Case Tl


As Marsha "Marty" Johnson Evans American Red Cross on August 5, with the challenge of restoring the . . During the past 24 of negative

en~.Itmust carryon its humanitarian work throughout its territory. inits internati. food and nutrition information. and without discrimination.l1lJou~lea. ". Source: American Red Cross. e72 Case 11:: American Red Cross . cooperation. and so prevent and alleviate human suffering WQereit may worldwide. in which all Societies have equal status and share equal responsibilities and duties in helping eachother.orpoliticafopinions. 9~nti. Itmust be opento all.generosity. > Ej(hibit 2 Values of the American Red Cross • • • • • • • Humanitarianism: We existto serve others in need. and efficiently with resources entrusted to us.onal.andappreciation. transportation. in excess of 6 million pints of blood. and youth. to identify. 1111~f)~if)lity:ltrnakesno discrimination asto nationality. andstaff we search for ways to provide hope to servewhileidemonstratingcompassion. ~~lpingOthers:Weareattentive and responsive tothose we serve. HIV/AIDS education.eacknowledge. always tpimprove. mental health counseling."_--'-" f)(hibit 1 Principles ofIntemational Red Cross • • • • • • • Hurilanity:ThelnternationalBed Cross and Red Crescent Movement. awareness required for exceptional service.found.independently. and support the rights and diversity of each person in our organization a?dinthecommunities we serve. Its purpose is to protect life and he. . and to give priority to to lT1?sturgentcases of distress. www. class. Int~grity:Weact with honesty. Disaster Services. Each year 83. or ideological nature. Voluntary Service:ltis a voluntary relief movement not prompted in any manner by desireJorgain. collectively and individually.countries. religious. and respond to emergencies. Stevvardship: We act respgnsibly. Swimming and lifeguard classes.eavors rel.000 hospitals with about half of the blood used in the United States.redcross.000 volunteers help disaster victims by providing food. ~~spect: Vv.volunteeJs. shelter.redcross. Community Services.ithoutdiscrimination to the wounded on the battlefield. while auxiliari. seniors. In~ependence: The Movement isindependent. race.~ndnational capacity. It promotes mutual understanding. endeavors.III~tal' Universality: The International Hed Cross and Red Crescent Movement.religious beliefs. and maintain competencies andthe. Educational services to prepare for disasters.esin. and openly share ideas and i_nformationwith each other. "~. hUIllanitari an services of their governments and subject tothe laws of theirrespective. demonstrate courage and accountability under pressure. financial assistance. Unity: There can be only one Red Cross or one Red Crescent Society in anyone country. always listening totlieirneeds and lookingforways to serve through existing or new initiatives. obtain. being guided solely by their needs. friendship. Health and Safety Services. Help for the homeless. prepare suffering of individuals.rning:We seek. the Movementmay not fake sides in or engage atany time in controversies of a political.allhandto ensure respectforthe human being. and so forth. living well programs.The National Societies.~~irit:Asafamilvofdonors.~utrality: In order to continue to enjoy the confidence of all. racial. effectively. born of a desire tobring assistance IN. and lasting peace amongst all peoples. must allNaysmaintain their autonomy so that they may be able atall times to act in accordance with the principles of the Movement. providing fer victims of disasters andh_elpingpeople prevent. Source:www. The American Red Cross supplies 3.

