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Legal Business Malden Mills Video Analysis Discussion
For discussion, address the following (if you use outside sources, provide URL)
1- Was Feuerstein guided by morals or ethics?
2- Do you think he could have made the decision if Malden were a publicly traded company?
3- Why do you think he has critics for his decision?
You must provide citations for all materials used.
2) Also you need to reply two classmates.
2. Your reply posts need to have substance. They cannot be… “good post.” It should read as a dialogue as if you were discussing in person. You can agree or disagree (if you disagree, do so respectfully. If someone disagrees with you, do not take it personally. If, at any time you think there is an inappropriate post, DO NOT reply…bring it to my attention immediately). You can cite to each other. A reply should show that you spent time and effort reading the post, thinking about it, and responding.
By Andrew Molina
Aaron Feuerstein in his decision to rebuild the textile mill after the fire and keep all his employees on full salary acted on his personal morals about the responsibility an employer has to his workers. Feuerstein made two separate choices, both of which may have cost him and his company significantly, including missed future profits, by not outsourcing and by continuing to pay his employees despite their lack of work. These decisions were made due to his belief that employers should strive to provide a decent living for their workers and should treat them as valuable to the company. He wanted to protect the livelihoods of these people and sought to give back to them for their hard work and found no pleasure in simply moving his factory overseas and making more money or cashing in on his fire insurance living the rest of his life in luxury.
If Malden Mills was a publicly traded company, chances are that Feuerstein would have been pressured by Wall Street to not pay his workers during the reconstruction of the mill; investors would have seen it as an unnecessary labor expense that was producing no returns for the company. Furthermore, it would have been likely that investors would have tried to get Feuerstein to rebuild his mill elsewhere besides the United States. American textile mills had higher costs due to labor than other more competitive countries and, given the trend of outsourcing manufacturing at the time, the rebuilding of the mill in Massachusetts would have been strongly opposed. Luckily for its workers, Malden was privately held by Feuerstein and he was able to make his own decision about what path to take with the company following the fire.
Feuerstein mostly has received criticism for his idealistic ethics and how it guided him to make the costly decisions that caused his company to acquire a large debt burden. This debt burden is what many critics see as causing Malden Mills to declare bankruptcy in 2001. Critics largely argue that Feuerstein’s decisions lacked any business sense and resulted in the company experiencing two bankruptcies and an eventual acquisition; they have used this as evidence that he mismanaged his company by prioritizing its employees over the survival of Malden. The issue with this stems from the fact that the company had already declared bankruptcy before, so the bankruptcies were not necessarily due to his decisions. Rather, it can be understood to be largely due to the capital-intensive nature of manufacturing and the low profit margins of the textile industry. This means that with even minor changes in consumer behaviors, Malden would have been vulnerable to considerable losses that would have made its debt unserviceable. Which is exactly what happened in the few years following the mill’s reopening. And ultimately the company is still around, as a subsidiary of Polartec, but more importantly, the mill itself is still open and its workers still have jobs there.
Edited by Andrew Medina on May 28 at 10:52am