Aaron Feuerstein and the story of Malden Mills

In December, 1994, fire destroyed the Malden Mills factory and owner Aaron Feuerstein faced a costly choice. Located in struggling Lawrence, MA, Malden Mills manufactured polar fleece for jackets and blankets. The factory would take months to rebuild, and the sensible decision would have been to lay workers off until they could start producing again. But instead of cutting costs, Feuerstein elected to keep paying worker salaries.

He said,

I have a responsibility to the worker, both blue-collar and white-collar. 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 worthless to Wall Street, but I can tell you it's worth more.

According to wikipedia, this decision cost Aaron Feuerstein $25,000,000. In 2001, he had to take the company through Chapter 11 bankruptcy. Lenient creditors and government grants helped the company survive, though Feuerstein was forced to resign as CEO. Then in 2007 the company, under its new owners, filed for bankruptcy again and closed down. A new company, Polartec, bought its assets. Although Malden Mills had missed a $1.7 million payment to its pension plan, the Pension Benefit Guaranty Corporation took over the pension plan and continued payments to retired workers.

So this story has a mixed ending. Doing the right thing doesn't lead inevitably to success in the marketplace. Hard times, market changes, competition, and unexpected disasters can lead to company failure, and company failure hurts workers, owners, and the community. In theend, Malden Mills failed.

For Feuerstein, the reward for doing the right thing was that three thousand people got eight months of pay they would otherwise have done without, and many of them stayed employed for another twelve years. A gradual winding-down instead of a catastrophic finish allowed workers time to plan for change. In the end, while Wall Street numbers determined the fate of the company, but one man's leadership helped determine the fate of the people who worked there.