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(solution) The reading is a case from the Daniels Fund Case Bank, which is


The reading is a case from the Daniels Fund Case Bank, which is about organizational ethics and ethical culture. Please find the case here.

In your comment, please identify two ethical issues of the non-profit organization ECR and provide a recommendation how these issues could be solved.

maximum 250 words


EARLY CHILDHOOD DISEASE

 

RESEARCH FOUNDATION

 

PART A INTRODUCTION

 

The Board of Directors of the Early Childhood Disease Research Foundation (ECR) is undertaking a review

 

of its strategic plan. You have been engaged by the Board to review ECR operations and make

 

recommendations. The goal is to ensure the continued viability of ECR as the leading funding organization

 

for research in rare early childhood diseases. You will review financial data and operating practices as disclosed

 

in interviews of the ECR staff and Board.

 

BACKGROUND

 

ECR is a nonprofit organization founded in 1963. Its mission is to fund research on rare early childhood

 

diseases and to make the research results widely available. It accomplishes this mission through extensive

 

fundraising activities; a prestigious grant program working with universities, hospitals and research labs; and a

 

public conference program. All of these efforts have experienced substantial growth over the previous decade.

 

The organization is led by a Chief Executive Officer (CEO) who is primarily a fundraiser. The CEO leaves

 

day-to-day operations of ECR to an Executive Vice President. The Board is composed largely of individuals

 

who have been chosen for their ability to create fundraising contacts or provide credibility to ECR as an

 

organization.

 

Funds raised have risen each year over the 10-year period ending 12/31/2014. The following chart illustrates

 

the growth: Total funds raised in 2014 were nearly $36 million. Grants awarded amounted to $24 million. Conferences

 

have drawn increasing attendance and positive publicity for the organization. Large conferences are held in

 

February on the West Coast and in July on the East Coast. Attendance in 2014 at these conferences was in

 

excess of 1,000. In addition, four regional conferences are held each year across the country. In 2014, these

 

conferences averaged 200 attendees. Sponsors and a vendor exhibit hall are now funding 75% of the Daniels Fund Ethics Initiative | CASE BANK conference costs. Attendance fees have pushed the conferences into a profit center position. The overall

 

operating budget for overhead (OH) and fundraising was $7.4 million. The following chart shows the budget

 

over a 10-year period. ECR has a small full-time staff of 20 people. Besides the CEO and Executive Vice President, this includes five

 

Grants Officers, three full-time Conference Planners, and a PR/Communications Director. (Note:

 

Conference Planners are responsible for all the logistics of holding conferences including selection of city,

 

selection of conference facilities and hotels, coordinating all onsite support such as meals, audio visual support,

 

etc.) The other positions are bookkeeping, information technology support, and office support including an

 

Office Manager. A new Finance Manager has just been hired. Human Resources? support is provided by the

 

Office Manager; Accounts Payable is outsourced; the General Counsel function is provided by a partner at a

 

large law firm, largely on a pro bono basis. Staff salaries are very competitive. There is excellent medical

 

insurance and a 401K with a strong match.

 

EXCERPTS FROM INTERVIEWS

 

CEO (Sharon): ?Given the economic issues over the last few years, we have posted very strong results. Our

 

research has been written up in the press and has resulted in several significant breakthroughs. Our major

 

contributors certainly are focused on the value of the work that we do and how it helps people, but the good

 

publicity they get doesn?t hurt at all. I focus most of my time on developing new sources of funding. That?s

 

why having an Executive Vice President like Rob is so important to our success. He was here when I took this

 

job and I don?t know what I would do without him. He keeps everything running and does a great job making

 

our existing contributors feel appreciated. I really don?t have to pay any attention at all to the operational side

 

of things and the staff loves him. Rob has introduced a lot of new initiatives. I have to admit that I was

 

skeptical when the first thing he proposed to me was expanding our conference program, but it has been a real

 

home run. We used to hold one educational conference a year at a university site that 200-300 people

 

attended, and no one noticed outside of the research community. Seven years later, we have 1,000 people

 

showing up at major conference centers twice a year and coverage from some prestigious publications and

 

news channels. Some folks have griped about how much money these meetings cost, but the payoff is in the

 

money we raise for our work.?

 

Executive Vice President (Rob): ?I?ve been here for 10 years and the results speak for themselves. We?ve

 

grown in size and influence every year. I doubt you can find a similar organization in the country with the

 

Page 2 of 5 © 2015 Daniels Fund. All rights reserved. Daniels Fund Ethics Initiative | CASE BANK success story we have. Our stakeholders are happy with how their money is spent. They really love the

 

opportunity for favorable publicity that our conference program provides to them. I?ve heard an occasional

 

grumble from a couple of the Board members about the conferences being too lavish, but that always dies out.

