Ethan Allen’s Farooq Kathwari is working to solve the geopolitical standoff in Kashmir that cost his son’s life

COMPANIES DON'T GET more American than Ethan Allen Interiors, the home furnishings and design company named after the Revolutionary War hero that has, for decades, been synonymous with the styles of its native land. Surprisingly, the company has been run for the past 23 years by Farooq Kathwari, a Kashmiri who arrived in New York after graduating from university in Srinigar. Kathwari worked as a bookkeeper in a small printing company and attended night classes at New York University. Later, he talked his way into a job with an investment firm and also began selling imports his grandfather sent from Kashmir. That led to a relationship with Ethan Allen’s CEO, who later hired him.

Kathwari became CEO himself in 1985. When the prospect of a hostile takeover appeared, he banded together with several other employees, borrowed a lot of money, and bought the company outright. Thereafter, he changed just about everything: supply and distribution, product lines, even the layout of his stores. He instituted a single shipping price to anywhere in the United States and refused to offer discounts to bulk buyers, saying, in essence, that the smallest Ethan Allen customer is as important as the largest. By any measure, his run has been a success. He took the company public again. There are 275 “design centers” in the United States and 40 overseas, including China, Kuwait and Taiwan. In 2007, Ethan Allen did more than US$1 billion in sales.

Hard days are ahead as the financial crisis pounds the housing and home furnishing markets. Kathwari is up to tough challenges, though.

In the mid-1990s, Kathwari started getting involved in the Kashmir issue, one of the globe’s thorniest geopolitical conundrums. He brought together scholars, diplomats and business people to form the Kashmir Study Group. Personal loss was Kathwari’s motivation: in 1992, his Westchester County-raised son Irfan died at the age of 19 after crossing into Afghanistan, possibly to wage jihad.

Wearing a white shirt and purple tie, his dark suit jacket hanging on the back of the door, Kathwari welcomes visitors to his office at Ethan Allen headquarters, a plush suite that looks very much like an advertisement for the company itself. (His daughter designed it.)

I saw a recent television interview in which you said this is the toughest business environment you’d ever seen.
Absolutely. Across the board. We had a meeting last Friday with our management around the country. I gave this analogy: to me it’s like climbing a very high mountain without understanding that you’ll have a tough time breathing at certain altitudes. And when that happens, people also have a tough time coming down on their own. That’s what happened. Our economy, the world economy, has gone on at an unsustainable level, and it’s having lots of trouble breathing. And lots of people are just staying there. When they have to come down, they’ll come down in a panic.

How does Ethan Allen come down, then? You had a stock buyback …
I think the stock price is the last thing anyone needs to worry about these days. Stock price is like the tail of a kite. If the kite is going down, the tail is going to be down there, too. If the kite is up, the tail follows.

At Ethan Allen, we have been coming down in the last year or so. About a year back, I said we had two plans. One is to prepare for a recession, and second is to be ready for the next cycle. That was our plan.

We have a lot of advantages. We only run one businesses and I’ve been running it for 23 years. When I took over this company, it was a very traditional company, well-known, but we had to re-invent its product line, its image, its manufacturing, its retail, its logistics. We said we were going to simplify our structure to make it more effective. Now, simplifying things is the most difficult thing in the world. It’s taken us many, many years to develop a system whereby we are delivering our products at one delivered cost to your home in the United States. It sounds nice and good, but the implication of that is so vast. You cannot do it unless your offerings are great. You cannot do it if your people do not believe in it. And also you cannot do it if you do not have the appetite to continue to do it even in tough times. It has impacted the efficiencies of our manufacturing, our retailing, our information systems, everything you can think of has been impacted by that one decision. It has reduced our manufacturing needs by 50 percent – think of it – 50 percent.

