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

and openly share ideas and i_nformationwith each other. Unity: There can be only one Red Cross or one Red Crescent Society in anyone country. Voluntary Service:ltis a voluntary relief movement not prompted in any manner by desireJorgain.~~irit:Asafamilvofdonors. Source:www. ~~spect: Vv. in excess of 6 million pints of blood. always tpimprove. and without transportation. ".~utrality: In order to continue to enjoy the confidence of all. Help for the homeless. and support the rights and diversity of each person in our organization a?dinthecommunities we serve. endeavors. shelter. Disaster Services. Each year 83.000 volunteers help disaster victims by providing food.The National Societies. or ideological nature. seniors. Itmust be opento all.l1lJou~lea.generosity. > Ej(hibit 2 Values of the American Red Cross • • • • • • • Humanitarianism: We existto serve others in need.onal. "~. Int~grity:Weact with honesty. 9~nti. mental health counseling.orpoliticafopinions. inits internati. financial assistance.000 hospitals with about half of the blood used in the United States. being guided solely by their needs.found. friendship. .religious beliefs. and efficiently with resources entrusted to us.rning:We seek. Source: American Red Cross. In~ependence: The Movement isindependent.andappreciation.en~. and so on."_--'-" f)(hibit 1 Principles ofIntemational Red Cross • • • • • • • Hurilanity:ThelnternationalBed Cross and Red Crescent Movement.ithoutdiscrimination to the wounded on the battlefield. and maintain competencies andthe. Health and Safety Services.volunteeJs. awareness required for exceptional service. demonstrate courage and accountability under worldwide. providing fer victims of disasters andh_elpingpeople prevent.Itmust carryon its humanitarian work throughout its territory. e72 Case 11:: American Red Cross .redcross. 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 prevent and alleviate human suffering WQereit may be. and youth. 1111~f)~if)lity:ltrnakesno discrimination asto nationality.eavors rel. obtain. It promotes mutual understanding. while auxiliari. ~~lpingOthers:Weareattentive and responsive tothose we serve. food and nutrition information. Stevvardship: We act Its purpose is to protect life and he.eacknowledge.ievethe suffering of individuals. religious. and so forth. prepare for. collectively and individually. Universality: The International Hed Cross and Red Crescent Movement. Community Services. racial.allhandto ensure respectforthe human being. andstaff we search for ways to provide hope to servewhileidemonstratingcompassion. and to give priority to to lT1?sturgentcases of distress. hUIllanitari an services of their governments and subject tothe laws of theirrespective. www.independently. race. in which all Societies have equal status and share equal responsibilities and duties in helping eachother.~ndnational capacity.esin. and respond to emergencies. HIV/AIDS education. The American Red Cross supplies 3. Educational services to prepare for disasters. living well programs. the Movementmay not fake sides in or engage atany time in controversies of a political. to identify. born of a desire tobring assistance IN.III~tal'Y.redcross. Swimming and lifeguard classes. cooperation. class.respect. always listening totlieirneeds and lookingforways to serve through existing or new initiatives. effectively.

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

801 126.089 2.374 203.825 197.374.258 110.924 liabilities 20.892 1.437. and other property.411 $439.386 12.57. net of allowance for doubtful accounts of $19.547 986.209 39. 2002 (with summarized information as of June 30.602.272 $3.lles.385 6.453 120.680 (-'elnsieln and postretirement liabilities benefits 357.385 American.913 548.541 35.buildings.162 585.654 183 29.050 $ 1.798 1.500 771.247 309.825 319.894 18..674 28.894 18.750 in 2002 and $6.575. current portion Other Inventories.180 13.543 16.587 mitl11ents and contingencies L..623 936.238 2.243 15.653 366..0.293 3. net 304.103 56 15.149 287. •.826 823.149 2. $2.036 357.137 liabilities and netassets Cross.042 93.514 15.704 380.092 20 83 380.453 296.626 1..354 2.92 22.545 34.784 in 2001 Other assets Total current assets Investments Contributions receivable Prepaid pension costs Land.209 823..293 63 63 23. June 30.421 1.042 92.626 1.525.525..924 2.662 39.453 120.964 325.570 15. net of allowance for obsolescence of $7.Red . 9.252 12.569 11.604 in 2002 and $19.374.913 Receival.402 3.473 7. 2002.066 $380._ ~jhibit 3 (ill thousands) Consolidated Statement of Financial Position..544 155.619 $771.164.301 in 2001: Trade Contributions. 2001) $146.823 950. Annual Report.'c· _~.556 379.633 4.541 11.840 12.029.