testing. Coinstar machines were located within two miles of 130 million Americans. John Clizbe. Each year more than 12 million Americans take advantage of lifesaving courses offered by the Red Cross.1 Technology and Operations Technology has helped the American Red Cross better coordinate its efforts among its 1. Volunteering. Inc. grants. the Internet serves as a vital source of information to the American public and as a new way to collect donations. The communication network allows it to locate family members during crises more efficiently. Helping kids.743 billion. Financial Overview In fiscal year 2001-2002 the American Red Cross had operating revenues of $4. For Cindee Archer. and the use of new technology will make this information available online. The Web site helps visitors locate local Red Cross shelters. materials."? Archer worked on developing a Web site where visitors could enter a zip code and quickly find information. In addition.570 billion (see Exhibits 3. Massachusetts General Hospital and the American Red Cross jointly own a patent for a protein associated with the underlying cause of Alzheimer's disease. and major expenses included:" can Red Cross in Washington. the American Red Cross supplies over 3." a nationwide disaster simulation to help prepare for acts of terrorism. 13 In February 2001 the American Red Cross teamed up with Coinstar. and it's not necessarily that." a service that enables blood drive sponsors to use their intranets to recruit donors and allows hospital customers to order blood products online. Investment income and other income: Investment income from endowments and reserve funds and income from contracts to provide various programs. Archer stated. staff expenses at disaster sites. Student nurses. and so forth. strengthen public health. International Services. Recruiting and organizing volunteers. Jane Delano Society. teens. Three main funding sources for the American Red Cross were:" • • Contributions: Fund-raising efforts by the United Way & Combined Federal Campaign. Geneva Conventions. administer funds. Consumers could drop loose change into the Coinstar machines located in local supermarkets. Youth Involvement. expenses in blood. legacies. "Some of them think this is going to be a kind of panacea for doing fund-raising. Total operating expenses for the 2000-2001 fiscal year were $2. and so on.000 hospitals with blood donations. and courses. Nursing. In the near future. primary health care programs."!' About 12 million Americans enroll in Red Cross courses each year. online media manager for the Ameri- . It works with the World Health Organization to alleviate malnutrition. it's only going to get more pervasive. and tissue services. A donation to the World Hemophilia Foundation of plasma product is used to treat hemophilia. keep up with breaking news. and diarrhea in poor countries and to support primary health care. there were costs associated with a Web site that many nonprofit groups did not realize. other monetary and in-kind contributions. to collect Red Cross donations for disaster relief efforts. As a result of recent research and development. The Red Cross has routinely published the latest public health information. You feel this sense of urgency whenever there's a disaster-e-you want that information up as quickly as you can get it. In 1999 the American Red Cross joined the Federal Emergency Management Agency for "TOPOFF.712 billion. and obtain information about donating and volunteering. 4. and distributing blood and tissue. and 5). it may be possible for the American Red Cross to offer an online shopping network to generate additional resources. lack of pure water.. and young adults. director of outreach at Action Without Borders has stated. Red Cross delegates help local citizens rebuild infrastructure. Total operating expenses for the fiscal year 2001-2002 were $3. It is now possible to make these courses available online. fees from collecting.v'? However. Biomedical services: Facility maintenance.P Strategic Alliances The American Red Cross has established a number of alliances with other organizations. The Red Cross is able to provide long-term aid and education to those in need.C. Products and services: Fees for products. Also. vice president of Disaster Services at the American Red Cross.400 chapters and to expand its reach across America. Emergency disaster response.117 billion. plasma. Wireless communication allows the American Red Cross to make faster damage assessment at the scene. In 2000 it launched "iGiveLife. indicated that "If every American near a Coinstar machine would donate a handful • • Disaster costs: Assistance to victims. feeding programs.• and so forth. and improve response time to local disasters. Russ Finkelstein. 8 The Internet provides information about nonprofit organizations and can provide "click-to-donate" sites for those individuals who are willing to help out with contributions while they are online. D. Funding disaster services: Expenses to solicit donations. find relatives in a disaster area. These "click" sites appeal to a newer and often younger audience for the nonprofits.. Cindy Archer also believed that "more and more people are coming onlinethis isn't going to go away. Total operating revenues for fiscal year 2000-2001 were $2. "The Internet has definitely changed how the whole organization thinks. and so on.

