The Right Thing to do

by Walter M. Brasch

Newspapers and TV stations ran the story of an owner who stood by his workers, even at personal financial sacrifice

BLOOMSBURG, Pa. -- To his 3,200 employees, 70-year-old Aaron Feuerstein looks a lot like Santa Claus. Two weeks before Christmas, fire destroyed the nine-acre Malden Mills complex, New England's largest textile plant. Within hours of the fire, Feuerstein told his workers at the Methuen, Mass., plant he would pay their salaries for at least a month, give each of them a $275 Christmas bonus, and make sure their health insurance was covered for at least three months. Then he told his workers he would rebuild the plant. Feuerstein could easily have told his workers he was sorry for the loss, explained how to get unemployment compensation and food stamps, wished them well, taken a multi-million dollar settlement, then closed the plant founded in 1906 by his grandfather. But he didn't. When other companies fled to the South to escape the unions and to exploit a cheaper workforce, Feuerstein stayed right where he was. Like his father and grandfather before him, Feuerstein believes if you take good care of your workers, treat them with dignity and respect, the rewards would be many-fold. For 90 years, Malden Mills took care of its workers, first immigrant Jews, then Cubans. But unlike many owners, Feuerstein didn't exploit foreign labor so he could "maximize profits." The Malden Mills workers are among the best-paid in the industry; their benefits a goal few companies wish to match. Unlike most owners, not only does Feuerstein encourage union membership, he and the Textile Workers union have a mutual respect for each other. Feuerstein had no intention of letting others know of his fierce loyalty to his workers, but the word did get out. In less than a week, newspapers and TV stations ran the story of an owner who would stand by his workers and the economy, even at personal financial sacrifice. To reporters' incredulous questions of why he did it, Feuerstein simply said, "It was the right thing to do," he said.

Short-term greed will cause the nation once again to go into a recession

The same week that Malden Mills burned, Kimberly-Clark Corp., which had just absorbed Scott paper, fired 2,700 employees. Of course, the PR operation called the move "downsizing," the new business euphemism for "We're gonna make a heck of a lot more money for the owners by cutting personnel and forcing the workers who are left to do even more work." The "downsizing" even has a tangential benefit; the workers are so afraid they'll be the next to be "downsized" that even in a unionized shop they'll do just about anything Management dictates. In October alone, Allied Signal laid off 3,000 employees, although third quarter profits were up about 15 percent; Fruit of the Loom closed six plants and laid off 3,200 employees, although its stock closed UP 7-3/4 points, a 47 percent gain from its low that year; and workers at the General Electric plant in Erie, Pa., staged a three-day strike to protest the company's plan to lay off 1,500 workers, although GE stock at the end of 1995 was 41.2 percent higher than a year earlier. In the last two weeks of December, hundreds of corporations, including Kmart and Wal-Mart, laid off thousands of employees. AT&T, which announced last year it was laying off 8,500 workers from its computer division, early this year announced another 40,000 layoffs, reducing its work force about 16 percent. The immediate result? Its stock rose 2-5/8 points. More than three million workers were "terminated" since 1990. Then, with a frightened workforce that has no grievance rights, management eventually lays off those workers and hires "replacement workers," usually part-timers, some working as many as 37 hours a week without benefits. When even part-timers become too costly, management "outsources," sending work to private contractors who underbid the competition and underpay their own staffs, or overseas where wages and working conditions are significantly less than in the U.S. Once inflation has been included, half the American workers haven't had any raises in 15 years, according to Robert Reich, U.S. secretary of labor. "Their health care benefits are drying up; their pension benefits are hollowing out," he told the national convention of the AFL-CIO in October, then boldly stated that "the rich are getting ahead; the rest are getting nowhere. In the space of a generation, 'job security' has become a quaint phrase of a bygone era." Between 1989 and 1994, workers averaged slightly less than three percent per year wage increases, about what the average worker earns before taxes on interest from a savings account; business executives, however, received about 11 percent pay raises per year, according to the Bureau of Labor Statistics. While workers are receiving minimal benefits or being "downsized," upper levels of Management, of course, retain their six- and seven-figure salaries, perks, fringes, stock options, and golden parachute escape/retirement clauses for assuring corporate boards an "adequate return on investment." For corporate America, which has settled for instant gratification in its stock portfolios, the slash-and-burn strategies allow investors to take short-term profits then turn to other companies willing to sacrifice their own workers, and even the quality of their product for the "bottom line." Last year, pre-tax profits on all American corporations were slightly more than 10 percent, rising from about 8 percent in 1989. The Dow Jones Industrial Average itself, reflective of business prosperity, finished the year at 5,117.12, up 33.45 percent from its January 2 opening of 3,834.44. Unfortunately, the market is at an artificial high because of management decisions to cut personnel and product quality to meet unrealistic profit goals. Continuing to reap the short-term greed will cause the nation once again to go into a recession, probably within a year. Perhaps the time will come when American business management will realize that the strength of America is its workers, not its stock investors, and that the "bottom line" is not to "maximize profits" by "downsizing" or "rightsizing," but by treating workers and the consumer with the same dignity and respect that made Malden Mills a profitable operation. Perhaps there will be a time when what Aaron Feuerstein did will be so common in American business it won't make headlines. After all, as Aaron Feuerstein said, it is "the right thing to do."

Walter M. Brasch is professor of journalism at Bloomsburg University.

Front Page