posted on: Friday, June 01, 2007

There have been significant attempts by the American Red Cross to boost its image after numerous pratfalls by its leadership (both at the board and staff level). But the future course of the agency ended up in the hands of an outsider--- the Senate Finance Committee. This is, in part, because the Red Cross operates under a congressional charter. But once again one of the nation’s leading nonprofits continues to be the poster boy for poor decision-making.

For the past few years, the Red Cross dug in and produced a vision document that addressed many of the nonprofits weaknesses, The American Red Cross Governance for the 21st Century, This was an attempt for the organization to make independent and meaningful changes that would ingratiate it with the public.

The lengthy document was a good start in identifying problems and making suggestions as to how to improve the nonprofit on a multitude of fronts. But, unfortunately insiders were unable to adequately address the omnipresent problems plaguing the organization.
Resolution: It took outsiders to strengthening the agency’s governance structure in a comprehensive manner by passing the Red Cross Modernization Act of 2007. It relieved the organization of some of the constraints posed by the 1947 congressional charter.

Understanding roles and responsibilities of the board and staff has been an enduring problem at the Red Cross. The conflict centered around who was the principal officer—the President or the Chairman ---and what their respective roles were. With each new executive, a conflict ensued with the board. These conflicts resulted in short-lived tenures of some of the most senior staff. Huge golden parachutes followed and the public got restive as to who was running the nonprofit and how its contributions were spent.
Resolution: It, again, took outsiders to bring a clear demarcation between board governance and executive management and hopefully avoiding the ever-present clashes between board members and management.

Perhaps the single topic that has received most of the attention from commentators was the size of the Board. The 1947 Bylaws called for a board of 50 members, including eight Presidentially-appointed members, who were seldom present for Board deliberations.
Resolution: Despite empirical studies that supports the notion that small boards are more effective and more efficient, the Red Cross will not fully comply with this matter until 2012.

There have been conflicts of interest with FDA blood program-related requirements with the Secretary of the Department of Health and Human Services in which there is a consent decree that has forced the Federal Drug Administration to fine the Red Cross almost $10 million.
Resolution: This has not been resolved even after a decade of contentiousness and as the fines continue.

Other conflicts involve the responsibilities of FEMA and the Red Cross under the National Response Plan and the Secretary of Homeland Security.
Resolution: This may have been resolved by the recent stripping of the Red Cross of its designation as the nation’s first responder

The Red Cross study suggested that it should consider establishing an ombudsman position, which would provide an additional avenue for independent review of significant issues within the organization. The Red Cross Modernization Act of 2007 cemented that concept and created the new position of ombudsman, who will have total access to all Red Cross operations and will provide annual reports to Congress.
Resolution: One of the first acts of the new CEO was to appoint his former Chief of Staff and close administrator from his former job. This position should have been filled by someone independent of the CEO and the organization. She, of course, is not independent. This is inconsistent with the concept of ombudsperson and her selection may be perceived with a bias that may prevent her from being effective and objective.

In an article that I wrote upon the selection of the new CEO Mark Everson, I had hoped that things would change at the Red Cross. With a clean slate for all concerned, everyone was hoping for the best. With his most recent appointment it seems like it continues to be more of the same.

Gary Snyder is the author of Nonprofits: On the Brink.

Email: gary.r.snyder@gmail.com, 248/324-3700
Website: http://www.garyrsnyder.com/