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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