The American Red Cross

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1.Explain the possible problems in the ethical culture of the Red Cross that created the issues discussed in this case. Ethical culture can be viewed as the character or decision making process the employees use to determine whether their responses to ethical issues are right or wrong. Ethical culture is driven by top management. The problems began with American Red Cross when the organization started to see a high rate of turnover in the executive level. The frequent executive turnover significantly weakened the organization’s ability to carry out its federal mandate. ARC also had an oversized board, that did more hiring and firing than building a strong Red Cross. The constant change in leadership was debilitating, and doesn’t do anything to address the real problem. The agency also has a reputation for awarding large severance packages for ousted executives, no matter how short the term. When employees see that they can do wrong, and still get a huge severance package, and not be punished there is not motivation for them to behave ethically. 2.Name some of the problems the ARC has encountered with handling donation money. In September 11, 2001, the American Red Cross was called immediately to assist on the attack on New York City's World Trade Center. Monetary donations poured in at an unpredicted rate. Healy set up a fund called “Liberty Fund” for donations for the victims. By the end of October the fund had received $543 million in pledges and had only distributed less than 1/3 of the funds. ARC announced that more than half would be spent to increase the organization’s ability to prepare for and respond to future catastrophes. The public was outraged; it prompted a US congressional hearing in November 2001. After that ARC announced that all Liberty Funds would go to the victims and their families.

Another disaster occurred during Aug. & Sept. 2005, when Hurricane Katrina and Rita hit New Orleans. Donations were pouring in raising more than $2 Billion...
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