The Red Cross brought in an AT&T exec as CEO and now it's a national disaster

In 2008, the Red Cross was a dysfunctional mess, so it hired on Gail McGovern, an AT&T exec and Harvard Business School prof, who parachuted in a group of other AT&T alums to oversee a program of rigid, centralized control; mass layoffs;secrecy and funny accounting, an emphasis on "branding"; and a collapse in volunteer morale and public reputation for one of America's most respected charities.

Propublica's excellent, in-depth investigation of "the corporate takeover of the Red Cross" chronicles how the standard CEO playbook — secrecy, abuse of staff and volunteers, cutbacks, and good relations with the Board of Directors — steered the Red Cross out of the ditch…and over a cliff.

The Red Cross's inability to perform during disasters since McGovern took it over has caused local emergency management directors to write it out of their emergency plans. The organization receives substantial public subsidies and sucks up giant sums of money during disasters like Superstorm Sandy, but does little on the ground with that money.

All along, McGovern has extolled her fiscal responsibility, while covering up a balance sheet that was bleeding red ink — $70M in losses in 2013, the year she declared that she had balanced the org's budgets and made it "financially stable." The Red Cross has operated in the red ever since.

Becky Maxwell of Loganville, Georgia, describes herself as a "diehard Red Cross person for 25 years." In March, after her frustrations built up for several years, she finally resigned from her volunteer position. "McGovern has fired almost all of the trained and experienced volunteers and staff," Maxwell told ProPublica, replacing them "with people who have absolutely no knowledge of what the Red Cross is or does in a disaster. Not only is she setting these people up to fail but she is compromising the service delivery that is so important to the clients."

While McGovern has angered many employees and volunteers, she has maintained the support of the constituency that matters most for her job: the Red Cross' board of governors, which hires and can fire the CEO. The board includes current and former executives from Goldman Sachs, Eli Lilly and Home Depot along with the chairwoman, McElveen-Hunter, a successful businesswoman and former ambassador to Finland.

McGovern has warm personal relationships with board members, recalls Beverly Perez, a former headquarters staffer who helped prepare for board meetings. "If at the last board meeting someone's mother was sick, at the next board meeting three months later McGovern would ask, 'How's your mother in the hospital?'"

The Corporate Takeover of the Red Cross
[Justin Elliott/ProPublica]

(via Super Punch)