Determine the impact of this event on ARC’s “benefits of business ethics” (employee commitment, investor loyalty, customer satisfaction, and bottom line). This event has had a major impact on the American Red Cross Association’s business ethics. Often times, employees join organizations because they believe that they share some of the same values as the organization. When business ethics are comprised in an organization it tremendously affects employee commitment and their overall performance. A lack of ethics in an organization sends employees the message that the organization is dishonest and untrustworthy.
As a result, employees start to disregard the procedural ways of doing things and begin to take shortcuts to complete tasks. Additionally, when managers in an organization exhibit a lack of ethical behavior, employees lack respect for them (Hartman, 2010). The absence of well-respected leaders can cause major problems within an organization. A lack of business ethics in an organization can also cause tension between employees (Hartman, 2010). Employees that follow the rules can be resentful to those who do not follow the rules, causing dissension in the organization.The lack of business ethics can also cause American Red Cross to lose investors.
Investors choose to work with organizations they trust. As information surfaces of their unethical behavior, investors will deny the American Red Cross these vital business relationships. Investors mays also tell other investors about these unethical practices, making it hard to the American Red Cross to obtain these resources. This decreases the chances of the American Red Cross being able to find money for sustainability, which can lead to the organization’s longevity being compromised.Customer satisfaction has also been comprised by this event. The reports of fraudulent use of donations has caused donors to become irritated.
This leads to people bad mouthing the organization to friends and family, which only strengthens the company’s bad reputation. This will discourage many people from volunteering their time, money and services. The bottom line has also been affected greatly by this event. The high turnover has brought attention to the ARC for their misappropriation of funds. This has also discouraged volunteers from contributing due to the fear of not knowing how their contribution will be used.
Overall, the unethical behavior displayed by the American Red Cross continues to bring doubt to customers and investors, making it hard for the organization to move forward in a more positive direction. Determine and discuss the role that that ARC’s stakeholder orientation played in this scenario. The American Red Cross’s stakeholder orientation played a major role in this scenario. Stakeholder orientation refers to the degree in which the organization understands their stakeholders concerns and if exercised properly, can reduce the risk of poor communication, unfavorable press and negative public reactions.
The ARC displayed a major lack of concern and interest for their stakeholders. Their interests were based solely on self-gain and benefited no one but themselves. This lead to allegations of fraud by employees and others associated with the American Red Cross. The presence of a strong stakeholder orientation could have prevented this event from taking place.
A strong relationship with stakeholders could have helped the American Red Cross to identify these activities early on, reducing the damage. Stakeholders could have identified the trouble in the boardroom, and eliminated issues before they started.It would have been very beneficial to the ARC if they had utilized their stakeholder’s insight in order to get good sound advice on how to deal with these situations and recover for them. A strong stakeholder orientation builds trust between the organization and the stakeholder, which can increase the company’s success (Chandler, 2010). The ARC’s allegations of fraud, bribery, and theft on the part of volunteers and employees working for the organization has had a major negative impact on the company’s reputation.
From a strategic perspective, the ARC would have benefited greatly from a strong relationship with their stakeholder and these events may have played out differently. Determine and discuss the ways in which ARC’s corporate governance failed to provide formalized responsibility to their stakeholders. The American Red Cross’s corporate governance failed to provide formalized responsibility to their stakeholders in many ways. The American Red Cross’s Board of Directors had the ultimate responsibility of ensuring that the organization was performing ethical practices.
This absence of leadership allowed room for unethical practices, which lead to various illegal and unethical activities. The ARC failed by not allowing their stakeholders to make leadership decisions. One of major problems that the ARC experienced was their constant change in leadership. Different managers with different values and visions for the organization, creates an inconsistency within the organization, making it hard for employees and management to stay on the same page (Monks and Minow, 2011).When an organization experiences a lot of turnover from upper management, it can be discouraging to employees. It can also create a sense of confusion and carelessness within the organization.
A formalized responsibility given to stakeholders could have allowed them the ability to properly screen these executives and employees to ensure they were a good fit for the organization. Secondly, the ARC failed to provide corporate governance by not properly updating The Ethics Rules and Policies. When updating this document the ARC neglected to use the word ethics.