 

The numbers don?t lie. Of course, none of this happens without our staff. These folks are great. Young,

 

enthusiastic, and ambitious. We take care of them. Promotion from within is our preference. Sometimes we

 

have even created new positions to provide promotional opportunities. We just did that with Susan, one of

 

our Conference Planners. She was named Director of Conferences last month. With the conference program

 

we run here, she?s indispensable. I know the other two Conference Planners have a lot more experience than

 

Susan, but she has a high energy level and she has a great grasp of what we?re trying to do when we negotiate

 

our conference contracts. Performance is what gets rewarded, not years of experience. Susan has been

 

invaluable in maintaining the strong relationships we have with major hotel chains that have the ability to host

 

our conferences. You asked about staff stability. We have some turnover but nothing unusual in this type of

 

operation. This past year we lost four people but replaced all of them without too much trouble. One of them

 

was a new Finance Manager who started two weeks ago ? we?re still educating Seth on how we do things, but

 

I?m sure he?ll fit right in when he gets the lay of the land.?

 

Finance Manager (Seth): ?I?m new here so I can only provide some first impressions. ECR is a strange

 

environment. Some of the staff seem really pleased with the place, others not so much. No one complains, but

 

there isn?t a lot of the office comradery I?m used to. This is my first management position, so I?m really trying

 

to adjust theory to reality. For example, I thought that our processes for approving expenses and payments

 

were a bit, well, ?informal? is the word that comes to mind. I mean, Rob approves everything, no two signature

 

requirement for payments, and no firm guidelines on expenses for travel or entertaining. When I saw some of

 

the dinner tabs, wow! Turns out that is part of how Rob keeps the staff happy, plus some of the dinners

 

involved our major contributors and even some Board members. The more I spend time with the books, the

 

more comfortable I get. In fact, our audit reports for the last four years are really clean ? not a single finding.?

 

Executive Assistant (Debra): ?I?m not sure there is very much I can tell you. We don?t see Sharon much here

 

in the office, but she has always been pleasant and appreciative of the staff. Rob really runs things. If Rob is

 

happy, then you?ve done your job. I will say that I don?t understand why folks like Susan get promoted so

 

quickly, but it happens here a lot. I know she?s a lot of fun to be around, but she?s only been here two years and

 

it was her first job out of college. Shelly was Susan?s predecessor and she was also fresh out of college, but she

 

didn?t last long. Pat and Art, the other two conference planners, are real pros, but I guess Rob knows what he?s

 

doing. Like I said, theres not much I can tell you.?

 

Grants Officer (Ryan): ?What I love about working here is the discretion we Grants Officers have in

 

reviewing and awarding grants for research. This is important work. We do send all grant recommendations

 

to the Board, but they simply approve them in a block. They do like to get highlights on our more successful

 

grant research and we make sure that information gets to them on a regular basis. The Grants Officers do the

 

real work, selecting the grant proposals that will get consideration, chairing oral presentations by the research

 

institutions, and making the final selections, of course with Board approval. We each have an area of research

 

we monitor and I can assure you the researchers know which of us handles what. I see them at the conferences

 

twice a year and we get a chance to hang out informally. Makes the formal part of the process a lot easier. Each

 

Grants Officer has a specific goal for the year to award a certain number of grants and Rob watches the goal

 

very closely. I know it?s important to get the work awarded ? no grants, no research. Of course the bonus

 

money at year-end for hitting the goal is a great incentive. ECR is a great place to work.?

 

Page 3 of 5 © 2015 Daniels Fund. All rights reserved. Daniels Fund Ethics Initiative | CASE BANK Public Relations/Communications Director (Frank): ?I came here from a pharmaceutical company. Before

 

that, I did this type of work with an information technology firm and a large investment firm. I?ve been

 

around. PR is the same no matter where you go. I work with Sharon on a constant basis. She understands the

 

importance of a good communications program and good press relations. So do most of the Board. Luckily,

 

we have mostly good news stories to get out there, so even the grumblers on the Board ? the ones who think

 

we are a bit too lavish or a bit too informal ? are happy. Results make all the difference.?