385 6.103 56 15.453 120.556 379. net of allowance for obsolescence of $7.042 93.293 63 63 23.801 126.892 1..209 39.402 3.840 12.633 4.453 296.243 15. $2.541 11.089 2.042 92.544 155.Red .547 986. 9.543 16.514 15.209 823.247 309.654 183 29..500 771.252 12.421 1.'c· _~.050 $ 1.buildings..662 39. 2002..036 357.437.525. net of allowance for doubtful accounts of $19.473 7..258 110.354 2.924 2.272 $3. June 30.823 950.913 Receival.137 liabilities and netassets Cross.453 120.604 in 2002 and $19.602.750 in 2002 and $6.569 11.411 $439.704 380. and other property.545 34.374.894 18. net 304.180 13.575.913 548.894 18. 2002 (with summarized information as of June 30._ ~jhibit 3 (ill thousands) Consolidated Statement of Financial Position.570 15.092 20 83 380. 2001) $146.619 $771.626 1.680 (-'elnsieln and postretirement liabilities benefits 357.825 197.525.066 $380.674 28.301 in 2001: Trade Contributions.. current portion Other Inventories.57.386 12. •.029.293 3.623 936.374.784 in 2001 Other assets Total current assets Investments Contributions receivable Prepaid pension costs Land.826 823.238 2.541 35..162 585.653 366.374 203.825 319.964 325.lles.0.626 1.149 287.385 American.924 liabilities 20.164.92 22.149 2.587 mitl11ents and contingencies L.798 1. Annual Report.

402 $1.575.077 136.083 3.222 67~175 36.900) (28.156 11 617.195) 411.117.931 420.967 213.582 58.601 989.906 61.960 108.742.736 3.848 136. 103.587 .901 174.960 1.902 32.815) 1.171 81.872.915 906 1.848 136.410) 420.960 1.066 546. Annual Report.872.518 (548) 419.342 2.405 40.182 311. 2002 (with summarized information for the year ended 30.330 (135.4 Consolidated Statement of Activities.712.745 (131.071 ) 2.699.086 $380. Year ended June 30.022 705 Armed Forces Emergency Services Disaster services liberty disaster relief-Sept.058 150.931 61.616 154.747) 19.844 2.970 337.201 (31.978 203.736 3.686. 2002.410 3.164.261 1.090 121)24 50.156 617.083 3.570.649 $ 757.822 1.069 2.302 30.18 22.924.171 82.902 32.097 4.614 152.727 115.077 137.135 2.236 213.238 2.756 284.980 360.137 in net assets from operations gains (losses) effect of accounting change in net assets beginning of year end of year Red Cross.035.513 308.967 213.448.118 22.034 21.008 (1.351 230.182 311.272 65.164.614 152.195.727 (2.089 1.901 174.466.728 76.437.726 263.108 45.513 308.208 $2.035.137 $2.259.876) 2.924. response Biomedical services Health and safety services Community services International services program services Supporting services: Fund raising Management and general 61.488 58.594 49.674.463 51.2001) (in thousands) $ 205.175 81.394 49.604 (63.570.060 6.619 22.845 1.549 84.016 22.289' 1.

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If all Americans donate the change in their wallet or pocket. and relief workers. sleeping quarters. and help from a myriad of volunteers contributed to Red Cross efforts to provide aid to survivors.5 million. and we must respond in an extraordinary way. the president and chief executive officer of the Red Cross. and changes in legislation. Right now we are just trying to keep up with responses/'" Goldburg stated that the entire amount raised by the Red Cross since the disaster would go into the newly created Liberty Fund. which prohibits monopolization. and Coral Blood Services alleged the Red Cross had cost them more than $25 million in lost business. said in a written statement. Funds were used for travel. William Nicely.3 billion. HemaCare Corp. The Red Cross is a fine organization. victims' families. the new M&Ms' captured the heart of America. In January 2002 Masterfoods USA presented a check to the Red Cross in the amount of$3. and other services to victims' families and others affected. She indicated that organization officials earmarked $100 million from the fund to provide short-term financial assistance to families of victims. Financial assistance. based on Healy'S policy of using donations for a "long period of C78 Case 11:: Amer lean Red Cr ass . a Red Cross spokeswoman. the Red Cross would be that much better prepared to respond to disaster immediately. the Red Cross created the Liberty Disaster Relief Fund to be used exclusively to meet the needs of people directly affected by the September 11 tragedy. "You no longer need a credit card or checkbook to provide financial support to those in need. declarations. Millions of dollars. HemaCare's chief executive officer. and will explore efforts in