Renewed family drama at the beloved local grocery chain Market Basket has left customers unsure of what to do with their dollar this week. CEO Arthur T. Demoulas has been on paid leave since late May over what the board described as fomenting a work stoppage; he claims his ouster is part of a hostile takeover.
The board also cited frustration that Demoulas would not budge on directives seeking board oversight of new store openings and an acknowledgment that Demoulas cannot appoint any of his children as a successor without board consent — according to an interview one board member gave to The Boston Globe in May.
This week, two top executives aligned with Arthur T. Demoulas were fired.
Here’s what you need to know about the latest saga:
What is the history of Market Basket?
The chain’s roots extend to 1917, when Greek immigrants Athanasios “Arthur” and Efrosini Demoulas opened a store in Lowell — in an ethnically-diverse part of the city known as “Acre-Acropolis” — that specialized in selling meats like lamb, pork and sausage.
More than a century and 90 stores later, Market Basket and Demoulas have both become New England household names.
Haven’t we been here before?
Arthur T. Demoulas, the current CEO, was initially fired in 2014 by board members who alleged he ignored them and spent money recklessly. A number of high-level managers resigned in solidarity with Arthur T., and hundreds of employees held a rally outside the Chelsea Market Basket, criticizing the board for putting profits before people.
Those protests grew in scope across the span of six weeks, and a number of additional employees were fired for their roles in organizing them. Ultimately, Arthur T. was reinstated. He and his sisters united to win complete control of the Tewksbury-based chain, buying off cousin Arthur S. Demoulas, who no longer has an ownership stake in the company.
But now, Arthur T.’s allies say the sisters have changed allegiances and are seeking more control of the company.
Both representatives for the board and for Arthur T. declined GBH News’ request for comment for this story.
Who has lost their jobs?
While Arthur T. remains on paid leave, two longtime executives of the company aligned with him were fired on July 22. Joe Schmidt, who served as the director of operations for Market Basket, appeared on Boston Public Radio just hours before he received his termination notice and pushed back on the work stoppage narrative.
“The real story is that there are three sisters that Arthur has. There’s Frances, Caren, and Glorianne, and they want control of the company,” he said. “There’s a lot of jealousy with them and thinking that they should have more notoriety in the company. But it also comes down to money. They want more money from the company, and apparently the $40 million after taxes that they’re getting on an annual basis is not enough.”
Arthur T. referred to the firing of Gordon and Schmidt as a “heartless and unwarranted decision” in a statement earlier this week, calling the two men “two of the brightest and best grocery store operators in the business,” whose “extraordinary work has been key to building this company and its culture.”
Gordon and Schmidt were both fired in 2014 and reinstated. They have worked their entire professional careers at Market Basket.
Who is supporting “Artie T”?
At least one local elected official is speaking out in support of the sidelined chief executive. Methuen Mayor David Beauregard penned a letter Thursday to the board of directors calling for an end to the dispute and the reinstatement of Arthur T. Methuen is home to two Market Basket locations.
“Market Basket is too important to Methuen — and to New England — to be treated like some corporate chessboard. My city’s residents rely on those stores to feed their families. Many rely on those jobs to pay their bills. And what they see right now is a company drifting dangerously off course.”
Beauregard continued, “What’s on the line here isn’t just one man’s title. It’s a business model, a culture, and a community lifeline that’s been built over decades. Don’t be the ones who tear it down.”
Why do people care so much about this?
It’s a generational family saga, for one, and who doesn’t love a bit of drama?
But the Market Basket story can also be seen as a microcosm of corporate governance writ large.
Arthur T. and his allies cite the trust they’ve built with employees and customers across the network of stores, and the shared value of things other than profit. Fired employee Schmidt told Boston Public Radio the culture at Market Basket is something worth standing up for.
“If you can’t stand up for something good in your life, then what’s the purpose of life? Yes, you can make money, but money isn’t what it’s all about. It’s about doing the right thing and standing up for people that you believe in. And I believe in Mr. Demoulas and his leadership style.”
Though Arthur T. and Schmidt don’t describe it in these terms, they run Market Basket under a form of stakeholder capitalism: a system focused on creating long-term value for all stakeholders — including customers, suppliers, and employees — not just shareholders.
Arthur T. has fired shots at three members of the Market Basket board of directors, accusing the board of giving in to private equity interests.
“Steven Collins of Exeter Capital [Partners] doesn’t understand this company’s culture. Nor do his fellow board members Jay Hachigian of Gunderson Dettmer and Michael Keyes of Intercontinental Real Estate,” Arthur T. said in a statement earlier this week.
The day after he was fired, Joe Schmidt echoed the private equity concerns on Boston Public Radio.
“You’ll see what their background is and what they’re versed in, and it certainly isn’t operating a cultural supermarket that takes care of its people,” he said.
In 2015, MIT Sloan School of Management published a case study on Market Basket: the document highlighted the company’s profit-sharing model with employees; a flexible part-time to full-time work schedule that enabled parents, students, and disabled people access to employment; and a close relationship with local vendors.
MIT professor emeritus Thomas Kochan, a co-author of the case study, told GBH News this week an attempt to turn it into a company that maximizes short turn return would be “a disaster for Market Basket.”
“Private equity is looking for short term returns. That’s its specialty,” Kochan said. “This is a company that was built over decades.”
Kochan urged the parties to consult an external mediator and resolve the issue quickly.
On Friday, Harvey J. Wolkoff of Quinn Emanuel — the law firm hired by the board to investigate whether Arthur T. and his allies planned a work stoppage — issued a statement saying that a session with a neutral mediator has been scheduled for September 3rd.
“Any further action will depend on the outcome of that mediation, consistent with the Board’s fiduciary duties,” the statement read. “It is the hope of the Board that a constructive resolution can be reached.”
Representatives for Arthur T. did not answer questions from GBH News about using an outside mediator.
What should customers do?
In 2014 when Arthur T. Demoulas was fired, the boycotts began immediately, and the sustained pressure from both customers and employees was a factor in the quick resolution of the issue.
But now, eight weeks after it was announced Arthur T. and some of his allies in the company were placed on leave, the messaging is still unclear. Even the two fired executives stopped short of calling for a boycott this time, instead saying it’s a matter of personal choice.
At the Chelsea Market Basket location on Thursday, the site of the first rally back in 2014, customers were hungry for more information from Arthur T.’s camp on how to respond to the latest drama.
Customer Sharon Sullivan said she has been shopping at Market Basket for 30 years, namely for the prices. But in a hushed tone in front of the deli counter, she acknowledged she would shop somewhere else if the workers called for a boycott.
“It’s like a bond,” she said. “Give these people what they want. You can’t be greedy.”
Matilda Luisi, a North End resident, told GBH News on Thursday that she takes a cab about once a month to the Chelsea Market Basket to stock up because the prices are so much cheaper than in her neighborhood, and she considers the quality of produce and meat to be unparalleled.
She said she hopes it all works out in Arthur T.’s favor.
“I love Arthur T. I think he’s the best, I want to cook for him, I want to do anything I can to help him in his situation, and if he needs me for anything all he has to do, I’ll be here at Market Basket,” she said.
But, would she boycott?
“I don’t want to talk about that. Don’t go there.”
