Reference no: EM131486472

Lawrence, Massachusetts, is 25 miles north of Boston. In the mid-1800s it was one of several planned industrial sites that developed the local textile industry based on the waterpower derived from the nearby Merrimack River. By 1900 the town had a population of over 95,000 and mills that worked day and night.

In 1906, Henry Feuerstein founded Malden Mills in nearby Lowell and Feuerstein’s son, Samuel, relocated it to Lawrence in 1956. It has traditionally been a closely held private firm. The company survived a number of boom and bust cycles and watched the exodus of other manufacturers to the American south and overseas.

In 1981 the firm developed Polar Tec, a lightweight versatile fleece fabric that has become synonymous with outdoor gear, and its future seemed secure. However, on a bitterly cold night in December 1995, a devastating fire burned most of the plant to the ground.

The CEO, Aaron Feuerstein, could have accepted an insurance settlement and closed the factory or moved operations overseas. Instead, he spent $15 million of his own money keeping all 3,000 employees on the payroll, with benefits, for three months while the factory was rebuilt. Feuerstein said,

I have responsibility to the worker…I have an equal responsibility to the community. It would have been unconscionable to put 3,000 people on the streets and deliver a deathblow to the cities of Lawrence and Methuen. Maybe on paper our company is worth less to Wall Street, but I can tell you it is worth more.

While the factory was being rebuilt, the human resources division used federal and state funding to give many of the displaced workers additional training, especially on computers. Feuerstein was lionized in the press and given a number of national and international awards for his stance. The new plant is environmentally sensitive, and reportedly individual productivity increased significantly.

Nevertheless, Malden Mills again hit hard times. Faced with financial difficulties that stemmed largely from financing the debt for rebuilding, it filed Chapter 11 bankruptcy in November 2001. In October 2003, the firm successfully emerged from Chapter 11. Aaron Feuerstein has been replaced as CEO, and there are six new directors on the board. Recent orders from the U.S. armed forces have given Malden Mills as significant boost.

Required:

1. How would you describe Feuerstein’s approach to helping his workers and the community when the factory burned?

2. Do you think the employees should have been expected to deal with the consequences of the fire without his help?