joint training exercises. counseling. child care. 2001. Within 15 days of the September 11. attack. Respite centers were set up in New York City. and blue M&Ms specifically to benefit the Red Cross. unfair trade practices.2001. The American Red Cross has a heavy burden-to live up to the inspiration and memory of those lost. and at the Pentagon to provide meals. In the lawsuit. white. stated. those handfuls will make a huge difference in our capacity to help others thisyear. The lawsuit also charged tortuous interference. stated. the Red Cross had annual sales of more than $1. their families. food. The ASAE provides the Red Cross with demographic information about associations and assistance with identifying organizations they wish to contact during times of need. the plaintiffs alleged the Red Cross violated Section 2 of the Sherman Antitrust Act. Less than 50 percent of the money raised was targeted for victims. the Red Cross set up family assistance centers to provide counseling.P This planned distribution of funds."!" Masterfoods USA. senior vice president. "What has taken place is extraordinary.. frequent schedule changes. said. COO of Coinstar. American Red Cross Growth and Integrated Development. The workers were unhappy about long hours. and Liberty Disaster Relief Fund After the terrorist attacks on September 11. said in a written statement. thousands of blood donations. lodging." unfair competition under the California Business and Professional Code. In August 2001 the American Red Cross and the American Society of Association Executives (ASAE) signed an agreement under which the two organizations will share data regarding disasters. Because of the large dollar amount of donations from the American people. Worker Strike In June 2000 Red Cross workers who collected blood donations and delivered them to hospitals went on strike after rejecting a contract offer by the American Red Cross. created a special package of red. the American Red Cross released a spending plan for the first $300 million in the Liberty Fund.g. In providing more than half the nation's blood. and creative displays in stores across the country. platelets) below production costs to drive out competitors while it charged higher prices for the same products in markets where there is no competition."? Blythe Kubina. the American Red Cross rose to the challenge of providing the most extensive relief operation in its 120-year history. MD. and meals for volunteers and staff working on-site. and other items to relief workers and volunteers. "Everything is happening at such a fast pace. and transportation were provided to families of missing foreign nationals. We have been in full compliance with the law. The national campaign theme used for this promotion was "Taking Care of America Everyday. In response to the tragedy.of change on their next supermarket visit."20 Recent Problems Events between 2000 and 2002 provided the American Red Cross with a number of challenges." "Through appearances on television. 15 One hundred percent of all profits from the sales of these M&Ms were donated to the American Red Cross Disaster Relief Fund. a Mars Incorporated Company. Pennsylvania." In January 2001 a California blood supplier filed an antitrust suit against the American Red Cross claiming the organization used its clout to eliminate competitors. and increasing health benefit costs. It is with great humility and pride that we carry out this noble obligation/'P On October 12." Rich Stillman. The remainder was earmarked to help the Red Cross improve its own organization and expand into new aid programs that might be needed in the event of future terrorist attacks. We just want them to play by the rules that are reasonable and fair and compete on a level playing field. Bernadine Healy. a Red Cross spokesperson. financial assistance. Somerset County. the Red Cross had collected $202 million in donations. or rescue workers.'? Unfair Trade Practices Lawsuit The Red Cross derived 60 percent of its revenues from the sale of blood. Deborah Goldburg. and we will vigorously defend this lawsuit. They further alleged that the American Red Cross priced some blood products (e.' stated Skip Seitz. radio and newspapers. "We believe that's unfair and illegal. "We believe the American Red Cross has done nothing inappropriate regarding HemaCare's claims to unfair business practices and we were surprised by this lawsuit.

