Editorial: Market Basket gambles, and many may lose
Family-owned companies are subject to family feuds. Ernest and Julio Gallo of the famed winemaking family became bitter enemies. The billionaire Koch brothers have been at each others throats, legally speaking, for decades. Adolf and Rudolf Dassler founded a shoe company before falling out. After the split, Rudolf started the company that would become Puma and Adolf launched Adidas. Brothers Curtis and Prestley Blake, founders of the Friendly’s restaurant chain, were enemies for years before making up in 2010.
The long and bitter battle between arch rivals Arthur T. Demoulas and his cousin Arthur S. Demoulas over control of the 71-store Market Basket supermarket chain now joins those legendary fights, but it is a family dispute with a twist.
It is a feud that, if unresolved, could do significant damage to an amazingly successful business and important New Hampshire employer. We join Gov. Maggie Hassan in asking the Market Basket board to settle the dispute quickly in a way that protects employees and customers.
This is the age of the reviled, overpaid corporate CEO. The belief that company loyalty, on the part of employers and employees alike, is a thing of the past is widespread. But that’s what’s so different about Market Basket. The average tenure of a Market Basket manager is 34 years, a company executive told the Boston Globe.
Most of the chain’s employees treasure Arthur T. Demoulas, who was fired as CEO last month by a board controlled by his cousin. It is Arthur T. who is credited with building upon a business model based on low prices for customers and high wages and good benefits for employees. The policy has paid dividends in cash and in employee and customer loyalty.
Arthur T.’s supporters, employees and Market Basket customers alike, gathered by the thousands this month to protest his ouster and pressure the board to return him to the helm. The protests have emptied Market Basket stores of produce, customers and employees who skipped work to attend protest rallies.
The new co-CEOs brought in from outside to run the company warned that they would fire employees who missed work to join the protest, and they made good on their promise by firing eight veteran managers. That decision was probably a mistake. The fired managers have employees and customers who are loyal to them.
If the protests spread – nearly 50,000 people have signed petitions supporting Arthur T.’s return – and more workers are canned, more customers will answer the call to boycott Market Basket stores. Combine a boycott with a business plan by Arthur S. Demoulas that, according to court filings, calls for increasing gross profits by increasing grocery prices, and customers will vote with their feet.
Market Basket is a privately owned company with, according to court records, nine shareholders. Some of them doubtless want bigger returns on a business that does $4.6 billion in sales each year. But this very public battle between the chain’s owners and its employees threatens to reduce sales and the value of the company.
Loyal shoppers value Market Basket for its low prices, but many also patronize the chain because of its reputation for paying workers well when other employers seek profits by paying as little as possible. Market Basket needs to hang on to its employees and its customers, and that may mean that it needs to hang on to Arthur T. Demoulas as well.