ASSIGNMENT ON

MALDEN MILLS

Question1: Are strong ethical values good for business?

Answer:

First of all, ethics is very subjective, as far as its understanding, importance

or acceptance is concerned. In real life, we have to face many different
situations, where there is more than one right, where the distinction between
right and wrong is blurred, things are “relatively good or bad”, where
survival becomes as important as principles or values, where things are
incomprehensible, in short where there is a dilemma involved and where our
integrity is tested. In such conditions ethics has an important role to play.

But in any case it is always good to stick to ethics, because it is based on the
principle of “greater good”. There are no fixed set of prescribed rules, which
can be called ethical. Of course we have law to ensure that fairness and
goodness remains intact in the society, but it has its limitations and cannot
deal with all the complex and complicated situations of life. It is left largely
to individuals to decide for themselves, what is ethical and what is not.
Basic and essential nature of human beings is “goodness”, though it may not
appear to be so in many cases because trials and tribulations of life shakes
ones belief system and, bring in lots of doubts. In spite of this, at the end of
the day all a person wants is love, happiness, peace and contentment. So
being ethical and striving for truth and betterment brings the true sense of
satisfaction, worthiness and achievement. This is true irrespective of time,
age or place.

Even people, who do not have firm belief in ethics, have a boundary for
themselves. So at the end even they follow what is ethical according to
them.

Ethics is as much applicable and fruitful for business, as it is for life. We must
not forget that after all business is done by human beings and their
requirements are same as that of any other individual.

King Solomon, who was hailed as the wisest leader ever to govern any
nation, said, "Be wise and give serious thought to the way you live." In all
endeavors, including our work, we must realize that morality is the single
most important guiding principle behind all that we do and say. Our morality
molds our ultimate being, who we really are.”

Even if we consider business at large instead of a businessman, being ethical

is better and also desirable. Without strong ethical values, companies easily
drift to the legal edges--dangerous territory where bending and breaking the
law leads to lawsuits and indictments.

Companies that tolerate unethical practices in today's transparent era will

almost certainly be exposed and then boycotted and punished in the
marketplace. Today's investors will avoid a company that isn't responsible
and ethical. Recent market declines have partly resulted from concerns
about unethical accounting practices. It is interesting to note that the lack of
confidence is thought to have caused a decline in the total market, not just
in "suspect" companies.

In an era of virtual corporations, partnerships, and extended enterprise, no

company is self-sufficient. Successful partnerships are built on trust and
trustworthiness. The technological revolution resulting in virtual corporations
demands very high levels of trust--externally as well as internally.
Customers are also looking at the reputation of the company. Customer
surveys have consistently shown that a company's ethical reputation is a
factor that affects purchase decisions.

People produce best in an open, creative, ethical environment. Companies

that have a poor reputation have difficulty attracting and retaining top
talent. Company leaders and employees can take genuine pride in their
accomplishments knowing they didn't bend rules, cut corners, or hurt people
to accomplish their goals and this gives them a lot of satisfaction.
Hence profits can build a business giant but to sustain it ethics is needed.
Without being ethical trust cannot be built, and without trust business cannot
sustain.

As far as the question of strong ethics is considered.Being strongly ethical is

one thing and having strong ethics is another. What is ethical and what is not
is based also on situation. While it is highly desirable and good to be strongly
ethical but strong ethical values may sometimes lead to troubles. So there
should remain a room for flexibility. Flexibility here does not mean the
flexibility of drifting away from ethical values rather it means the flexibility in
making choices after evaluating all of them in various respect. A value or
principle is called ethical because of the fact that it is above personal
benefits, for common and greater good, because it is conscientious and
honest. So cherishing and practicing this essence of ethical behavior
religiously, is actually being strongly ethical.

Again, bringing it back to business scenario, it is always good to be strongly

ethical.
The way Johnsons&Johnsons handled an ethical issue (the "Tylenol scare"
crisis) in the 1980s is probably one of the most inspiring and enlightening
examples of how to successfully deal with a major ethical issue in business.
J&J managers immediately removed Tylenol from the market and stopped all
production of the product after seven Chicago residents died after ingesting
cyanide-laced capsules. Despite different advice from consultants and
lawyers who said they would ruin the brand forever, these managers lived
their code of business ethics and made these decisions while their company
CEO was on a plane. By the time he landed, the entire process was
underway.