assistanceto 3. Art Taylor.32 Another onslaught of negative publicity for the American Red Cross occurred March 10.P? On March 7. Deborah Daley." In response. "If we don't subject ourselves to public scrutiny." The Lancet reported. The attorney general of New York State threatened legal action. "Today we are recognizing the work of our staff. and the financial accountability of Red Cross chapters. on the CBS news show 60 Minutes. 2002. chairman of the American Red Cross Board of Governors. interim president. David McLaughlin stated. As for the Alpine fire in Southern California. it's in small print. The Red Cross does regular audits of chapters. She stated that Wallace's claim that chapters "are not even required to submit financial reports" is completely false. CFO of the Red Cross. and donors who responded to September 11th. hire an additiona1200 caseworkers. it took us too long to hear their message. These donations were given in response to Healy'S "Together. In his letter Decker requested a public retraction of Taylor's statements and that the Better Business Bureau's current report on the Red Cross be restored to the give.P 60 Minutes Program 1. president of the alliance. Wallace reported. It appears to have contained some inaccuracies concerning floods. "The people of this country have given the Red Cross their hard-earned dollars. participate in a database to be shared among relief agencies. we will never have public truSt. A letter from Harold Decker to the Wise Giving Alliance explained that a request by the alliance for an updated report from the Red Cross was received in January" Web site. In addition. made some unsupported public statements regarding the Red Cross that were reported in the Philadelphia Inquirer.uncertainty and recovery. "They also decided to put a disclaimer in their ads saying that donations will be used for this and other disasters. McLaughlin.~ssistanceto 51. 2002. . the American public donated blood for the disaster victims. allegedly because the American Red Cross did not provide a timely report to the alliance. "Donors charged the organization with abuse of their good intentions. we can save a life" public service announcement. Given the recent activities of the American Red Cross. stated. claiming that the organization's board had pushed her OUt. Deborah Daley reported. "Outside audits of local Red Cross chapters are rare. By November 2001 about 10 percent of the red blood cells collected on September 11 and 12 had expired. In fact.i" The donors blasted Healy because they expected their donations to be helping September 11 disaster victims now.000people. interim CEO and president of the Red Cross. "I had no choice. In a comment about advertising Web site.althservices for 232. Jack Campbell. a spokesperson for the Red Cross. News & World Report. fires." Harold Decker. sent a letter to CBS News indicating the errors and an explanation."28 In addition to donating money. the American Red Cross saluted the staff and volunteers who provided assistance to the more than 54. and very clear direction for our September 11 relief effort.S. David T. their trust.'dE)ceasedand seriously injured . Healy was confronted with allegations of "panicking the public into wasteful donations of blood. The largest 126 chapters must send quarterly financial reports to the national Red Cross. Experts questioned the wisdom of calling for blood donations when there were very few blood recipients. H. Chapters must meet specific national guidelines to maintain their charters. 2001. and extend the use of toll-free telephone lines. Harold Decker.26 On November 14. "In the West Virginia flood ad. there is so little accountability that local chapters-and there are more than one thousand of them-aren't even required to submit financial reports to Red Cross headquarters in Washington.500 families affected by the attacks. COO of the alliance.000 in annual expenses must have an external audit conducted by an independent CPA. Wallace reported." Healy finally responded with her announcement of retirement. and Bennett Weiner. announced that the American Red Cross received $930 million in contributions and this money was used to provide the following. the "this and other disasters" language appears in the same font and size as the rest of the body copy appealing for support. announced changes adopted by the American Red Cross Board of Governors to meet the immediate and long-term needs of people affected by the September 11 terrorist attacks. 14 months after the fire. volunteers. mental he.'! BBB Wise Giving Alliance On February 16.000people $169 270 94 3." Deborah Daley responded that chapters are accountable in a number of ways. Mike Wallace reported."?" In an article in U. agreed to a March 30 deadline for the updated report." she said. Chapters that have over $100.P In a congressional hearing. $ millions gir~Gt. The trouble is. Regrettably. and health services for 129.266families of . All chapters must have an independent annual review. The Red Cross would provide increased financial support to families. David McLaughlin stated. 2.000families of displaced workers and disaster workers Provision for 14million meals. "As oflast week. it was determined that such a report could not be provided by the due date.." caused a huge uproar. 2002. the Better Business Bureau Wise Giving Alliance removed the American Red Cross from its "give.

