O.T. -- update on that guy who paid all of his out-of-work employees, after the 1995 fire at a textile mill.
January 20, 2002
THE RIGHT THING
A Boss Saved Them. Should They Save Him?
By JEFFREY L. SEGLIN
After my first grandson, Evan, was born
three years ago, a friend gave him a
sage-green blanket made of Polartec
fleece. The blanket was made by Malden Mills,
the textile company in Lawrence, Mass., that
nearly burned to the ground on Dec. 11, 1995.
I hadn't noticed the blanket's label until this
past November, just after Malden Mills filed
for Chapter 11 bankruptcy protection.
As the fire was raging in 1995, Aaron M.
Feuerstein, the chief executive, decided to keep
paying all of his out-of-work employees as he rebuilt the company, which is
privately held. For his actions, Mr. Feuerstein, now 76, was heralded as a hero,
someone whose commitment to his employees and community went beyond any
ethical obligation.
But by late last year, the company had run short of cash. Its annual sales
stagnated at $180 million, and its earnings dropped to nearly nothing from $35
million in 2000. Already on the hook for $140 million in loans, Mr. Feuerstein
asked his creditors for an additional $20 million to keep the company operating.
They agreed, but only if he first filed for bankruptcy protection so that the new
loans would receive priority payment should the company not survive. "I begged
them on my knees not to go into this chapter," he said. But he recognized that it
was the only way he could get the funds.
Given Mr. Feuerstein's magnanimous behavior in the past, are any of his
constituents — employees, customers or the company's hometown — ethically
obligated to help him now?
So far, none of his customers — manufacturers like L. L. Bean, Patagonia and
North Face that use Polartec in their high-end garments — have left him. His
union workers have agreed to a salary freeze until 2003 and are giving up paid
personal days this year. He estimated that those and other concessions would
save Malden Mills around $2 million.
He has also received letters of support, some including small donations. "It's one
thing when you have a fire and you decide to rebuild," he said. But when a
company is in Chapter 11, he added, "who would ever anticipate that you would
have thousands of letters of encouragement from strangers?"
Mr. Feuerstein said he never expected anything in return after keeping his
employees on payroll in 1995. "You're supposed to do what's right because it's
right, not because there's a payoff," he said. "And so I don't expect anything of
people."
The question is: Should he?
As part of its "Polartec Promise" campaign started in December, the company is
asking consumers to buy products made with Polartec fleece. Those generally
cost more than those featuring fleece made in countries where labor costs are
lower.
"Any individual certainly can do that," said Jon P. Gunnemann, a social ethics
professor at Emory University. "But there's no moral obligation to do it. At some
point, if you decide to live in a market system, you can't function that way. The
only thing that's going to fix his problem is a profitable business."
Mr. Feuerstein knows that. He says he's optimistic that the company will make a
$19 million profit on revenue of $200 million this year, despite another setback
this month. The company voluntarily recalled 15,000 electric blankets that had
been distributed by Lands' End after one shorted out.
Barbara Ley Toffler, an adjunct professor at Columbia University's Graduate
School of Business who specializes in ethics, said "caring is something we like to
see," but she wondered "if making enormous demands on his constituencies is
the only way somebody like Feuerstein can be successful."
It's difficult not to want Malden Mills to succeed. As stories abound of corporate
executives paying themselves fat bonuses before filing for bankruptcy while
leaving the retirement funds of rank-and-file employees eviscerated, we are
desperate for business heroes like Mr. Feuerstein.
But did his lenders have an ethical obligation to grant him the new loan? Or his
union employees to agree to concessions? Do we have an obligation to buy from
Mr. Feuerstein simply because of his past good deeds?
Absolutely not, just as he had no obligation to keep paying his employees six
years ago. For him, it was the right thing to do. Without obligation, his
constituencies can now decide what's right, whether that means buying a North
Face jacket lined with Polartec or a less expensive knockoff.
I, for one, have my eye on another blanket made of Polartec fleece for my new
grandson, Lucas.
Copyright 2002 The New York Times Company |
