Governance suggestions for Red Cross Society of China
Governance is of great importance for efficiency and credibility building of not for profit organizations. This week’s journal continues to be based on the background of China, and the targeting organization is Red Cross Society.
Year 2011 was an eventful period for Chinese Charity Sector. A series of scandals aroused public outrage and trust crisis, and Red Cross Society of China, as the biggest official charity, bore the brunt of the crisis. The “Guo Meimei Event” pushed the public question whether their donation really contribute to philanthropy or come into corrupt officials’ own money pockets. To think deeper, some people condemned the bureaucratization of the organization and non-transparency of the financial information as well as calling on supervision strengthening. Credibility of Red Cross China encountered the unprecedented challenge and the reform is of great urgency. In this journal, I would like to use what we learned in week 4 to make some suggestions for Red Cross Society of China to rebuild public credibility in terms of governance.
1. Building a board that at least half of board members serve the Society as volunteers.
As we learned in the class, one of the differences between corporations and not for profit organizations is that, for corporations, directors of the board are members of board only, while for not-for-profit organizations, many directors of the board “may need to wear ‘two hats’ – director & involved in operations”. Currently, all members of board of Red Cross Society of China are appointed by the government and get paid. Such method is likely to result in corruption. It is not realistic to transform the all-appointed-selection method to all-elected-selection method. I personally think that the idea of “extended board” in New Hybrid model proposed by Bradshaw and Hayday is a good way to solve the problem. In such model, the board can be divided to core board and extended board for participation. In the case of Chinese Red Cross, the original appointed directors still function as members of core board, and representatives from each constituency or stakeholder group are elected as members of extended board. All the elected extended board members should be volunteers, ensuring that they would not abuse of power for personal gain.
2. Board mandate and position description.
Selection of directors is not the end. Red Cross Society of China should also ensure that its board members fully understand what is expected of them in their board roles and of the board as a whole. As we learned in the class, functions of not-for-profit boards include outreach, stewardship, overseeing operations, legitimating, and self-reflection and assessment. A mandate which describes such responsibilities of the board and its directors is important and should be available on the official website for every potential donor or other stakeholder to read.
3. Building a regular assessment and supervision system
This system is the guarantee of transparency of the Red Cross Society of China. At present, there is not a particular monitoring department (inside or outside) responsible for its supervision. After the “Guo Meimei Event”, the investigative work was done by a temporary team composed by different stakeholder representatives. However, it is not a long-term solution. To rebuild the credibility, the board should set up an audit committee, responsible for internal control, regular assessment (at least annually) and financial report publication. The assessment and supervision should include directors’ contributions, purchasing process and distribution of donations. The annual result of the assessment and supervision should also be posted on to the official websites of the Chinese Red Cross.

Since Red Cross Society of China is the biggest not-for-profit organization, its reform would play a model role. I personally believe that the reform would be a step by step process, but without a restructure of the board, I could not expect the final success.