Section C (30 marks) Case Study Malden Mills

Sometimes, doing the right thing is more important than profits, a lesson that Malden Mills, privately owned company, learned firsthand. When the factory burned down in 1995 just two weeks before Christmas, production halted and employees assumed they'd be out of work until the factory was rebuilt. In contrast to normal practice in an era of corporate downsizing and layoffs, CEO Feuerstein told his employees on the night of the fire that they were the business and he was keeping all of them on the payroll for 90 days at fully pay, as well as 180 days with benefits at a cost of $25 million to Malden Mills. After the factory was rebuilt and all of the displaced workers were rehired, cooperation and productivity reached a new high, with 40% more business, 95% customer and employee retention, and a production increase from 130,000 to 200,000 yards per week. However, since then, Malden Mills has been to bankruptcy court three times, with much of the debt tied to the rebuild of the factory. Feuerstein made employees happy, to be sure, but did his actions pay off in the end? The increased demand for Malden Mills products wasnt enough to offset the debt he had built up waiting for the plant to rebuild: $100 million. This situation was coumpounded by a downturn in the market, as well as cheaper fleece alternatives flooding the market. Malden Mills filed for bankruptcy protection in November 2001.

C1. Using Archie Carolls CSR Pyramid, describe and explain the responsibilities of Malden Mills. While there are four responsibilities in the Pyramid, what does this case say about the economic responsibility?

C2. List Malden Mills organizational, economic and societal stakeholders. How were they affected by the companys actions? (10 marks)

C3. If Malden Mills was a publicly held company with shareholders, rather than a privately-held company, do you think that would have changed the CEOs decisions? (5 marks)

C4. Describe two other ways Feuerstein could have handled this incident? How would the workers have been impacted? (5 marks)