 

Chair of the Board of Directors (Emily): ?I asked for this review not because I?m disappointed in our results,

 

but because I want to make sure that we stay ahead of the curve. Nonprofits are constantly challenged to stay

 

viable and I don?t want to have a downturn on my watch. I?m a business person and performance is what keeps

 

you viable. Sharon and Rob are a great team, I just want to make sure we support them appropriately. I must

 

say that Rob and Susan do a great job planning our Board meetings. The environment makes a difference,

 

especially for our Board members who are all busy people with tight schedules. We can come in, relax, have a

 

good meal and get right to business the next morning. Rob puts together a tight agenda and provides all the

 

right information in advance. The new grant proposals are synopsized and easy to understand; we don?t even

 

need to discuss them, just get the approval on the board minutes. Rob usually takes us right through the

 

budget numbers so we can focus on Sharon?s report on fundraising activities. That?s where we spend most of

 

our time. Oh, Frank always gives us the ?good news? report at the end of the meeting. It?s great knowing that

 

our grant money is producing results.?

 

Member of the Board of Directors (Dr. West): ?I think ECR is a very effective organization and it?s doing

 

good work. I?m a pediatric cardiologist, so this work is close to my heart. Overall, it?s hard to criticize the

 

organization. I mean, look at the numbers! I admit mine is often a skeptical voice on the Board. I must drive

 

Rob crazy with all my questions. I keep thinking, do we really need to spend some of the money we do?

 

Wouldn?t the conferences be just as effective in lower key venues? Should we look in more detail at our

 

research results? Of course, at the end of the day, we are recognized as one of the most effective organizations

 

in the field, so I guess that?s my answer. Hopefully you can help us ?fine tune? the organization.?

 

Office Manager (Leslie): ?This is a very well-run organization. Rob runs a very tight organization, but he still

 

manages to keep it almost a family type atmosphere. I don?t deal with Sharon very much ? she?s hardly ever in

 

the office. Rob runs things and I can?t say enough good things about him. I keep him up-to-speed on

 

everything in the office. I?m his eyes and ears on the ground, so to speak. Besides the day-to-day office

 

administration, I also provide the human resources support for the staff. Usually it?s just paperwork on

 

benefits and performance reviews; that sort of thing. I?m here if people have concerns, but honestly, I haven?t

 

heard a complaint in the five years I?ve been here. Why would anyone complain? Rob takes care of his top

 

performers, passing on some of the perks that come in from our conference partners and exhibitors, for

 

example. It?s a happy place.?

 

Grants Officer (Miriam): ?We do a substantial volume of grant work here. ECR received about 500 grant

 

proposals in 2014. The number has been going up for years, so we added a fifth Grants Officer in 2011. That

 

helped, but it?s still a lot of work. We review them against previous work in the field, identify which proposals

 

present an opportunity to continue promising work (we have a lot of renewal grants), which are looking at

 

new approaches that have promise, and which aren?t adequately supported or don?t really fit within the scope

 

of our work. Those latter proposals just get a polite letter saying we will not be able to fund their work. We

 

used to do peer reviews the way the National Institutes of Health does, but Rob did away with that to speed

 

up the process and get more grants awarded. All the Grant Officers have background and education in

 

Page 4 of 5 © 2015 Daniels Fund. All rights reserved. Daniels Fund Ethics Initiative | CASE BANK medical research. Rob?s position is that with a mature program such as ECR?s, we can filter the grant

 

proposals more than adequately. After the initial review, we ask for supporting information on the proposed

 

budget (well, at least I do ? I don?t know how the other Grants Officers handle it). In any case, we run

 

everything past the Board before awarding and there are some heavy hitters there to catch anything that gets

 

past us. Honestly, the one area I think we are weak is monitoring progress. The progress reports we require

 

are pretty perfunctory. The final reports have more detail, but I have yet to see a researcher tell me they didn?t

 

get useful results. The Board eats up the success stories. Rob and Sharon get a regular report on that sort of

 

thing.?

 

General Counsel (John): ?My firm provides a fair amount of pro bono support to ECR. We helped develop the

 

pro forma grant agreement, answer questions from the Grant Officers when someone wants to alter the terms

 

of the grant agreement, and help with intellectual property issues. Truthfully, that is most of what we do for

 

ECR. I do attend all Board meetings and perform the corporate secretary functions for the Board and ECR.

 

The firm does a lot of research grant legal work so this is relatively straightforward for us.?