What’s that done for you?
That has prepared us better to face this recession than we could have done through many other means. This process has evolved from taking 29 manufacturing plants, many of them inefficient – now we have nine in the United States and one in Mexico. And a few overseas, but they’re not ours. These nine manufacturing plants today produce, I think, 300 percent of what the 29 did. Similarly, 20 years back, we had 300 stores – we now call them design centers – in the United States. We now have, I think, 275 or so in the United States, but in better locations. We changed 60 to 70 percent of them.
Had we not done all of these things, our ability to withstand this tsunami – it has been like a tsunami – we’ve been able to withstand it. Now we will see what happens.

Do you anticipate further cuts?
We announced a few weeks backs consolidation of one plant, which was in our plans, not because of this. We consolidated one plant and took all of its production to our other plants. We have had to slow down production. We have had to have people work short time.

You bought the company in the 1980s, largely with credit. Would that have been possible to do now?
I don’t think so. The financial institutions are having a hard time giving credit to creditworthy customers, let alone someone who wants to buy a company with very little equity. Not today.

As a public company, do you have to ward off the shareholders?
Over a period of time, our performance and profitability is probably the best in our industry. The reason is that we always thought long term. There was some reaction when I said to Wall Street that I have no interest in buying anybody. They said, “How are you going to grow?” I said, “We’re going to run one business right.”

It’s tempting to see your instinct to think long-term considering your personal history of moving around, weathering changes, some of which weren’t of your own making.
I have been influenced, obviously, by external factors, seeing conflict, seeing family separated. That has played a role. To keep that part of your life, and also be involved in running an enterprise, running it professionally, takes a lot of judgment, making sure that you maintain a balance between the two.

Were you raised in Srinigar?
Yes. My father, when we were very young, used to cross the Line of Control [dividing India- and Pakistan-controlled Kashmir] for one-week or 10 day visits. In those days, you could get permits to visit the other side. His permit got cancelled. He was not allowed back for 17 years. He lived in exile [in Pakistan]. We joined him a year later, lived there for 10 years, then went back to Srinigar, where I went to college.

You joined him because he couldn’t come back?
Right. My elder brother and sister did not come because they were in school. My grandfather said – at that time it looked like there would be a plebiscite and Kashmir would be reunited – it would be a one-year thing, or six months. Well, my mother went with us to the other side, and she did not see two of her children for 10 years. It affected her whole life.

Being separated from her children?
Other things, too. When you are so close to conflict it affects you. It had an effect on all of our lives.

I think that’s one of the lesser-understood aspects on conflict, how the trauma seeps through generations.
Absolutely. Look at our leadership, look at our world. Look at decisions that were made 20, 30, 60 years back. The problems we have in Afghanistan, the problems we have Iraq, the Middle East, in other parts of the world. People were not thinking of the implications. They were just thinking short term.
I tell you what, let’s walk around so you can see what we do here.

[Kathwari leads a tour of the facilities, greeting staffers by name, asking for updates on matters large and small, displaying his knowledge of the business from top to bottom, almost all of which is coordinated from this facility. At one of the first departments he visits, he asks after an employee whose son died in a car accident the previous Saturday. Kathwari knows the boy’s name and says he called the employee the day after, on a Sunday, to see if he could do anything. The interview continues back at the office.]

Are you looking to expand internationally or scale back?
Our focus in the last 10 years was right here in North America. We had to make tremendous changes, repositioning our design network, establishing a retail division. We also had to make sure that our manufacturing is more balanced domestic and overseas. We have great partners overseas in China, the Philippines, Indonesia. India is more for textiles. On the retail side, also, we have spent more time in China, but now we are looking to expand. We are looking at Hong Kong, Singapore, Malaysia.

To open design centers?
Yes.

I saw several eco-themed posters in the building. Do you have controls in place so you know where the wood comes from?
Absolutely. Certainly, we have much better control over what we do in the United States, but we also work to get information from the people we deal with in the Philippines, in China, in Indonesia, that these are woods from managed forests. On top of it, we have established guidelines that within one year all of our finishing will be done with water-based [finishes].

What were they before?
Lacquer. That’s what everybody uses. Water-based finishes have fewer chemicals. It takes more work to make sure it’s done right, however. We needed an entirely different technology.

