Business Ethics Case of Malden Mills

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MGMT – 368 Business Ethics
The Case of Malden Mills

On December 11, 1995 a fire burned most of Malden Mills to the ground and put 3,000 people out of work. Most of the 3,000 thought they were out of work permanently. A few employees were with the CEO in the parking lot during the fire and heard him say “This is not the end.” With these words began a saga that has made Aaron Feuerstein a legend among American leaders and a hero to his employees, (Boulay, Art). Central Facts about the case

In the 1980’s Malden Mills had gone bankrupt when the market for the fake fur, (which they produced), dried up. Conversely, Mill’s continued its production of upholstery fabric and developed a new fleece product, Poalartec, and made a very successful recovery, (DeGeorge, Richard). Aaron Feuerstein was the third generation owner and CEO of Malden Mills in Lawrence, Mass. Even though the massive fire in 1995 nearly destroyed the whole place, Feuerstein continued to pay all of his workers their full wages, refusing to lay any of them off, and was determined to rebuild. He felt he owed it to his employees since they had always done their greatest for him and for the mill and for this, he became a case study in how to treat employees, (DeGeorge, Richard T).

In 2001, the tables turned and Polartec’s popularity declined, Malden Mills was forced into Chapter 11 bankruptcy-court protection. By 2003, the company had emerged from the bankruptcy with the company lenders in control and a debt of $180 million dollars. By 2004, Feuerstein was still trying to raise enough credit to buy back control of the company, (DeGeorge, Richard T.).

The filing was necessitated by the cost of servicing bank debt. A number of factors contributed, including a sluggish retail market, the high costs associated with rebuilding and the closure of the company’s upholstery division after a significant market share loss as a result of the fire. Malden Mills, a privately-held company, worked with its lenders and strategic advisors and determined that a Chapter 11 filing was the best way to reorganize the company for continuing operations and for building on its unique position as a brand innovator. Through Chapter 11, Malden Mills is fully operational and conducting business as usual. Gorlitz Fleece GmbH, a wholly owned subsidiary of Malden, based in Gorlitz, Germany, will continue operations unaffected by the U.S. filing. Customers worldwide will continue to receive product, without interruption, from both facilities. The U.S. Customer Service Center in Lawrence, MA and the European Customer Service Center in Maastricht, The Netherlands, will also continue to operate as usual and serve customers’ needs. “Malden Mills is in an enviable position in the marketplace,” said Feuerstein, “and with this infusion of capital, we will continue to grow the business and retain our preeminent status in the industry. Our customers, employees, and vendors will all be the beneficiaries of this reorganization plan which allows us to focus on our very positive outlook for the future”, (All business) Ethical Responsibilities

Deontological moral systems are characterized by a focus upon adherence to independent moral rules or duties. To make the correct moral choices, we have to understand what our moral duties are and what correct rules exist to regulate those duties. When we follow our duty, we are behaving morally. When we fail to follow our duty, we are behaving immorally. Typically in any deontological system, our duties, rules, and obligations are determined by God. Being moral is thus a matter of obeying God, (Cline, Austin). The key questions which deontological ethical systems ask include: What is my moral duty? What are my moral obligations? How do I weigh one moral duty against another?

As the current owner of a business controlled for many decades by his family, Feuerstein said he made this decision—an important business decision—based upon the religious...
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