'Corporate Decency' Prevails at Malden Mills
THE transformation at Malden Mills is almost too good to be true - even to its president, Aaron Feuerstein.
Last December, a fire nearly destroyed the 130-year-old textile company in Lawrence, Mass., that Mr. Feuerstein's grandfather founded. Three of its manufacturing factories, which occupy a space the size of a track field, were reduced to charred metal and brick.
But today, the picture is completely changed. Ever since Feuerstein vowed on the night of the fire to rebuild and to keep on the payroll those workers left jobless by the disaster, his employees have been working at a frenetic pace to get the mill up and running again.
To Feuerstein - who has become the nation's icon of corporate decency - his workers' commitment is the direct result of his own loyalty. Yet, even he is surprised by the value of that loyalty.
"I always thought that perhaps in the long-run [my employees] would return to me a quality product that would make Malden Mills continue to excel," he says in an interview. "But I never dreamed there would be any short-term advantage."
Since the fire just three months ago, two of Malden Mills' three divisions are running again at near-full capacity. Also, 80 percent of the firm's 3,200 employees are back at work; and engineers plan to break ground in mid-April for a new manufacturing facility slated to be operating in January 1997.
In today's lean-and-mean corporate culture, where thousands of workers have seen their job security diminish, Feuerstein's actions, in his words, "struck a nerve with the American psyche."
Thousands of letters have poured in from well-wishers across the country. Dozens of local and national organizations have rushed to recognize him. Five universities will be awarding him honorary doctorate degrees. And he attended President Clinton's State of the Union address.
Yet to this no-nonsense chief executive, who has guided the family business for four decades, the accolades seem undeserved.
"Fifty years ago," Feuerstein says, "it would have been considered very natural for a CEO, if his plant burned down, to rebuild it and to worry about his people and ... his community and city."
Today, he contends, business leaders have lost their allegiance to their workers and communities and remain loyal only to the shareholder - all in the name of short-term profits.
"There's some kind of crazy belief that if you discard the responsibility to your country, to your city, to your community, to your workers, and think only of the immediate profit, that somehow not only your company will prosper but the entire economy will prosper as a result," he says, "and I think it's dead wrong."
In 1995, before the fire, Malden Mills sold $400 million worth of fabrics for apparel and upholstery. Its most well-known product is Polartec, a synthetic fleece used to make outerwear.
Feuerstein estimates that it has cost $10 million to pay those workers who lost their jobs from the fire - some 1,400 at first - for 90 days plus full health-care benefits for 180 days.
The investment has already begun to pay off: The quality and efficiency of production are better today than before the fire, Feuerstein says. For example, in one of the Polartec finishing plants that wasn't destroyed, the plant produced about 130,000 yards of the fabric a week prior to the fire. Today, production is double that.
In addition, before the fire, 6 to 7 percent of what was manufactured was off-quality, he says. Now, that number has dropped to 2 percent. "This is a direct result of the goodwill and determination of our people to show their gratitude to Malden Mills," he notes.
The company also has been able to get production back quickly by turning its warehouse space into manufacturing space. New equipment that was ordered before the fire, but hadn't been installed, is now in the warehouses.
For Feuerstein, a devout Jew, a driving force in his life has been a 2,000-year-old saying from the Jewish tradition that his father taught him. It says, in essence: When everything is moral chaos, try your hardest to be a "mensch," or man of highest principles.
Had he decided to take the insurance money and not rebuild, Feuerstein says, it would have been "very profitable" for him but not for his employees or the town of Lawrence. "What kind of an ethic is it that a CEO is prepared to hurt 3,000 people who are his employees [and] an entire city of many more thousands ... in order for him to have a short-term gain," he says. "It's unthinkable."
Malden Mills has a history of taking care of its employees. Workers' salaries average $12.50 an hour compared with the textile industry's average of $9.50. And in the 1950s, when other New England textile manufacturers fled to the South for cheaper labor, Malden Mills stayed.
Feuerstein criticizes those who downsize simply to contract out cheaper labor. "There's a downsizing that is necessary as a result of technological improvement ...," he says. "But there's a downsizing that is a result of the CEO searching for cheaper labor elsewhere that I don't feel is the right way to go in the long run."
Feuerstein approaches everything with a relentless intensity. Born in Boston, one of five children, he joined the family business after graduating from New York City's Yeshiva University in 1947. He took the helm in the early 1970s. Shortly thereafter, he moved into the fake-fur business, which proved to be disastrous. In 1980, he declared Chapter 11 bankruptcy and laid off workers.
Then came Polartec - what he calls the mill's "finest hour." Developed by the plant's own research team, Polartec put Malden Mills back in business; and Feuerstein hired back every worker he let go after the bankruptcy.
Many of those people are still at the mill and believe Feuerstein's efforts will again succeed.
"Nothing will surprise me about Aaron," says Paul Coorey, president of Local 311 of the Union of Needletrades, Industrial and Textile Employees, who has worked at the mill for 35 years.
Feuerstein admits that, as owner, he has a great advantage over leaders of public firms because he answers only to himself. "But I would like to think," he says, "that the average CEO - even though they're reporting to the public and the so-called shareholder - also feels that there's a moral imperative that they must answer to as well."