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. tested. In such conditions ethics ethics has an important role 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 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 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. 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 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 ha rd 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.
