How the Amalean family made MAS Holdings Sri Lanka’s biggest garment manufacturer – and one of the industry’s best corporate citizens.
Janet Paskin | March 2008 issue
The plant was hot. Crowded. Poorly lit. Under the three previous owners, more than 400 garment workers, mostly women in their late teens and twenties, worked 12- to 14-hour days with fewer than five toilets to share. No surprise, the Sri Lankan apparel factory had a history of labour disputes. Now MAS Holdings, Sri Lanka’s biggest apparel manufacturer, was promising to fix the problem. Under the new ownership, said MAS Managing Director Dian Gomes, the workers would keep their jobs. In many cases, they’d have higher salaries. And they’d have a downright nice place to go to work every day.
The women were skeptical, but Gomes wanted their confidence. So he raised the stakes. If he couldn’t make good on his promises in six months, he said, he’d resign. Within four, MAS had overhauled the plant, installed air-conditioning and retrained the workers. Within a year, the plant was generating $10 million in revenue—$1 million in profit—and providing meals, health-care services and career development to workers every day.
The year was 1993. “Corporate social responsibility” wasn’t yet a business school buzzword. Sweatshop conditions weren’t yet an international shame. At MAS, progressive labour practises were simply business as usual, nothing to brag about. “It was the right thing to do, especially when the entire industry depends so much on women,” says company chairman and founder Mahesh Amalean, a business leader who has become known for humility, respect for people and integrity, all of which form the foundation of his company.
In an industry known for exploitation and labour abuses, stories like this are rare. And with its history of civil unrest and rebellion, Sri Lanka may be an unlikely country in which to find one of garment manufacturing’s best corporate citizens. Nonetheless, headquartered in a high-rise in the capital city of Colombo, MAS Holdings has emerged both as one of the country’s most successful companies and as a global leader in ethical fashion.
In the last two decades, the company has increased revenues from $6 million to $700 million, and counts Victoria’s Secret, Gap, Speedo and Marks and Spencer among its clients. At the same time, it’s been singled out for recognition by the United Nations and the World Bank for the quality of its labour practises.
“Many of the policies MAS has implemented would do justice to companies in the developed world,” says Jonathan Story, emeritus professor of international political economy at the French business school INSEAD. He found MAS so remarkable, he wrote a case study about the company. “It demonstrates very clearly a simple business point: If you treat your people well, the top line and the bottom line will move together.”
In the coming years, though, the changing landscape of global trade will challenge the three Amalean brothers who run MAS, and in fact, the Sri Lankan garment industry as a whole. The expiration of the Multi-Fiber Agreement—the big, overarching trade policy that regulated international textile exports—relaxed quotas and opened the door to serious competition from China, a behemoth of textiles and manufacturing. For MAS, which makes lingerie, this is a serious threat: China immediately began shipping 33 percent more bras than before to the U.S., 63 percent more to the European Union—a sign that the country was taking market share from smaller countries.
Meanwhile, technology has also sped up production, making it easy for clothing companies to sell an abundance of cheap threads in up-to-the-minute styles, though at the same time increasing the demands on factories. Sri Lanka can’t compete in price or speed. But with MAS Holdings leading the way, industry leaders believe the country’s garment manufacturers can survive in a global economy if they put working conditions ahead of the bottom line.
Family tradition dictated careers in the garment industry for Mahesh Amalean and his younger brothers, Sharad and Ajay. Their grandfather, an Indian immigrant, established a textile business in Colombo in the 1920s. Their father finished 8th grade, then went to work alongside his father. Mahesh was encouraged to study, but there was no real question as to his career. After his father’s death, Mahesh chose to stay close for college, going to school in India rather than the UK or U.S., and when he finished, he returned to Sri Lanka and joined his uncles in the family business. Sharad and Ajay followed.
In 1984, Mahesh and Ajay left the family business to start their own company. They pooled $10,000, bought 40 sewing machines and opened Sigma Industries’ factory in an industrial area south of the city. Mahesh’s wife took charge of human resources and administration, Sharad’s wife ran the accounts, and the brothers did everything else, from meeting with customers to sewing samples to packing and shipping the finished goods.
From the beginning, the brothers rejected the sweatshop model, in part because they were supervising production themselves—if conditions were bad for the garment workers, they were equally uncomfortable for them.
Some orders were late. Others were returned for sub-par manufacturing. Frustrated customers took their business elsewhere. It was a year before things ran smoothly. Within two, Sharad had joined his brothers, they renamed the firm with their initials and the company had landed its first big international customer, MAST Industries, a major supplier to Limited Brands, the $7.5 billion apparel company behind Victoria’s Secret, Henri Bendel and the Canadian lingerie label La Senza.
For the Amaleans, it was a big break. On a global scale, it was tiny. Compared to neighbouring India and other Asian countries, Sri Lanka is a bit player in the garment industry: It accounts for about 2 percent of the $120 billion global apparel trade. (MAS accounts for about 15 to 20 percent of Sri Lanka’s textile exports.) But for the country itself, the industry is huge: Textile exports bring $2.8 billion into Sri Lanka every year, making up more than half the country’s foreign exchange.
And counter to the traditional cultural values that discourage women from living alone or even working outside the home, the industry is dominated by women. More than 85 percent of Sri Lankan garment workers are female. Many have left rural towns and villages to work in the urban free-trade zones—sometimes gated industrial areas crammed with factories to promote employment for local residents—for $50 to $70 per month, living in cheap hostels or half-built houses, saving money or sending it home. And though they may be the sole source of income for their families, when men advertise for wives in the newspaper, they have been known to stipulate, “No garment workers.”
