I need an explanation for this Business Law question to help me study.
For discussion, address the following (if you use outside sources, provide URL)
1- Was Feuerstein guided by morals or ethics?
2- Do you think he could have made the decision if Malden were a publicly traded company?
3- Why do you think he has critics for his decision?
You must provide citations for all materials used.
2) Also you need to reply two classmates.1. Your original post must show effort. There is no hard rule for length, but many of these can be expressed in 2-4 paragraphs. The post is graded on content, grammar, spelling, and presentation. You can, and are encouraged, to use outside material such as web sites but you must provide a citation (even an informal citation is acceptable). Please DO NOT post as a file attachment. If you want to compose in MS Word or any other program, once you are finished, copy and paste directly into the board.
2. Your reply posts need to have substance. They cannot be… “good post.” It should read as a dialogue as if you were discussing in person. You can agree or disagree (if you disagree, do so respectfully. If someone disagrees with you, do not take it personally. If, at any time you think there is an inappropriate post, DO NOT reply…bring it to my attention immediately). You can cite to each other. A reply should show that you spent time and effort reading the post, thinking about it, and responding.
By Andrew Molina
Aaron Feuerstein in his decision to rebuild the textile mill after the fire and keep all his employees on full salary acted on his personal morals about the responsibility an employer has to his workers. Feuerstein made two separate choices, both of which may have cost him and his company significantly, including missed future profits, by not outsourcing and by continuing to pay his employees despite their lack of work. These decisions were made due to his belief that employers should strive to provide a decent living for their workers and should treat them as valuable to the company. He wanted to protect the livelihoods of these people and sought to give back to them for their hard work and found no pleasure in simply moving his factory overseas and making more money or cashing in on his fire insurance living the rest of his life in luxury.
If Malden Mills was a publicly traded company, chances are that Feuerstein would have been pressured by Wall Street to not pay his workers during the reconstruction of the mill; investors would have seen it as an unnecessary labor expense that was producing no returns for the company. Furthermore, it would have been likely that investors would have tried to get Feuerstein to rebuild his mill elsewhere besides the United States. American textile mills had higher costs due to labor than other more competitive countries and, given the trend of outsourcing manufacturing at the time, the rebuilding of the mill in Massachusetts would have been strongly opposed. Luckily for its workers, Malden was privately held by Feuerstein and he was able to make his own decision about what path to take with the company following the fire.
Feuerstein mostly has received criticism for his idealistic ethics and how it guided him to make the costly decisions that caused his company to acquire a large debt burden. This debt burden is what many critics see as causing Malden Mills to declare bankruptcy in 2001. Critics largely argue that Feuerstein’s decisions lacked any business sense and resulted in the company experiencing two bankruptcies and an eventual acquisition; they have used this as evidence that he mismanaged his company by prioritizing its employees over the survival of Malden. The issue with this stems from the fact that the company had already declared bankruptcy before, so the bankruptcies were not necessarily due to his decisions. Rather, it can be understood to be largely due to the capital-intensive nature of manufacturing and the low profit margins of the textile industry. This means that with even minor changes in consumer behaviors, Malden would have been vulnerable to considerable losses that would have made its debt unserviceable. Which is exactly what happened in the few years following the mill’s reopening. And ultimately the company is still around, as a subsidiary of Polartec, but more importantly, the mill itself is still open and its workers still have jobs there.
Edited by Andrew Medina on May 28 at 10:52am
By Kyle Teijeiro
1. After watching the video, my initial reactions made me believe that Feuerstein was guided by morals, but now, I do not believe that to be true. According to a Forbes article by Bruce Weinstein, respondents tend to see morals as what the individual personally considers right and wrong, and ethics as a set of codes set externally to display what is right and wrong. When defining morals and ethics in this manner, it makes it clear that Feuerstein was guided by ethics. Towards the end of the interview, Feuerstein admits that most of his decisions regarding what he did with his employees and the factory were guided largely by his religion and by Jewish law. In the end, both his religion and the Jewish law have rules in place to display what is right and wrong, making them a form of ethics.
2. If Malden Mills were a publicly traded company, I do not think that he could have made the decision. As David Gill pointed out in his article, Malden was a privately-owned company, which allowed him to make his own decisions without any worries of how it affected others. However, if Malden had been a publicly traded company, Feuerstein would have had to consider the interests of his shareholders and everyone else with a stake in his company. In such a situation, it would have been much more difficult to make the decision he did, because it would have most likely hurt the wallets of those who had been investing in Malden. Even if he had wanted to do the right thing, there would have been a very small probability that his shareholders and other investors would have allowed him to make such a financially risky move just to appease his own ethical code.
3. I believe Feuerstein has been criticized for his decision for three main reasons. I believe the first and most simplistic reason is that the decision was foolish. I think some people criticize his decision because it was just out-right foolish from a business perspective. To take such a financial loss for the sake of your employees rather than outsourcing your factory somewhere in China or cashing in on your fire insurance and using the rest of the money to live out in retirement made no sense to some individuals. The second reason he was criticized for his decisions was because some people probably thought he was doing all this for his own satisfaction. Feuerstein’s decision to rebuild the factory and continue paying his employees while they were out of the job made the news everywhere, and he was soon being called the “Mensch of Malden Mills.” Considering what a financially foolish decision he had made as the CEO of a company, some individuals assumed that he made such a decision for the sole purpose of satisfying his own ego—to make himself seem “holier” than everyone else. The final reason he was criticized for this decision was because other businesses feared the implications this action would have on them. Feuerstein’s decision was not one that anyone would have imagined a CEO making in that day and age, especially following the Enron scandal; but as it got more and more attention from the news and other media outlets, it must have gotten the CEOs of other companies thinking. If this altruistic form of people over profits became a standard in the business world, it would either negatively affect the public relations or the profits of their companies when the time came for them to follow suit. In order to avoid bringing this new ethically focused form of business into the spotlight, they most likely criticized Feuerstein’s decision under the guise of the first two reasons mentioned above.
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