Ethan Allen CEO Begs State to Help Small Business

Author: Kelsey Rinehart

On Wednesday, Chief Executive Officer (CEO) and Chairman of Ethan Allen Inc. M. Farooq Kathwari proposed a lowering of Vermont's lofty electricity costs, workers' compensation rates, property taxes and corporate tax rates. He hopes that modifications will better the business atmosphere in Vermont and make it easier for Ethan Allen to continue production in Vermont. Speaking in Barton about the future of the company, Kathwari warned that the Connecticut-based company might leave its two Vermont factories if the state fails to respond to his concerns within a year.
While hundreds of furniture-makers are shipping their operations overseas in search of cheaper production and labor costs, Kathwari, the recipient of the Southwest Connecticut/New York Hudson Valley Ernst & Young "Entrepreneur of the Year" award, keeps 85 percent of his production in the United States.
Kathwari says he values high-quality workers and wants to maintain company tradition, but the decision to keep Ethan Allen largely on U.S. soil leaves him to contend with multiple problems. Electric bills reached over $1 million for the company's plant in Orleans alone last year, and the Orleans and Beecher Falls plants' property taxes are one-third greater than the joined amount for five similarly sized plants in North Carolina, Virginia and New York.
The two Ethan Allen plants in Vermont's Northeast Kingdom are that region's number one employers, together providing jobs to 1,200 people who make up 15 percent of Ethan Allen's workforce. Twenty percent of Ethan Allen's furniture is assembled in the Orleans and Beecher Falls factories, where upgrades have cost the company over $20 million, according to Kathwari.
Despite criticism, the CEO insists that he is not just looking for a handout. "I don't want any free lunch. I am not interested in asking you to do something that is impossible," Kathwari said. "But we need to put our heads together."
A recent editorial in the Burlington Free Press commented on Kathwari's requests, stating, "Vermont doesn't have the money — much less the political culture — to entice businesses with huge tax breaks and lavish subsidies. If those are the kind of benefits Kathwari was seeking when he complained about the state's business climate earlier this week, he might as well leave Vermont."
In response to Kathwari's request for lower workers' compensation costs, legislators on Wednesday said that the costs — money the state requires a company to give workers who are injured on the job — are on the rise all over the country. Some said that electric costs will always be high in Vermont because of the state's lack of hydro-dams and other natural sources of power. The Free Press editorial, however, suggested that alternatives could come in the form of flexible permitting and technical support to help the plants become more energy-efficient.
The state has approximately one year to evaluate Kathwari's requests and alter its business policies accordingly. If the CEO is dissatisfied with Ethan Allen's prospects in Vermont, many workers, particularly in the Northeast Kingdom, may be facing unemployment.