Against this backdrop, MAS was growing, quietly continuing its policies of higher salaries, free breakfasts, eight-hour workdays and on-site health clinics. Meanwhile, unrest was growing in Sri Lanka. Rebellion had broken out in the north and east, as Tamil separatists fought the Sinhala majority for independence. Meanwhile, in the late 1980s and early ’90s, young people rioted in the cities and the southern part of the country, railing against the economic liberalization that revolutionaries said had encouraged women to leave their villages and stripped rural areas of economic opportunity. In response, then-president Ranasinghe Premadasa offered incentives to apparel-makers to build factories in rural areas. The Amaleans leaped at the opportunity, establishing factories in Horana and Pannala, several hours from Colombo. Here, too, the company paid good wages, contributing to local schools and maternity clinics.
By the time MAS hired Ravi Fernando as the director of market branding in 2003, the company was operating 15 factories in five countries. Internally, the labour practises were taken for granted. With an outsider’s perspective, Fernando saw it differently. “There were pockets of excellence,” he says. Career training, English classes, health clinics, athletics—the environment at MAS was markedly different from other garment factories. And different was good. MAS knew it couldn’t compete with China or India in price or speed. It made high-quality lingerie, but who knew whether that would be enough to keep customers? So Fernando pitched the Amaleans on a corporate social responsibility initiative: expanding MAS’ social programs and marketing the company’s progressive labour practises.
The company’s founders balked. The labour practises, the community development, the career training—that was just a part of business as usual at MAS, not a marketing ploy. Why invite the prying eyes of the outside world? “For the last 15 years, what we did for the people, we did from our hearts,” Sharad told INSEAD emeritus professor Story. Fernando pushed. If the company failed to differentiate itself, “we wouldn’t have a foot to compete on,” he said. Finally, they struck a deal: Fernando could expand MAS’ programs and unify them, but he couldn’t spend a single dollar to promote the effort externally.
In 2004, Fernando and MAS rolled out the Women Go Beyond program. They installed a “Go Beyond” team leader in every plant. The same way an apparel manufacturer would hand over a design and technical specifications for a garment, MAS executives packaged curricula and incentive programs and distributed them to the factories.
As the program gathered steam, Fernando started talking to MAS’ clients, encouraging them to sponsor monetary awards for women who participated. He took executive classes at INSEAD and mentioned his initiative to professors. He talked up the program to officials at the International Labor Organization, the World Trade Organization and the United Nations. “I didn’t have a dollar to spend on advertising,” he says. “So I identified credible organizations, told them about the program and asked them to pay attention.”
The response has been overwhelmingly positive. Companies like Nike, Victoria’s Secret, Gap and Speedo have given almost $300,000 combined to fund programs and awards. When the United Nations reviewed the success of the Global Compact, an initiative to promote progressive labour practises, the report identified MAS as one of 20 international companies that ”truly define corporate citizenship in the spirit of the Global Compact’s universal values.” The World Bank tagged MAS as a “Market Mover” and began to use Women Go Beyond as an example of sustainable business practises in a developing economy. At INSEAD, Story wrote his case study and produced a short documentary about the company. (Go to odemagazine.com/mas to see it.) “My vision is that one day,” Fernando says, “the ‘Go Beyond’ logo will be the ‘Intel Inside’ in apparel.”
MAS’ competitors took notice too. Because Sri Lanka has strict child labour laws and a relatively high minimum wage, when it came to working conditions, the garment industry was ahead of suppliers in India, Bangladesh and China. At a trade association meeting in 2005, Fernando suggested an initiative to brand Sri Lanka as a destination for ethical manufacturing. In 2006, the Joint Apparel Association Forum, an umbrella trade group for garment manufacturers, established the Garments without Guilt campaign, which required members to run their plants free of “child labour, forced labour, discrimination on any grounds and sweatshop practises.”
The campaign is still too new to judge. While the Sri Lankan garment industry was in good shape to begin with, it’s hard to change established business practises. Better labour practises mean garment workers clock fewer hours, which means plants have to be more productive, says Kumar Mirchandani, who heads the Garments without Guilt initiative. And for the industry to change, clients will have to understand that making last-minute alterations or rush orders comes at a price.
“I may not want to work on a Sunday, but what if I get the order on Friday, and the buyer says, ‘I need it by Monday—or else!’ I may not have much of a choice,” says Mirchandani, whose company, Favourite Group, makes outerwear and children’s clothing. To achieve change in the garment industry, Mirchandani believes buyers’ expectations have to be reasonable too.
And no matter how good the working conditions get, Garments without Guilt—even MAS’ empowerment programs—remain optional. There’s no government monitoring, unions are rare and garment workers are still poor, notes Rachel Weeks, a Fulbright scholar studying “ethical fashion” in Sri Lanka. “These initiatives are all really positive,” she says. “But at the end of the day, this country needs a living wage more than anything else.”
Even so, MAS’ programs offer a powerful alternative for the garment industry. While even company executives acknowledge that the Women Go Beyond initiative can’t reach everyone, on average, each employee participates in a program between three and four times a year. As part of the initiative, MAS has sent garment workers to the U.S. for leadership training, supported women in starting their own businesses and opened its doors to community members so workers’ families can participate in English and computer classes.
In December, thousands of MAS employees went to Colombo for the company’s annual ceremony to honour its most empowered women—workers who take their own development seriously. From the cover of programs and a screen onstage, the logo—a woman’s face with the words “Women Go Beyond”—smiled at participants. It’s a simple, clear image—and if Fernando has his way, someday it will be shrunk to the size of a postage stamp and sewn into the back of your T-shirt.
Janet Paskin is a financial journalist based in New York.