Assignment 3: The American Red Cross (ARC)”
October 28, 2012
HRM 522 Ethics & Advocacy For HR Pro
Determine the impact of this event on ARC’s “benefits of business ethics” (employee commitment, investor loyalty, customer satisfaction, and bottom line).
Business ethics includes the principles and standards that guide behavior in the world of business. The ethical behavior of a company is being judged and determined by its stakeholders. They may not always be right but their judgment affects the company’s reputation in society. There are several benefits of business ethics. Ethics contribute to (Ferrell, Fraedrich, & Ferrell, 2011, pp. 18-21): * Employee commitment – comes from employees who believe their future is tied to that of their organization and their willingness to make personal sacrifices for the organization. * Investor loyalty – ethical conduct results in shareholder loyalty and can contribute to success that supports even broader social causes and concerns. * Customer satisfaction – one of the most important factor in a successful business strategy; a company must continue to develop, alter, and adapt products to keep pace with customers’ changing desires and preferences and it must seek to develop long-term relationships with customers and stakeholders. * Profits – must have adequate financial performance in order to nurture and develop an ethical culture.
Because of the actions of the American Red Cross following 9/11 and Hurricane Katrina, their benefits of business effects were damaged. Employee commitment wavered because of the actions of the organization. Because of the lack of monitoring some employees or volunteers were doing unethical and fraudulent things (i.e., mishandling funds). This misconduct severely damaged the reputation of the American Red Cross. Investor loyalty was diminished because the American Red Cross was not following their own bylaws and was mismanaging funds donated to the organization. Customer satisfaction was low because of the actions of the American Red Cross following these disasters. Profits can be significantly affected by the actions of an organization. The American Red Cross relies heavily on donations. If the public does not feel the American Red Cross is using the funds in a way they supposed to they will stop donating. Determine and discuss the role that ARC’s stakeholder orientation played in this scenario.
Stakeholder orientation is “the degree to which a firm understands and addresses stakeholder demands” (Ferrell, Fraedrich, & Ferrell, 2011, p. 34). Stakeholders are “customers, investors and shareholders, employees, suppliers, government agencies, communities, and many others who have a ‘stake’ or claim in some aspect of a company’s products, operations, markets, industries, and outcomes” (Ferrell, Fraedrich, & Ferrell, 2011, p. 31). There were many concerns regarding the American Red Cross in the scenario. The goal of the American Red Cross is to bring aid to victims of a disaster. The attacks on New York City’s World Trade Center and Hurricane Katrina were major events that effected the United States. The American Red Cross came under heavy scrutinizing due to how they handled these events.
With the World Trade Center, the American Red Cross was criticized for their slow response time. “The Virginia-based command center known as the Disaster Operations Center (DOC) had, for more than a day afterward, failed to activate the specialized teams normally sent out after a plane crash or similar disasters” (Ferrell, Fraedrich, & Ferrell, 2011, p. 330). In addition to the slow response time to the 9/11 disaster, the American Red Cross was also criticized for their mismanagement of monetary donations. A separate fund was set up for 9/11 victims and their families. In about two months almost $550 million in pledges was collected but only a third of those funds were distributed to relief efforts. The American Red Cross had decided...
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