171 81.726 263.083 3.058 150.195) 411.18 22.931 420.902 32.5.570.848 136.195.090 121)24 50.069 2.008 (1.872.035.175 81.902 32.513 308.089 1.137 in net assets from operations gains (losses) effect of accounting change in net assets beginning of year end of year Red Cross.815) 1.156 11 617.118 22.727 115.960 1.970 337.575.900) (28.872.086 $380.164.745 96.960 1.351 230.727 (2.980 360.016 22.066 546.238 2.097 4.182 311.236 213.342 2.437.488 58. 2002.302 30.604 (63.034 21.289' 1.924.085 (131.208 $2.960 108.394 49.674.728 76.259.171 82.915 906 1.261 1.083 3.035.582 58.967 213.518 (548) 419.2001) (in thousands) $ 205.614 152.022 705 Armed Forces Emergency Services Disaster services liberty disaster relief-Sept. Annual Report.614 152.844 2.686.906 61.619 22.156 617.616 154.513 308.060 6.4 Consolidated Statement of Activities.601 989.570.549 84. 2002 (with summarized information for the year ended 30.967 213.594 49.402 $1.463 51. response Biomedical services Health and safety services Community services International services program services Supporting services: Fund raising Management and general 61.071 ) 2.135 2.272 65.848 136.756 284.742.924.330 (135.164.736 3.931 $2.448.077 137.405 40.410 3.901 174.201 (31.901 174.222 67~175 36. Year ended June 30.822 1.699.876) 2.712.077 136.108 45.747) 19. 103.978 203.466.845 1.649 $ 757.587 .736 3.182 311.410) 420.

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

David McLaughlin stated."?" In an article in U..P 60 Minutes Program 1. 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. and extend the use of toll-free telephone lines. "Today we are recognizing the work of our staff. 2001. The Red Cross does regular audits of chapters. it took us too long to hear their message. the Better Business Bureau Wise Giving Alliance removed the American Red Cross from its "give. Wallace reported." Healy finally responded with her announcement of retirement. fires." caused a huge" Web site.32 Another onslaught of negative publicity for the American Red Cross occurred March 10. News & World Report. Chapters that have over $100. Chapters must meet specific national guidelines to maintain their charters. and donors who responded to September 11th. the American Red Cross saluted the staff and volunteers who provided assistance to the more than 54. 2. By November 2001 about 10 percent of the red blood cells collected on September 11 and 12 had expired. interim CEO and president of the Red Cross. president of the alliance. "In the West Virginia flood ad. The Red Cross would provide increased financial support to families." Harold Decker. and very clear direction for our September 11 relief effort. $ millions gir~Gt. 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. announced that the American Red Cross received $930 million in contributions and this money was used to provide the following.000families of displaced workers and disaster workers Provision for 14million meals. "Donors charged the organization with abuse of their good intentions." The Lancet reported. we will never have public truSt. on the CBS news show 60 Minutes. In addition. agreed to a March 30 deadline for the updated report. Jack Campbell. Healy was confronted with allegations of "panicking the public into wasteful donations of blood. claiming that the organization's board had pushed her OUt. and health services for 129. All chapters must have an independent annual review. As for the Alpine fire in Southern California.266families of . chairman of the American Red Cross Board of Governors." she said. Art Taylor." Deborah Daley responded that chapters are accountable in a number of ways. and Bennett Weiner.i" The donors blasted Healy because they expected their donations to be helping September 11 disaster victims now. It appears to have contained some inaccuracies concerning floods.uncertainty and recovery. volunteers. their trust." In response. the American public donated blood for the disaster victims. a spokesperson for the Red Cross. Deborah Daley reported. CFO of the Red Cross.P? On March 7. we can save a life" public service announcement. stated. Regrettably. Given the recent activities of the American Red Cross.'! BBB Wise Giving Alliance On February 16. The largest 126 chapters must send quarterly financial reports to the national Red Cross. David McLaughlin stated. 2002. 2002. 14 months after the fire. "If we don't subject ourselves to public scrutiny.000people $169 270 94 3. H. In fact. Wallace reported. sent a letter to CBS News indicating the errors and an explanation.'dE)ceasedand seriously injured . COO of the alliance. 2002. The attorney general of New York State threatened legal action.assistanceto 3."28 In addition to donating money. "They also decided to put a disclaimer in their ads saying that donations will be used for this and other disasters.500 families affected by the attacks. mental he. it's in small print. interim president. Mike Wallace Web site.26 On November 14.P In a congressional hearing. participate in a database to be shared among relief agencies. "I had no choice.althservices for 232. She stated that Wallace's claim that chapters "are not even required to submit financial reports" is completely false. it was determined that such a report could not be provided by the due date. In a comment about advertising practices. David T. "The people of this country have given the Red Cross their hard-earned dollars. made some unsupported public statements regarding the Red Cross that were reported in the Philadelphia Inquirer. allegedly because the American Red Cross did not provide a timely report to the alliance. Deborah Daley. 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.~ssistanceto 51. McLaughlin. Experts questioned the wisdom of calling for blood donations when there were very few blood recipients. and the financial accountability of Red Cross chapters.000 in annual expenses must have an external audit conducted by an independent CPA. These donations were given in response to Healy'S "Together.000people. The trouble is. 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. "Outside audits of local Red Cross chapters are rare. Harold Decker.S. hire an additiona1200 caseworkers. . "As oflast week.