 

Conference Planner (Pat): ?We have an extraordinary volume of meeting and conference work for an

 

organization of this size. That?s good for my department. We handle the regional meetings entirely within the

 

department. For the two big national conferences, we do all the leg work, but Rob steps in to work the

 

negotiations. He visits the competing venues with one of the Conference Planners; usually Susan the last

 

couple of years. Before her, it was Shelly. The site visits cost a lot of travel dollars, but they?re really necessary

 

with the level of complexity and the size of the national conferences. Art and I handle the regional conference

 

site visits. Honestly, I have no idea what goes on at the conferences, this research stuff is over my head. But

 

meeting planning I know and we run first-rate meetings and conferences. The feedback from the attendees is

 

always positive on the arrangements. I can get you copies of the feedback surveys if you like.?

 

ADDITIONAL OPERATIONAL DATA

 

Year Proposals

 

Received Grants

 

Awarded Grant Dollars

 

Awarded $ Awarded per

 

Grant Officer Grants Reviewed per

 

Grant Officer Grants

 

Awarded per

 

Grant Officer Average Value

 

per Grant 2005

 

2006

 

2007

 

2008

 

2009

 

2010

 

2011

 

2012

 

2013

 

2014 223

 

234

 

246

 

258

 

276

 

296

 

316

 

338

 

362

 

500 67

 

63

 

71

 

62

 

61

 

65

 

85

 

88

 

94

 

75 19,000,000

 

20,140,000

 

21,368,540

 

22,607,915

 

22,810,197

 

22,964,799

 

24,595,300

 

24,768,914

 

24,915,979

 

28,570,323 4,750,000

 

5,035,000

 

5,342,135

 

5,651,979

 

5,702,549

 

5,741,200

 

4,919,060

 

4,953,783

 

4,983,196

 

5,714,065 56

 

59

 

61

 

65

 

69

 

74

 

63

 

68

 

72

 

100 17

 

16

 

18

 

15

 

15

 

16

 

17

 

18

 

19

 

15 284,006

 

318,568

 

299,705

 

364,902

 

375,362

 

353,183

 

288,048

 

281,531

 

264,675

 

380,938 Charles Chadwick, Senior Consultant, Ethics Resource Center, wrote this case with the approval and collaboration of

 

the Daniels Fund.

 

Page 5 of 5 © 2015 Daniels Fund. All rights reserved. EARLY CHILDHOOD DISEASE

 

RESEARCH FOUNDATION

 

PART B: CRISIS SITUATION The Board of Directors has received an anonymous letter with a series of allegations against the Executive

 

Vice President. The letter is attached. Almost simultaneously, the CEO received a phone call from a national

 

news network. A copy of the letter was provided to the network, apparently before it was received by the

 

Board Chair. They are preparing a story and are looking for comment from the CEO.

 

Please prepare recommendations to the Board on how they should proceed on both the allegations and the

 

request for comment. Daniels Fund Ethics Initiative | CASE BANK Ms. Emily Hirsch

 

Chair of the Board of Directors

 

Early Childhood Disease Research Foundation

 

Dear Ms. Hirsch,

 

I am compelled to write to you so that you are not blindsided. What is going on inside of the Foundation is

 

simply inexcusable and possibly illegal. The actions of Mr. Rob Adams, Executive Vice President, have put

 

ECR at risk and may ruin its reputation forever. Here is just a short list of his transgressions.

 

ƒ ƒ

 

ƒ ƒ

 

ƒ He is engaged in an affair with Susan Thompson. This has been going on for at least two years and is

 

not the first time he has had an affair with a staff member. Her promotion and exorbitant raises are a

 

direct result of this affair.

 

Mr. Adams has used his Foundation credit card for personal expenses, including lavish meals and

 

trips. Why are his expenses never challenged? This is money that should go to helping children!

 

He takes favors from hotel chains who want him to award business to them. The scouting trips he

 

takes for conference sites are just an excuse for a stay at a resort with his girlfriend. Who?s watching

 

for this? Obviously, not his boss or the Board.

 

Adams is moonlighting on ECR?s time, ?helping? another nonprofit organization. I?m sure he?s getting

 

consulting fees for this.

 

Everyone is using ECR to further their own purposes. Everyone in authority is skimming one way or

 

another. No one on the ECR staff feels it is safe to raise these issues and I can understand why. Mr. Adams controls all

 

the key staff positions and makes sure they stay loyal to him. This is only what I know about, but I?m sure

 

there is more.

 

You need to take action before he takes down the whole organization and the Board as well. I have sent this

 

letter elsewhere, including to Ms. Sharon Atwell, the CEO of ECR, but I know that will be a waste of time.

 

Act before it is too late!

 

A Concerned Observer Charles Chadwick, Senior Consultant, Ethics Resource Center, wrote this case with the approval and collaboration of

 

the Daniels Fund.

 

Page 2 of 2 © 2015 Daniels Fund. All rights reserved.

 


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