malden mills
Mike Romero
9/4/13
Malden Mills The case of the Malden Mills fire poses many important questions related to ethics. At first look, a CEO paying his employees continually after his mill burned down seems to be the model for ethical behavior. However, when one looks deeper into the case and asks questions it is not so obvious. The first question that needs to be answered is what the factual circumstances of the case are. Malden Mills was a factory located in Lawrence, Massachusetts that specialized in making a high tech fleece called Polartec. The company was relatively successful in its industry until the factory was destroyed by a fire in 1995. After the fire, the company’s CEO Aaron Feuerstein declared that he would continue to pay his employees their normal wages for at least one month. In the end he paid the employees for longer than that and spent around 15 million dollars paying the employees while the new mill was being built. Feuerstein built the new mill for a cost of 400 million. He gambled that the money from the insurance company and expanded Polartec business would cover this cost. However, Malden Mills only received 300 million from the insurance company and the Polartec sales did not rise as Feuerstein had projected. The company was forced to claim bankruptcy in 2001 and Feuerstein lost control of the company to GE Capital in 2003. A second important issue related to this case is what the ethical issues are. In the case of Malden Mills, the main ethical dilemma was whether to keep paying the company’s employees or have a massive layoff. This dilemma was a mix of personal and business problems. Part of the problem was personal because the company was located in a small town where a majority of the residents worked at the mill. Because most of the people in the town worked there, the company had the feeling of a family business and the workers truly felt like family to Feuerstein. The family atmosphere made it a tough decision for
9/4/13
Malden Mills The case of the Malden Mills fire poses many important questions related to ethics. At first look, a CEO paying his employees continually after his mill burned down seems to be the model for ethical behavior. However, when one looks deeper into the case and asks questions it is not so obvious. The first question that needs to be answered is what the factual circumstances of the case are. Malden Mills was a factory located in Lawrence, Massachusetts that specialized in making a high tech fleece called Polartec. The company was relatively successful in its industry until the factory was destroyed by a fire in 1995. After the fire, the company’s CEO Aaron Feuerstein declared that he would continue to pay his employees their normal wages for at least one month. In the end he paid the employees for longer than that and spent around 15 million dollars paying the employees while the new mill was being built. Feuerstein built the new mill for a cost of 400 million. He gambled that the money from the insurance company and expanded Polartec business would cover this cost. However, Malden Mills only received 300 million from the insurance company and the Polartec sales did not rise as Feuerstein had projected. The company was forced to claim bankruptcy in 2001 and Feuerstein lost control of the company to GE Capital in 2003. A second important issue related to this case is what the ethical issues are. In the case of Malden Mills, the main ethical dilemma was whether to keep paying the company’s employees or have a massive layoff. This dilemma was a mix of personal and business problems. Part of the problem was personal because the company was located in a small town where a majority of the residents worked at the mill. Because most of the people in the town worked there, the company had the feeling of a family business and the workers truly felt like family to Feuerstein. The family atmosphere made it a tough decision for