21. A torrent of donations. Ibid. Modern Healthcare 31. 2002. American 4. 32. Association Management. Annual Report.S. Red Cross announces major changes in Liberty Fund: Fund solely used for people affected by September 11 tragedy. February 12. chairman of the Board of Governors of the American Red Cross. 30. Cross. US Newswire. U. 8. Press release. 2001.. Tyrangiel. The timely and capable response day-in and day-out to these disasters speaks volumes about the character of the volunteers and staff. Press release. November 5: 75. American Red Cross letter to Better Business Bureau's Wise Giving Alliance. Press release. Greenberg. Blood. 33. 2001. but there are costs. 2002. Greenberg. Blood. How should she proceed? Endnotes 1. 25. PR Newswire. 28. Taylor. Navy. The charity olympics: After weeks of record giving. 53(8): 12. Ibid. some 45. their talent. Infoworld. 29. Cross. 2001. 11. 2001. American Red Cross. prior to which she had a 29-year career in the U. 27. where she earned the rank of rear admiral. Daniel S. 2001. March 7. In his announcement. 18. 2001. Sanborn. ASAE and American Red Cross formalize partnership agreement. Looking to the Future After a five-month search. 2000. Ibid. and most especially their dedication. 2001-2002. 2002. Charity olympics. American Red Cross. Cross. Tyrangiel. November 14. American Red Cross and Coinstar to launch new fundraising technology to prepare for disasters. Red Cross workers on strike. 2002. 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. 19. 20. Reports. Press release. 31(4): 33. Taylor. Evans has served as national executive director of the Girl Scouts of the USA for the past four years. Lancet. 15. charities wrestle with how best to spend money pouring in since attacks. American 2. 35. 2000-2001. 2001. Fund Raising Management. 34. Samantha. and the American Red Cross. Ibid. 200 I. 22(25): 37." Deborah Daley responded that the chapter has provided up-to-date financial information on its response to the Alpine fire three times since November. Annual Report. American 3. Red Cross faces antitrust lawsuit. politics. 14. politics. Ibid.S. and the American Red Cross. 7. 12. 24. Red Crossroads."?" Evans remarked that: In the midst of responding to the extraordinary demands of 9/11 and a lot of criticism about these efforts. January 1: 20. Ibid. American 6. she is well poised to guide our organization as we continue to provide vital services in a world faced by new challenges. Becker. Marsha Johnson Evans must confront the many issues faced by the American Red Cross. Johnson Evans was named president and CEO of the American Red Cross on June 27. 31. Press release. Modern Healthcare 31. February 1. 2002. Annual June 27. Ibid. Josh. 2000. said. Blood. 2002. American 5. C80 Case 11:: American Red CI ass . Charity olympics. 17. and the American Red Cross. December 9. Reports.redcross. Mark. 2000. American Red Cross. Cinda. Greenberg. February 16. October 1: 8. Levine. 9. 2002. PR Newswire. Marsha. Tyrangiel. 26. Americans want to know: Is that money helping? Time.San Diego was still waiting for a full accounting of how the money donated for the fire victims has been and will be spent. News & WorldReport. "Marty's unique style of leadership along with her experience as established administrator will bring new vigor to the American Red Cross. 2001. Red Red Red Red Red Cross. 10. 16.. politics. February 1. November 24: 1789. November Annual Cross. 2000.000 in the months since last September. www. Ibid. 22." As she begins to guide the organization. US Newswire. Red Cross faces antitrust lawsuit. Nonprofits reap rewards of the Web-Internet proves to be a great fund-raising tool for charities. American Red Cross. 13. Newsweek: Former Red Cross head says her fundraising message was clear . 23.. Red Cross announces major changes in Liberty Fund. June 27. With great insight into our mission. David McLaughlin. American Red Cross. Stephanie.

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