Case Tl

American

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

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

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

894 18.750 in 2002 and $6.385 American.587 mitl11ents and contingencies L. net of allowance for doubtful accounts of $19. Annual Report.258 110.453 296.826 823.662 39.964 325.704 380. net of allowance for obsolescence of $7.823 950.544 155.149 287.437.653 366.57. June 30.103 56 15.0. and other property.buildings.374.801 126..209 823.623 936.525.374 203.137 liabilities and netassets Cross.411 $439.541 35.092 20 83 380.421 1.272 $3.514 15.301 in 2001: Trade Contributions.149 2.385 6. 9.924 2.500 771.602.913 548.293 63 63 23..784 in 2001 Other assets Total current assets Investments Contributions receivable Prepaid pension costs Land.029.569 11.209 39.050 $ 1.619 $771..162 585.798 1.164.066 $380.556 379.036 357.453 120. 2001) $146.604 in 2002 and $19.293 3.92 22.'c· _~.913 Receival._ ~jhibit 3 (ill thousands) Consolidated Statement of Financial Position.575.402 3.473 7.374.543 16.089 2.626 1.541 11. •.386 12. 2002.042 93. net 304.924 liabilities 20.243 15. 2002 (with summarized information as of June 30.840 12.680 (-'elnsieln and postretirement liabilities benefits 357.547 986..lles.894 18.892 1. current portion Other Inventories.825 319.825 197.525.570 15.626 1..180 13.252 12. $2.238 2.633 4.354 2.Red .654 183 29..674 28.042 92.453 120.247 309.545 34..

876) 2.902 32. Year ended June 30.906 61. response Biomedical services Health and safety services Community services International services program services Supporting services: Fund raising Management and general 61.437.261 1.513 308.302 30.931 420.083 3.058 150.164.135 2.022 705 Armed Forces Emergency Services Disaster services liberty disaster relief-Sept.931 61.587 .848 136.448.900) (28.980 360.970 337. 2002.156 11 617.077 136.727 (2.066 546.699.728 76.960 1.5.915 906 1.736 3.960 108.289' 1.182 311. 103.164.844 2.083 3.182 311.960 1.463 51.742.086 $380.488 58.582 58.616 154.259.967 213.118 22.674.745 96.726 263.736 3.756 284.008 (1.236 213.649 $ 757.108 45.614 152.872.570. 2002 (with summarized information for the year ended 30.272 65.259.619 22.090 121)24 50.513 308.549 84.410) 420.089 1.822 1.924.924.405 40.171 82.394 49.137 $2.201 (31.137 in net assets from operations gains (losses) effect of accounting change in net assets beginning of year end of year Red Cross.967 213.18 22.594 49.902 32.117.222 67~175 36.156 617.171 81.901 174.330 (135. Annual Report.077 137.402 $1.848 136.604 (63.727 115.238 2.466.071 ) 2.601 989.069 2.686.060 6.978 203.035.351 230.2001) (in thousands) $ 205.815) 1.570.195.845 1.4 Consolidated Statement of Activities.518 (548) 419.208 $2.085 (131.614 152.872.175 81.410 3.035.342 2.575.195) 411.034 21.747) 19.097 4.712.016 22.901 174.

