In the business world,
long-term loyalty to a CEO is supposed to be a good thing. For New England
supermarket chain Market Basket, however, employees’ reverent appreciation for
their former chief and co-owner, Arthur T. Demoulas, has proved to be
destructive to the business in the short term, causing employee and customer protests
as well as a state of decision paralysis among Market Basket’s board of
directors.
In June, Demoulas was ousted
in the culmination of a decades-long feud with his cousin, Arthur S. Demoulas,
another co-owner of the family business. Arthur S. took control of the company,
which is one of New England’s most successful retail chains, the New York
Times reports.
The firing infuriated Market
Basket employees, who had enjoyed good wages, regular bonuses and a generous
profit-sharing plan. “You had Santa Claus in charge,” supermarket industry
analyst Daivd Livingston of DJL Research in Milwaukee told the Boston Globe.
“Every day it was Christmas.”
Many of the company’s 25,000
employees began staging demonstrations to demand their beloved CEO’s
reinstatement. Customers joined the cause, boycotting the chain. At this
writing, Market Basket stores were still open, and many employees were still
going to work, but the shelves were nearly empty, and customers were few.
As sales plummet and the
company hemorrhages money, its board is quietly negotiating with potential
buyers, including the ousted Arthur T. Demoulas. He announced in July that he
had bid to buy the 50.5% of the company that he and his allies in the Demoulas
family do not own, according to the Times.
Some Market Basket board
members reportedly believe Arthur T. is the most promising bidder because he is
well positioned to rally employees and customers behind him to end the
standoff. But some board members may consider his bid less appealing than other
bids, which come from national supermarket chains and investment firms. Unlike
these bidders, Arthur T. would need to secure financing for his purchase.
Moreover, as CEO he at times made decisions that benefitted customers and
employees at the expense of shareholders, a management style that could work
against him in a shareholder vote on a sale.
The employee and customer
actions in support of Arthur T. complicate the potential sale. If he were to
urge workers and customers to end their protest, as some have called on him to
do, he could lose leverage in the negotiating process and decrease his odds of
winning the company. The longer the protests continue, the lower the company’s
value—and the less Arthur T. and others would have to pay to take it over.
The Boston Globe has accused
the Demoulas family of allowing their internal feud to cloud their judgment,
noting that members are “stubbornly sticking to their positions instead of
using clear-headed business judgment.” The paper has urged Massachusetts
governor Deval Patrick to mediate the dispute.
Indeed, it appears mediation
is urgently needed to prevent the precipitously declining company from collapsing.
Market Basket has a number of good options. But to realize them, it must move
beyond its past frictions and chart a more stable course for the future.
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