Real life business scenarios are very complicated. It’s tough to follow ethical
values strongly every time. The nature of business is such that it poses
limitations. For example, let us consider the recession that was witnessed a
year ago. Due to Recession companies had to go for downsizing and
retrenchments. In an already tough situation it is not ethical to snatch from
our own employees, their source of living. But if they were not terminated
the company would have suffered huge losses which could lead to shutting
down of the company. So by terminating some people, it could have saved
itself and also support the life of at least some of its people. On the other
hand retention could have endangered the future of company and all its
employees.

Let us consider another example. Suppose a manager has a strong value of

being fair to his employees in their appraisal. The appraisal system is based
on relative grading and the grading again is based on several criteria. Now
extraordinary performance of one employee pushes good performance of
another (who has achieved considerably more than his target and has been
consistently performing so for years) into average category. So fairness is
not maintained. But manager does not have many choices as there is no
system of appraisal which guarantees total fairness and we have to follow
one of them. In both the cases, the best way is to minimize the flaws in the
system and assure that criteria are transparent honest and humanistic as far
as possible.

Hence strongly adhering to ethical values is a good choice for business. Only
thing to be taken care is that the situation should be evaluated properly and
a right choice with a right intention should be made. The rigidity of sticking
to one principle should not overpower the basic intent of being ethical. No
matter what the consequences, it is intrinsically good to do the right thing
and be ethical.
Question no 2: What in your analysis caused the failure of Malden mills? Is
the failure in spite of ethics or because of ethics?

Answer:

It is highly commendable that Malden mills CEO Feuerstein, thought first for
his employees, people who made it all possible and then bottom lines of his
company. His conscience did not allow him to leave these people alone in
the time of trouble, who had contributed so much in making the company
what it was. The decision he made needed lots of courage and integrity. He
had set an example that business is not above people.

It was alright not to relocate the factory for the benefit of people, even at
the cost of losing some of its profits, till things were going well. When the
mill was destroyed in fire, it had to be rebuilt almost from scratch. It was well
known that locating it to an economically attractive area, would have been
economically beneficial for mill.

Feuerstein’s value was to help people. His intentions were good. But that
intention could be fulfilled only when he had resources. Intention alone is not
sufficient.

In this case the CEO lacked this foresightedness. He could have continued to
help people in different ways even after relocation. May be of the profits he
would have earned by relocating the mill, he could have spent some for
these people on a regular basis, by indulging in certain welfare activities.
May be he could have opened a free school for their children or start a
hospital or built house for them. May be then he could have helped in a
better manner because he would have had resources with him, which he
could spent with greater autonomy and for many years to come.

What the CEO lacked was this vision. If his intentions were right and honest,
even relocation would not made been unethical. The value of helping the
community was important to him. If the relocation was done for the same,
then it would not have been unethical to do so.

As far as tackling with crisis is concerned his policy of extending employees

salary and medical coverage also proved fatal. Instead of taking entire onus
on himself, Feuerstein could have taken help of aids, donations and could
have arranged for funds. To repair the damage done to the mill was his
personal liability but helping people to recover from what had happened
should have been a concern for society at large. The credibility that Malden
Mills hold would have certainly helped in making such arrangements.

To support the businesses which were depended on this company would

have been difficult after relocation, but even if the mishap would not have
occurred how long the company would have continued to exist by losing
profits. Technologies were changing; the sector was witnessing an overall
reform. It would have been hard to survive tough completion anyways.
Change was the demand of time and company’s existence could have been
under stake. Everything has to change as per requirement. If intentions are
good the changes are justified.

In any case rebuilding the factory did not help the CEO fulfill his intentions.
Due to poor policies he lost money further and became bankrupt. He was
removed from his position and the he was prohibited from purchasing the
mill later on. One of the major reasons of Malden Mills’ failure was dishonest
behavior of creditors. But unfortunately, in this world, one with money and
position is always more powerful. So Feuerstein’s willingness to help the
community did not realize. The opposite could also have happened but the
chances were almost zero.

It is also true that being ethical alone does not guarantee success. One has
to be ethical doubtlessly, but wise and flexible in evaluating alternatives and
making choices. Farsightedness is needed in any decision making. If short
term losses and comprises bring long term gain and happiness and welfare
of all, it is better to incur short term loss and make compromises, if they do
not harm others. This does not mean that ethics is not important. Ethics is
the guiding force which gives a sense of right and wrong and in this world
nothing is absolutely right or wrong. One has to listen to his conscience and
decide for him. Ethics help in this.

Hence, we can conclude that in above case the failure is not because of
ethics, but because of wrong policies, because of creditors’ decisions and
because of a limited understanding of situation and may be because of a
limited understanding of ethics itself.