Mark W. Emerson, who served less than six months as President, was also forced to resign after the organization and others learned of an unappropriate sexual relationship with a subordinate. The frequent turnover rate of executives weakened the ARC’s ability to carry out its federal mandate. Many believed the oversize board of directors contributed to the frequent turnover.
The ARC also had a history of awarding large severance packages for ousted executives regardless of their length of service. In 2001, Bernadine Healy received $1.9 million in salary and serverance pay. In 2005, Marsha Evans received a total of $780,000.
Leadership troubles also affected local chapters of the ARC in Louisiana, Pennsylvania, Maryland, and New Jersey. The troubles included: paddling personal bank accounts, embezzling funds to support drug habits, forging signatures on work orders intended for disaster victims, and using organization funds to gamble and purchase gift. These problems caused the ARC to run a $200 million deficit and forced to eliminate jobs.
In 2006, Senator Charles E. Grassley filed a legislation to overhaul the ARC with the intentions of improving the ARC effectiveness and efficiently after recent scandals. The legislations forced ARC to become more transparent, assuage the difficulties in the board, restructure the role of the US President, and allow the board to nominate a chair for approval and appointment by the President.
January 2007, the ARC updated its Code of Business Ethic and Conduct and required all employees to read and sign. The update included an anonymous hotline and a eight page publication. However, the publication did not include the word “ethics” and the word “compliance” was only used to reference its requirements related to the collection of blood donation. The publication also did not discuss any employee or volunteer ethics training.
After the 9/11 attacks, ARC was widely criticized for its slow response and its mismanagement of the financial donations of $543million that came from many Americans. The Liberty Fund was specifically created for donations for the victims. Less than one third of the donations was distributed to fund the relief efforts., which sparked an explosive debate and President Bernadine Healy was forced to resign. Subsequently following the US congressional hearing, the ARC announced that all funds donated specifically for this disaster would go to victims and their families.
In August 2005, the ARC responded to the disastrous effects of Hurricane Katrina and Rita, which were the organization’s largest national emergencies. More than $2billion was raised and yet again, the ARC disappointed the American public. As a result of the faulty responses and at the request of various congressional committees, a report detailing the inadequacies of the ARC and FEMA was written by the Government Accountability Office. The report discovered that the National Response Plan written by the Department of Homeland Security was not properly followed and that coordination between the ARC and FEMA was unsatisfactory.
Another story that emerged from the Hurricane Katrina disaster involved ARC acceptance of choice of corporate partnership. Coca-Cola, Anheuser Busch, MasterCard, J.P. Morgan, and Southwest Drycleaner Association were among the corporations that donated water or funds. The disadvantage of receiving donations from these corporations made ARC appear to be in collusion with or biased toward certain corporations.
In the analysis of ARC donation management involved the organization’s capacity to electronically accept donations. With the ARC website being their main source of receiving donations, the technology staff was forced to off load some of their expansion capabilities work to contractors. With the magnitude of donations from the disasters discussed, ARC learned that they would benefit having a plan to effectively partner with various Internet technology firms.
The ARC also faced challenges in marketing itself as a prominent, ethical, and transparent nonprofit organization. After being criticized by numerous reports of fraudulent use of donations, donors became uncertain with the giving to the ARC.
In 2004, the ARC joined in partnership with Lionsgate Film Studios to market the release of Saw IV, while promoting blood collection services. The filmgoer’s blood donation increased from 4200 pint to 41,000 pints in a 3 year time period.
The ARC also benefited from its Red Cross symbol. The symbol also generated a lawsuit filed in 3004 by Johnson and Johnson Company, who believed the ARC was benefitting from consumers confusing their packages for those of Johnson and Johnson. Both parties dismissed their suits and countersuit in 2008.
In addition to organizational upheaval and marketing challenges, the ARC faced many ethical risks and challenges. The challenges included executive compensation, prevention and handling of employee misconduct, and consideration of its stakeholders. Some of the risk included transparent and accurate representation of the organization’s need for and use of monetary donations, volunteer time, and blood donations. The ARC also had the ethical challenges of maintaining effective and efficient operations to respond to disasters and transparently reporting the organization’s accomplishment, failures, and opportunities for improvements in disaster response activities.