Corruption in a Public Organization

Performance Evaluation on Corruption for Public Organization In the wake of the double-edged sword caused by its scandalous mismanagement of the September 11th terrorist attacks and Hurricane Katrina's devastation of New Orleans in 2005, the venerable charity organization American Red Cross (ARC) was subjected to intense public and political scrutiny.

This pressurized process of external examination eventually revealed an abundance of systemic flaws in the ARC's organizational management structure, including widespread fraud and abuse of privileges by executives, gross misconduct on the part of volunteers and other employees, and an astounding level of wasteful spending as it pertains to funds that were ostensibly donated to a charitable cause.

The four established benefits of business ethics, as described by Ferrell, Fraedrich, and Ferrell in Business Ethics, of employee commitment, investor loyalty, customer satisfaction, and bottom line (2011) all experienced dramatically detrimental consequences that were directly caused by the ARC's corrupt and incompetent management structure.

During the investigation into accusations of misconduct filed by ARC volunteers after the debacle in New Orleans, "more than a dozen Red Cross volunteers from around the country described an organization that had virtually no cost controls, little oversight of its inventory and no mechanism for basic background checks on volunteers given substantial responsibility" (Strom, 2006), demonstrating that employee commitment had been severely diminished by the institutionalized impropriety.

The 'investments' made by the public in the form of charitable donations were curtailed sharply as news of the ARC's exploitative practices spread, and the recipients of promised aid became vocal in their dissatisfaction with the organization's deployment of medical aid, sustenance, and other drivers of the ARC's charter.

This reversal in the ARC's formerly sterling reputation has slashed the group's bottom line, as just recently the ARC "the largest supplier of donated blood in the U.S., was fined $9.6 million after federal inspectors found hundreds of blood safety violations at 16 of the organization's 36 blood collection centers nationwide" (Koleva, 2012). As one of the world's most prominent humanitarian organizations, the conduct of the ARC is ostensibly governed by a unique set of key stakeholders who hole a vested interest in the group's actions and agenda.

With a stated mission to "provide relief to victims of disasters and help people prevent, prepare for and respond to emergencies" (Ferrell, Fraedrich, and Ferrell, 2011), the ARC's primary stakeholders are obviously the afflicted populations in disaster zones in desperate need of aid. As subsequent investigation revealed, however, the ARC succumbed to the bane of every large enterprise: egotism and avarice.

With seven different permanent or acting heads during the last decade, the ARC suffered from an inordinately high rate of executive turnover, indicative of a misaligned stakeholder orientation which prioritized personal power over the assurance of an effective charitable network. Furthermore, this misaligned stakeholder orientation soon spread virulently throughout the ARC's legions of volunteer service members and temporary employees, as cases of rampant misconduct became commonplace after both September 11th and Hurrican Katrina.

As the New York Times reported in an investigative series launched to address allegations pouring from New Orleans, "among the specific problems identified by volunteers were the disappearance of rented cars, generators and some 3,000 of 9,000 air mattresses donated by a private company, as well as the unauthorized possession of Red Cross computer equipment that could be used to add money to debit cards and manipulate databases" (Strom, 2006). Investigators identified countless examples of the ARC's corporate governance structure failing to provide formalized responsibility to its stakeholders.

In addition to the revolving door to the ARC boardroom described above, in which no less than seven leaders came and went during the last decade, several instances of cronyism in appointments to prominent positions, improper diversion of funds and resources, and a disturbing lack of financial transparency were identified by independent investigators.

In an especially egregious example of this failure to uphold responsibilities to stakeholders, a recently launched federal inspection campaign launched to assess the ARC's blood collection processes found "regulators claim the organization allowed employees with no medical training, certification, or experience to serve as Medical Directors in charge of reviewing donor complications, and permitted staff to "perform tasks they did not understand" (Koleva, 2012) The ongoing efforts to restructure and rebrand the ARC represent the organization's renewed commitment to developing a mutually beneficial stakeholder perspective, but many critics have decried the rehabilitation campaign as insufficient and disingenuous, as the ARC has experienced broad restructuring on a near constant basis for the last two decades (Scott, 1995).

Nonetheless, a targeted campaign of emotional appeals, combined with evidence of real reform in action, could be utilized by the ARC's executive management in their attempt to reconnect.