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[10 comments]

Chain's workers refuse to work after board ousts president

July 23, 2014

There's a revolt going on in Boston and it has nothing to do with tea. Workers at the Market Basket grocery chain's headquarters, stores and warehouse have walked off the job in protest of the board's firing of Arthur T. Demoulas, the now former president of the company.

According to reports, Mr. Demoulas (AKA Artie T.) lost his job at the family-owned business in June as a result of a dispute with his cousin, Arthur S. Demoulas, who runs the company's board. The second Mr. Demoulas (Artie S.) wanted to find ways to extract more cash from the business for investors. About a year ago, the board approved a distribution of $300 million to shareholders. This event, along with employee protests supporting Artie T., has kept him in his job until recently.

Workers, in short, believe that of the two cousins, only one (Artie T.) has their back. Market Basket, according to RetailWire sources, is known for its long-time employees and highly loyal customer base. As workers refuse to work, many customers are staying out of the chain's 71 stores.

According to a Boston Globe report, competitive stores are doing a brisk business bolstered by shoppers who either are supporting Market Basket's workers or simply looking for items that aren't on their favorite store's shelves when they go shopping.

Deidre O'Connor, a Market Basket customer, told The Boston Globe she went to a nearby Hannaford to support the protest. Ms. O'Connor told the paper she wasn't alone.

"I've popped in and out of Hannaford, but I've never seen this Hannaford as busy as it is today. The shelves were bare," she said.

One store manager, Glenn Connors, has been with the chain for 36 years. He remained on the job while his employees were outside.

"I'm sick to my stomach over all of this," Mr. Connors told The Patriot Ledger. "My strong feeling is that if he (Artie T.) was in power, none of this would be going on,"

Support for Mr. Demoulas (Artie T.) has led to dismissals at Market Basket. The Globe reported that eight supervisors and managers at the company have been fired. The company's co-CEOs Felicia Thornton and James Gooch said the "individuals who were terminated took significant actions that harmed the company and therefore compromised Market Basket's ability to be there for our customers."

In his first public statement since his termination, Mr. Demoulas said (via the Easton Patch), "The success of Market Basket is the result of two things: a business model that works and the execution of it by a dedicated and impassioned team of associates. Their fierce loyalty to the company and its customers has always been deeply valued. In the final analysis, this is not about me. It is about the people who have proven their dedication over many years and should not have lost their jobs because of it. I urge that they be reinstated in the best interest of the company and our customers."

Discussion Questions:

What is your take on the worker protests taking place at Market Basket? What should the board do?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Would you rehire Arthur T. Demoulas to run Market Basket if you were a member of the company's board?

Comments:

The board of directors by law work for the shareholders. Since the value of the company is going down due to the lack of support of the customers and the workers, the board needs to take action. The board needs to find a new or impartial chairman to decide the fate of the company. I would think that many of the employees are also shareholders and they would have a say too. I am not sure what should be done but selling the company, reinstating the CEO, or replacing workers who walked off are the options to be considered. However, customers are moving on, and that needs to be a major consideration by the board.

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Frank Riso, Principal, Frank Riso Associates, LLC

My take is it's Main Street vs. Wall Street (or whatever level the investors are at).

Asking what the board should do presumes it has the willingness and ability to do anything but what it has already done. It sounds like it is doing exactly what it wants to do. I wish I knew more about who those investors are, when the money came in and what their stated objectives are.

A better question is, "What should Artie T do?" Assuming he doesn't have a non-compete, I'd suggest he start a competing chain—"Demoulas Two"—and knock the bejeezus out of his former alma mater. Market Basket (which has been renamed in the decade since I left Boston ... it used to be called Demoulas) will ultimately fade away. Why not start fresh?

Oddly, a similar thing happened with another Boston institution, Legal Seafood—between brothers. My recollection is that SkipJack is run by the "other" brother.

Sad.

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Paula Rosenblum, Managing Partner, RSR Research

You never like to see family squabbles become public except on the gossip programs. In this case the board needs to better realize who they work for and what their purpose is. Cousin A (bad cousin) seem to have taken the stance of wanting to take more money out of the business for the stockholders (including himself). Cousin T (good cousin) seems to have the best interest of the employees and customers in mind. I am rooting for Cousin T to prevail. But I also have to ask how each got the position they held before the storm hit.