2002.S. Fund Raising Management. Taylor. Press release. February 1. Ibid. How should she proceed? Endnotes 1. www. The timely and capable response day-in and day-out to these disasters speaks volumes about the character of the volunteers and staff. Red Cross faces antitrust lawsuit. 11. Evans has served as national executive director of the Girl Scouts of the USA for the past four years. Cross. 7. Press release. Annual June 27. Navy. Cross. 23. 18. ASAE and American Red Cross formalize partnership agreement. 31. Levine. With great insight into our mission. American Red Cross. Daniel S. 2000. Ibid. Red Cross workers on strike. 2001.redcross. American 2. and most especially their dedication. 15. 34. David McLaughlin. 10. Marsha Johnson Evans must confront the many issues faced by the American Red Cross. 2002. Marsha. February 12. American 6. American 5. American Red Cross. Mark. Tyrangiel. Press release. Red Cross announces major changes in Liberty Fund. U. US Newswire. 2002. Taylor. Greenberg. Ibid. 2001-2002. some 45. 2002. Red Cross announces major changes in Liberty Fund: Fund solely used for people affected by September 11 tragedy. 2002. December 9. 22(25): 37. politics. In his announcement. 28. Stephanie.San Diego was still waiting for a full accounting of how the money donated for the fire victims has been and will be spent. C80 Case 11:: American Red CI ass . February 1. 17. News & WorldReport. PR Newswire. Charity olympics. Press release. American Red Cross. June 27. Reports. Blood. A torrent of donations. Ibid. Tyrangiel. said. 24. Ibid. "Marty's unique style of leadership along with her experience as established administrator will bring new vigor to the American Red Cross. US Newswire. Annual Report. 8. their talent. 2000. Ibid. 200 I. Ibid. Ibid. 13. American 4.. 2002.." As she begins to guide the organization. February 16. 30. Greenberg. 53(8): 12. Greenberg. 20. Infoworld. and the American Red Cross. The charity olympics: After weeks of record giving. Charity olympics. November 24: 1789. Looking to the Future After a five-month search. November 14. PR Newswire. where she earned the rank of rear admiral. 2001. chairman of the Board of Governors of the American Red Cross. and the American Red Cross. 31(4): 33. 35. American Red Cross and Coinstar to launch new fundraising technology to prepare for disasters. Cinda. 25. Tyrangiel. prior to which she had a 29-year career in the U. Becker. politics. American Red Cross letter to Better Business Bureau's Wise Giving Alliance. 9. 33. Josh. 19. 21. Johnson Evans was named president and CEO of the American Red Cross on June 27.. Association Management. politics. Reports. November 19. Modern Healthcare 31. 2000. 16. Cross. my observation is that the Red Cross never lost sight of its responsibility to every community and every victim of the other disasters that occurred. Annual Red Cross faces antitrust lawsuit. 2001. but there are costs. Nonprofits reap rewards of the Web-Internet proves to be a great fund-raising tool for charities. 2001." Deborah Daley responded that the chapter has provided up-to-date financial information on its response to the Alpine fire three times since November. 12.S. Press release. 29. Red Red Red Red Red Cross. Blood. January 1: 20. 22. October 1: 8. Modern Healthcare 31. 2001. Red Crossroads. Lancet. Blood. 2001. American 3. November 5: 75. Sanborn. Newsweek: Former Red Cross head says her fundraising message was clear . 14. Annual Cross. Samantha. 32. 2001."?" Evans remarked that: In the midst of responding to the extraordinary demands of 9/11 and a lot of criticism about these efforts. and the American Red Cross. 2000. 26. charities wrestle with how best to spend money pouring in since attacks. 2001. American Red Cross. March 7. 2002. Americans want to know: Is that money helping? Time. 27.000 in the months since last September. she is well poised to guide our organization as we continue to provide vital services in a world faced by new challenges. American Red Cross. 2000-2001.

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