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the plaintiffs alleged the Red Cross violated Section 2 of the Sherman Antitrust Act. stated.. child care. They further alleged that the American Red Cross priced some blood products (e. Because of the large dollar amount of donations from the American people. platelets) below production costs to drive out competitors while it charged higher prices for the same products in markets where there is no competition.2001. those handfuls will make a huge difference in our capacity to help others thisyear. 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. "Everything is happening at such a fast pace. American Red Cross Growth and Integrated Development. declarations. 15 One hundred percent of all profits from the sales of these M&Ms were donated to the American Red Cross Disaster Relief Fund. MD. and other items to relief workers and volunteers. the president and chief executive officer of the Red Cross. and Coral Blood Services alleged the Red Cross had cost them more than $25 million in lost business. Funds were used for travel. stated. Within 15 days of the September 11. 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.3 billion."!" Masterfoods USA. and we must respond in an extraordinary way."? Blythe Kubina. "We believe that's unfair and illegal. and transportation were provided to families of missing foreign nationals. counseling. We just want them to play by the rules that are reasonable and fair and compete on a level playing field. the new M&Ms' captured the heart of America. William Nicely. a Mars Incorporated Company. lodging. and creative displays in stores across the country." 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. COO of Coinstar. the American Red Cross rose to the challenge of providing the most extensive relief operation in its 120-year history.' stated Skip Seitz. and other services to victims' families and others affected.P This planned distribution of funds. Respite centers were set up in New York City. HemaCare Corp. and Liberty Disaster Relief Fund After the terrorist attacks on September 11. and relief workers. Bernadine Healy. a Red Cross spokeswoman. the Red Cross had annual sales of more than $1. If all Americans donate the change in their wallet or pocket. their families. "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. The Red Cross is a fine organization. Financial assistance. sleeping quarters. and at the Pentagon to provide meals. food. said in a written statement. "You no longer need a credit card or checkbook to provide financial support to those in need. Pennsylvania. The national campaign theme used for this promotion was "Taking Care of America Everyday. said in a written statement. the Red Cross would be that much better prepared to respond to disaster immediately. and will explore efforts in joint training exercises. the Red Cross set up family assistance centers to provide counseling. created a special package of red. In response to the tragedy. a Red Cross spokesperson.g. which prohibits monopolization. unfair trade practices. and we will vigorously defend this lawsuit. Deborah Goldburg." "Through appearances on television. Millions of dollars. said." Rich Stillman. and meals for volunteers and staff working on-site. 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. "What has taken place is extraordinary. thousands of blood donations. frequent schedule changes." unfair competition under the California Business and Professional Code. and help from a myriad of volunteers contributed to Red Cross efforts to provide aid to survivors. The lawsuit also charged tortuous interference. and changes in legislation. based on Healy'S policy of using donations for a "long period of C78 Case 11:: Amer lean Red Cr ass . We have been in full compliance with the law. It is with great humility and pride that we carry out this noble obligation/'P On October 12. and increasing health benefit costs. 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. The ASAE provides the Red Cross with demographic information about associations and assistance with identifying organizations they wish to contact during times of need. or rescue workers. In the lawsuit. 2001. She indicated that organization officials earmarked $100 million from the fund to provide short-term financial assistance to families of victims. financial assistance. The American Red Cross has a heavy burden-to live up to the inspiration and memory of those lost. In January 2002 Masterfoods USA presented a check to the Red Cross in the amount of$3. HemaCare's chief executive officer. Less than 50 percent of the money raised was targeted for victims. victims' families. 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. senior vice president."20 Recent Problems Events between 2000 and 2002 provided the American Red Cross with a number of challenges. Somerset County. and blue M&Ms specifically to benefit the Red Cross.5 million. white. The workers were unhappy about long hours. attack. radio and newspapers.of change on their next supermarket visit. In providing more than half the nation's blood. the Red Cross had collected $202 million in donations.'? Unfair Trade Practices Lawsuit The Red Cross derived 60 percent of its revenues from the sale of blood. the American Red Cross released a spending plan for the first $300 million in the Liberty Fund.

000people.000 in annual expenses must have an external audit conducted by an independent CPA. Healy was confronted with allegations of "panicking the public into wasteful donations of blood.P 60 Minutes Program 1.assistanceto 3. claiming that the organization's board had pushed her OUt. 2002. In fact. chairman of the American Red Cross Board of Governors. it's in small print. 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 2002. and health services for 129. All chapters must have an independent annual review. Jack Campbell.S.'! BBB Wise Giving Alliance On February 16. and extend the use of toll-free telephone lines. Wallace reported." Deborah Daley responded that chapters are accountable in a number of ways. 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. These donations were given in response to Healy'S "Together." The Lancet reported. interim president. the American public donated blood for the disaster victims. and Bennett Weiner. The attorney general of New York State threatened legal action. It appears to have contained some inaccuracies concerning floods. "As oflast week. interim CEO and president of the Red Cross. Experts questioned the wisdom of calling for blood donations when there were very few blood recipients. Chapters must meet specific national guidelines to maintain their charters. David McLaughlin stated. "I had no choice. 14 months after the fire. COO of the alliance. 2. 2001. "If we don't subject ourselves to public scrutiny.000families of displaced workers and disaster workers Provision for 14million meals.500 families affected by the attacks. 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. McLaughlin. and very clear direction for our September 11 relief effort." caused a huge uproar. The Red Cross does regular audits of chapters. The trouble is.266families of . "The people of this country have given the Red Cross their hard-earned dollars. mental he. a spokesperson for the Red Cross. on the CBS news show 60 Minutes. The Red Cross would provide increased financial support to families. As for the Alpine fire in Southern California." In response. president of the alliance. hire an additiona1200 caseworkers. 2002.32 Another onslaught of negative publicity for the American Red Cross occurred March 10.i" The donors blasted Healy because they expected their donations to be helping September 11 disaster victims now. and donors who responded to September 11th. participate in a database to be shared among relief agencies. the American Red Cross saluted the staff and volunteers who provided assistance to the more than 54. David McLaughlin stated. allegedly because the American Red Cross did not provide a timely report to the alliance. it was determined that such a report could not be provided by the due date. "They also decided to put a disclaimer in their ads saying that donations will be used for this and other disasters. their trust.P? On March 7."?" In an article in U. we can save a life" public service announcement. The largest 126 chapters must send quarterly financial reports to the national Red Cross. "In the West Virginia flood ad. Wallace reported. She stated that Wallace's claim that chapters "are not even required to submit financial reports" is completely false.P In a congressional hearing.althservices for 232. In a comment about advertising practices. stated. News & World Report.'dE)ceasedand seriously injured . By November 2001 about 10 percent of the red blood cells collected on September 11 and 12 had expired. announced that the American Red Cross received $930 million in contributions and this money was used to provide the following.26 On November 14. Mike Wallace reported.. "Today we are recognizing the work of our staff." she said. the Better Business Bureau Wise Giving Alliance removed the American Red Cross from its "give." Healy finally responded with her announcement of retirement. fires. we will never have public truSt. Chapters that have over $100. Deborah Daley reported. . 2002. In addition." Harold Decker. 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.org" Web site. $ millions gir~Gt.~ssistanceto 51. the "this and other disasters" language appears in the same font and size as the rest of the body copy appealing for support.org Web site. "Outside audits of local Red Cross chapters are rare. Harold Decker.uncertainty and recovery. agreed to a March 30 deadline for the updated report.000people $169 270 94 3. H. Regrettably."28 In addition to donating money. "Donors charged the organization with abuse of their good intentions. Deborah Daley. made some unsupported public statements regarding the Red Cross that were reported in the Philadelphia Inquirer. CFO of the Red Cross. Art Taylor. and the financial accountability of Red Cross chapters. volunteers. it took us too long to hear their message. Given the recent activities of the American Red Cross. David T. sent a letter to CBS News indicating the errors and an explanation.

