation” (Trevino, Ethics in the Global Market Place). Instead of protecting victims, the American Red Cross has taken actions which directly deprive them. The question is, was the American Red Cross purposely depriving these victims? Ethics in the Global Market Place states that “motivations and intentions are important to ethical decision making” (Trevino, 46). In terms of the American Red Cross, the overall organization had intentions to help the victims, but volunteers and employees were motivated by greed. The organization as a whole did not have direct and clear communications with all chapters; the lack in communication led members to act unethically and represent the overall organization in a negative light. Since the American Red Cross is a not-for-profit organization, does it have a duty to protect the public, or does the fact that it is not a “corporation” free it from this duty of protecting from deprivation?
Tomas Donaldson and Edwin Hartman discuss the different duties and rights corporations and organizations owe to their stakeholders, and more specifically, the public. The rights discussed in both articles should be done to the best of the organizations ability, meaning that it is in legitimate scope of the businesses operations. Linking this ideology to the everyday actions of the American Red Cross, it is clear that this organization in particular is not meeting the bare minimum in terms of the rights and duties it owes to the public, to all of its stakeholders. According to Hartmin, “decisions…that managers make in the normal course of…activity have moral consequences that cannot be detached from them” (164). Many of the managers of the different chapters within the American Red Cross do not act in accordance with the established code of ethics. Furthermore, the decisions made by these managers, such as money (donationa) laundering, cannot be separated from the American Red Cross. So, who is acting unethically? Should the employees and volunteers be separated from the American Red Cross, or are the employees and volunteers a direct representation of how this organization is run?
Utilitarianism ethics focuses on maximizing happiness and states that the proper action is the one that provides the most benefits. “It is ethical theory because it is concerned with whether human actions are right or wrong; it is consequentialist because it tells us that an act’s rightness or wrongness is determined solely by the act’s consequences and not by any feature of the act itself.” In this sense, looking at utilitarianism ethics is important in decoding the action of the entire American Red Cross. Many unethical decisions were made from the top of the company; for example, fraudulent accounting, hoarding donations that were meant for victims of natural disasters, and not managing direct communications with chapters during times of crisis. “The intuitive idea behind utilitarianism is that we should act to bring about the best consequences” (Humber, Utilitarianism and Business Ethics). In these situations, the American Red Cross was clearly not trying to bring about the best consequences. Furthermore, the American Red Cross was not in the position to offer support and help in a large scale manner period. Act utilitarianism is not solely about providing beneficial results; it is about having the beneficial results outweigh any negative impacts. In the case of the American Red Cross, any beneficial outcomes did not, and do not, outweigh the overall fraudulent and negative outcomes.
Not-for-profit organizations have goals that are defined, goals with the purpose of benefiting people, places, or ideals. The American Red Cross has a mission of alleviating human suffering through the use of donations and volunteers. Looking at the works by Trevino and Nelson in Managing Business Ethics, Hartmin and Donaldson, and Snoeyenbos and Humber in Utilitarianism and Business Ethic, it is obvious that the interworking and decisions made by the American Red Cross have had, and continue to have, a negative impact on the focus of this organization, the victims. 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.
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Hartmin, Edwin M. “Donaldson on Rights and Responsibility.” Multinational Corporate Responsibility. N.p.: n.p., n.d. 163-72. Print.
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Trevino, Linda, and Katherine Nelson. Managing Business Ethics. 5th ed. N.p.: n.p., n.d. Print.