Are you confident in the monitoring mechanisms you have overseas?
Well, it’s tougher overseas.

To be clear, can a person shopping at Ethan Allen be confident that their new dresser or table they buy is made from wood that has been responsibly acquired?
Absolutely.

You’re on the board of Refugees International and the International Rescue Committee, and your origins are in a faraway place. Do you find it interesting that you work for a company that’s all about creating a home?
Well, yes and no. My family history has been in dealing with home, dealing with handicrafts. My grandfather had one of the art emporiums in Kashmir. He also had a great sense of architecture. In fact, in the 1940s, he brought in architects and built four homes. One was a very traditional Kashmiri home, but right next to it he built an English Tudor. In another place, he built a Victorian. In another place, he built a Dutch colonial.

People do once in a while say, “You’ve been involved with an enterprise that affects a core design of American homes. Ethan Allen is as classic as you can get.” I say, “I feel as comfortable here as I would anywhere.” In the designs, in the projection. It is not foreign to me.

What is the status of the Kashmir Study Group?
Well, that is changing gears. You can see some of the photographs here, those two on the left side are Congressman Gary Ackerman  and then-Congressman Bob Torricelli with me when we formed the Kashmir Study Group in 1996. And then other members of the Kashmir Study Group next to it. Then this is a photograph of President Bush and then on the left hand side, [Indian] Prime Minister Manmohan Singh. And then there is [ex-Pakistan] President Pervez Musharraf in that corner.

This conflict in Kashmir re-ignited in the early 1990s. To me it was very bad for India and Pakistan and disastrous for Kashmir. If there was not some positive, constructive debate taking place, it could continue to become worse and worse. The Indians said all of it was ours, Pakistan should vacate what they have. Pakistan said all of it is ours. And some in Kashmir said both India and Pakistan should leave. All three [were] not feasible.

I said to myself, we need help in shaping the debate. The objective of the group was that we should help in discussing the issues with the parties and then put out some kind of plan. At the end of the day, it has to be resolved in a manner that was peaceful. Violence was not an option because everybody suffers. Second, it has to be perceived as fair. And thirdly, very important, it has to be feasible.

How did you set about this?
I was invited by [former Pakistan prime minister] Nawaz Sharif and [former Indian prime minister] Atal Bihari Vajpayee. In a very short period of time they decided that we should help in the discussion of the ideas. And in 1998, both the Indians and the Pakistanis sent their representatives and we had a meeting at my farm in Livingston, New York. If you go to the Kashmir Study Group website you’ll see the Livingston Proposal of 1998. We basically said, “Give the people of Kashmir the right to govern themselves. Don’t change the borders. Open the borders and give them what we called at that time sovereignty but without an international personality.

It caught attention. Then there was the Kargil War [an armed conflict between India and Pakistan between May and July 1999 in the Kargil district of Kashmir]. We had made progress, but every time something happens.

The good news is that at least they are now discussing within the framework of these ideas of self-rule. The bad news is there are so many vested interests. There are so many other problems. And today, of course, with the problems of greater South Asia, it’s even more important that they focus on it.

Do you think living on both sides of the Line of Control gave you a perspective most people don’t have?
It does. Because of that, I have an ability to relate to both sides.

You come at this as a Kashmiri, but also as a father who has lost a son to this conflict, or to a related conflict.
They’re all related.

Was your son’s death the impetus to get the Kashmir Study Group going?
When you get personally impacted, it’s a shock to your system. To me, I was always impacted, and always believed that violence is not an option, for everybody. The death of my son made me aware of the responsibilities that people have of making sure that we don’t put young people, somebody’s children, at risk.

A lot of people in leadership should pay more attention to that. My perspective was that losing a child was the worst thing that can happen. And I said, “If there is anything I can do, I might get you both [India and Pakistan] to see that, to do something to save lives.”