org. Reports. and most especially their dedication. 2002. Marsha Johnson Evans must confront the many issues faced by the American Red Cross. Charity olympics. and the American Red Cross. November 14. 2001. 28. June 27. U. News & WorldReport. 22. October 1: 8. where she earned the rank of rear admiral. Red Crossroads. she is well poised to guide our organization as we continue to provide vital services in a world faced by new challenges. Stephanie. 2002. American 5. 53(8): 12.. Mark. American Red Cross. politics. With great insight into our mission. Blood. prior to which she had a 29-year career in the U. 2001. December 9. Evans has served as national executive director of the Girl Scouts of the USA for the past four years. February 16. Modern Healthcare 31. 23. 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. Tyrangiel. November 5: 75. American 3. Press release. Marsha. 2002. The timely and capable response day-in and day-out to these disasters speaks volumes about the character of the volunteers and staff. US Newswire. Modern Healthcare 31. 13. Infoworld. 35. 27.. Greenberg. American Red Cross. Association Management. 26. 25. Navy. Newsweek: Former Red Cross head says her fundraising message was clear . 2000. 2001. American Red Cross letter to Better Business Bureau's Wise Giving Alliance.S. February 1. 19. US Newswire. American Red Cross. 2000. 11. Ibid. Ibid. Fund Raising Management. 34. some 45. 15. PR Newswire. 2002. Cross. their talent. Americans want to know: Is that money helping? Time. 2000-2001. politics. 31. November 24: 1789."?" Evans remarked that: In the midst of responding to the extraordinary demands of 9/11 and a lot of criticism about these efforts. David McLaughlin. American 6. ASAE and American Red Cross formalize partnership agreement. A torrent of donations. Annual June 27. Ibid. 2001. www. Press release. 2002. Ibid. 2001. In his announcement. politics. 22(25): 37. Blood." Deborah Daley responded that the chapter has provided up-to-date financial information on its response to the Alpine fire three times since November. Red Red Red Red Red Cross. Ibid. charities wrestle with how best to spend money pouring in since attacks. Reports. 7. Nonprofits reap rewards of the Web-Internet proves to be a great fund-raising tool for charities. Annual Report. Red Cross announces major changes in Liberty Fund: Fund solely used for people affected by September 11 tragedy. American Red Cross and Coinstar to launch new fundraising technology to prepare for disasters. November 19. Looking to the Future After a five-month search. The charity olympics: After weeks of record giving. Red Cross workers on strike. March 7. 2001. 2002. but there are costs. 30. PR Newswire. 18. Press release.S. Lancet. American 2. Annual Cross. 31(4): 33. Cross. Josh. February 1. 12.000 in the months since last September. Red Cross faces antitrust lawsuit. How should she proceed? Endnotes 1. Samantha. Cinda. Press release. 17. Becker. and the American Red Cross. Ibid. 24. Blood. chairman of the Board of Governors of the American Red Cross. 16. 33. American 4. Cross.redcross. 2000. Charity olympics. Red Cross faces antitrust lawsuit. 2001. 2001. Tyrangiel. said. 2001-2002. Daniel S. 29. "Marty's unique style of leadership along with her experience as established administrator will bring new vigor to the American Red Cross. Taylor. Greenberg. Ibid. 10. 2000. 8. Levine. C80 Case 11:: American Red CI ass . 9. Taylor.San Diego was still waiting for a full accounting of how the money donated for the fire victims has been and will be spent. American Red Cross. 200 I. 32. 14. Annual Report. Greenberg." As she begins to guide the organization. Press release. 21. February 12.. Ibid. Johnson Evans was named president and CEO of the American Red Cross on June 27. American Red Cross. 20. January 1: 20. Sanborn. Red Cross announces major changes in Liberty Fund. and the American Red Cross. 2002. Tyrangiel.

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