Barry Schwartz, in a TED talk, speaks about the value of practical wisdom and the problems with reliance on rules and incentives. Near the end of his talk, he quickly lauds Aaron Feuerstein as a moral hero for having gone against the pressures of Wall Street after a fire destroyed Malden Mills. He chose to keep everyone on the payroll at immense cost to the company and to shareholder value because doing otherwise would irreparably damage the Massachusetts community where they were located, according to Shwartz.
Robert Reich also mentions the actions of Feuerstein in his book, Supercapitalism. Malden Mills had to file Chapter 11 in 2001 as a direct result of the $15 million it took to keep everyone paid and the insistence on staying in Lawrence, Mass. where wages remained high in spite of more “competitive” wages elsewhere (North Carolina or subcontracting in China). Feuerstein was fired and replaced with someone who took most of the jobs out of the community.
Barry Schwartz’s talk was in 2009, eight years after the bankruptcy, “Three thousand employees, he kept every one of them on the payroll. Why? Because it would have been a disaster for them and for the community if he had let them go. Maybe on paper our company is worth less to Wall Street, but I can tell you it’s worth more. We’re doing fine.”
Obviously not. Feuerstein, according to Reich, is an anachronism, a “corporate statesmen” in an era of ruthless competition.
I find myself to be “of two minds”, as Reich puts eloquently. I want to live in a world where people and organizations can make decisions that are morally and socially beneficial to others, but I also see that as an impossibility given the current economic context. Shareholder value will continue to trump any sort of ethical stance until we find a way to reassert ourselves as citizens with moral agency.