What did happen with you son? He was at Harvard?
Unfortunately there has been a lot of misinformation. He was at McGill in Canada. He was born here. He was affected – when he was in high school, he was tremendously impacted by the Afghans fighting the Soviet Union.

Watching it on TV?
TV, writing. It was big news at the time, and he was tremendously influenced by that. He was also influenced in Kashmir. Since he was seven years old, we would go back to Kashmir every year. And every year we would go for a different hike, a different mountain in Kashmir. He was also impacted by talking to the people.

He would go there during the summer then come back to his life over here?
Right. He would see over there the fact that things were not good. And by 1990, this thing happened in Kashmir [India dismissed the state government and ruled directly, setting off a period of terrible violence]. Of course, people from the outside [Pakistan] put the fire in there, too. And the Indians reacted very poorly. The government, instead of saying, “It’s a small problem, we’ll handle it,” said “We’re going to nip [the anti-Indian insurgency] in the bud through a very extensive crackdown.” Checkpoints. Curfews. Killings. The result: it went in the opposite direction. Fifteen thousand young Kashmiris crossed the border to the other side to get guns. And the Pakistanis should not have allowed them to go back with their guns. They did, and most of them lost their lives. It was a disaster. He was affected by all these events, but especially Afghanistan. It’s a long story. One of our friends, who is now one of the justices of the criminal court in the Hague, invited him to come to Pakistan for a visit and also to attend a semester at a university in Islamabad. We thought, “Maybe he’ll get over this thing that is always on his mind, what’s happening in Kashmir and Afghanistan.

And then, unknown to us, one weekend he went to Afghanistan. He was there for six or seven hours. He was in the wrong place and he was shelled. He lost his life the same day. He was there six or seven hours.

He’d just gotten to Kabul?
Not Kabul. He went … this was right before the [Communist] government failed. He lost his life on April 7. He was in Jalalabad. He went through the Khyber Pass. Actually, he’s buried near Torkham.

Was he looking to join the mujahidin or one of the commanders? Was he thinking to train for something else, for Kashmir, maybe?
It was possible. He was young. He was 19. He was influenced by some people. We only heard about it afterwards.

Did you expect more scrutiny when you took the more public role of the Kashmir Study group?
Of course. The rightwing elements in India, and here also, they were not really interested. For them, any talk of Kashmir is anti-India. Then you have some other organizations, [controversial American commentator] Daniel Pipes, for instance. I was invited to speak at the Islamic Society of North America. They said I went and talked to a radical group. They did not say what I said there.

Did you have any trouble here after 9/11?
Not really. I said to myself, “This is wrong,” but I was also very concerned about the response. I felt that revenge is never a response. Those people, like the people in Kashmir, only think of revenge. You know what happens when you see your family get killed, your mother raped, your sister raped, your wife raped, what do you think you’re going to do? Revenge, right? But if a nation comes to revenge, it’s dangerous.

I wrote an open letter to the president, which I then put [in] a full-page ad in the New York Times and the Washington Post, basically saying, “Our religions do not tell us to kill innocent people.” But I also have to say our response was important, too. I co-chaired a task force called the American Muslim Task Force, organized by the Chicago Council on Global Affairs. I spent almost a year and a half discussing these issues. Running a public company, it’s a balancing act. I’m not running some not-for-profit organization. I’m running a very visible public company.

Nonetheless, you’ve gotten very involved in things that are bound to be controversial.
The death of my son has made me stronger in business and otherwise. You lose your child, other issues are small. Making more money is also a small issue. Being scared to say what is the right thing to do is also gone. It has emboldened me to go and meet the heads of the Indian intelligence and Pakistani intelligence, the Indian Army and the Pakistani Army, some of the radical groups. Someone could say, “What are you doing? One of these could have you killed in five minutes.” I said, “You have to do what is the right thing to do. You can’t be scared.”

Did the board here ever have any concerns?
No. In fact the board passed a resolution that all the work I’m doing for the Kashmir Study Group is important for the welfare of the world and the United States.