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Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

To help make it clear to those not from the New England area, there are essentially no outside investors. This is a family owned business and the Board is the family. So the argument is and always has been a family feud—which is not always subject to rational debate, no matter how well packaged statements in public may sound. The employees are workers, not stockholders at all.

This feud goes back to the parents of the respective Arthurs—the founder and his brother. There is a deep level of distrust which has been paraded in what everyone around here knows is the longest running (and one of the most expensive) civil lawsuits in the history of the Commonwealth. I suspect much of it, no matter how subject to public record, will never be known or fully understood by anyone not part of the Demoulas family.

That said, Arthur T has been engaged in the business. He works in the stores and the offices, and has for many years. The line managers and the rank and file know that he "gets it." He has run registers and bagged groceries and met and talked to customers all across the market area.

Arthur S has been a member of the board by virtue of inheritance alone. He seems to have many other interests, and the Market Basket chain is a source of revenue, not a source of engagement or satisfaction. Like many stockholders everywhere, family or not, he just wants his money, and does not care or pretend to want to engage in the day-to-day business concerns.

Since neither Arthur S nor Arthur T owns more than 50% of the voting control, the power between them see-saws with the voting decisions of other family members. as so often happens with family companies, the farther one gets from the roots of the founder, the less likely they are to be engaged—the point of view of Arthur S is more common in second and third generation companies that of Arthur T.

If these guys had hired a third party professional management team that they could have both accepted, and stepped out of it years ago, they could have rolled up the market. The chain would be 2-3X larger than it is now. But they have been fractured and unable to invest sensibly for long term growth for more than two decades. Arthur T returned them to growth, building new buildings and remodeling old ones, staying on point with the low prices and value orientation of the store brand. Arthur S wants less investment and more disbursement.

They may both end up rich, unfulfilled, and unemployed as the chain tears itself apart.

John Rand, Senior Vice President, Kantar Retail

It would appear "grocery clerks" weren't too high on Artie S.'s list. The grocery industry's thoughts went down this road when self-check was rolled out, but as you've pointed out today, something strange happened on the way to the grocery investor's ball.

And when egos trump employees, market share is seldom if ever recovered.

The board, most of all, should have known this. Their mistake was viewing the chain in a product-only light. They will not recover Market Basket's share of the Boston market.

W.R. "Russ" McAfee, President, Davis Mountain Press

Ladies and gentlemen, meet the downside of passionate, engaged employees. Like the others here — save, maybe, John — I don't know enough about the company to take sides, but any story involving the phrase "extract more cash from the business for investors" isn't likely to have a happy ending. I wish everyone well.

(On a side note relating to brothers running groceries: the elder Albrecht brother Karl died recently. Condolences to the family and recognition to a retail pioneer.)

'notcom'

The employees need to understand that this is a no win for them. The company ownership is OK with putting themselves at the mercy of the consumer and the competition in order to fight this battle in the open. It is a good time for all to start looking for another job.

'gjarnoldjr'

Rehire the CEO and give him an honorary title and job. Pay him a nice bonus to go around glad-handing employees and tell them everything is okay.

David Livingston, Principal, DJL Research

Great. The board has no authority, and should not be doing anything. We live in the USA, where our freedoms of free speech, right to assembly, and freedom of voting are all inherent in our basic rights as Americans. Any actions by the board will probably come back to hurt the company and will only hurt everyone involved, including the employees....

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Kai Clarke, President, Kowa Optimed, Inc.

The thing is, it seems Arthur T. was removed due to wanting to run the chain in a healthy manner vs. other board members who were more interested in extracting cash from the chain.

This is an interesting chain. Actually, it is an excellent chain that doesn't get much attention for some reason. Its mix and pricing on center store are the best I've seen anywhere and I have visited many stores. Perimeter was not the best quality but the prices were right. The stores are run very well and have good service. Store hours are short, you won't find a self checkout, the uniforms and floors look straight out of the '50s even in new stores, and the employees have an attitude and work ethic like no chain I've ever seen.

It is very sad to see this sort of thing happen. There will be no winners in this situation.

The tenure of the employees being laid off or commenting in news articles should tell everyone here everything they need to know about this chain.

I have seen other chains described as having a cult-like culture where I do not necessarily agree (especially WinCo, with some of the worst customer service in the industry in my local store). But this is a chain that seems to have a cult-like culture. People go work there forever. And people will stick their neck out and stand up for what they believe even if it goes against leadership and appears it will cost them their job.

'storewanderer'

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