A stunning joint worker-executive action brought thousands to the street to rally—not for better pay or benefits—but to reinstate ousted CEO Arthur T. Demoulas to the New England supermarket chain Market Basket. The move was the latest incident of a bitter, decades-long feud with his cousin Arthur S. Demoulas over control of their grandfather’s company. The saga could easily be named a tale of two Arthurs. More importantly, it could herald a new chapter in a wider battle over low-income worker treatment in corporate America.
What’s all the fuss about? Market Basket offers prices lower than Walmart and pays their workers a starting wage well above the state’s minimum, as well as offering profit sharing, bonuses and a 401k plan with no union strong-arming them to do it. As Sally Kohn over at CNN notes, experienced cashiers make $40,000—nearly double the industry average—and stores charge 10 percent to 20 percent lower than their competitors. Their management structure is small, high-touch and contains long-time employees promoted from within. The $4.6 billion company took in $240 million profits in 2013, while investing in new stores (numbers currently stand at 71), and paying shareholders a healthy dividends in the last decade. Ask the big boys out there fighting against a minimum wage increase and they’ll try to sell that running a company this way will put you in the poorhouse.
Arthur T.’s close relationship with his employees and stewardship of a successful and growing business is what led employees and some executives to revolt, leaving unmanned stores and empty shelves. “Market Basket represents an increasingly rare business culture, one where workers are unusually well paid and willing to put their jobs on the line to force the reinstatement of a beloved boss who made them feel valued,” writes Callum Borshers in the Boston Globe. “All this at a time when most workers fret about job security and don’t know who owns their companies.”
Although new co-CEOs Felicia Thornton and Jim Gooch argue “the direction of the company has not changed,” part of the fight between the two Arthurs has been over the amount paid out to shareholders in dividends. Last year, Arthur T sought an injunction to stop the payout of $300 million in dividends approved by the board last fall. “The payout is a victory for the wing of the Demoulas family that contends that CEO Arthur T. Demoulas has been much too generous in profit-sharing with employees, while cheating the owners,” contended a 2013 Boston Globe editorial. “Shareholders have already received $500 million in dividends over the last decade, but the branch of the family headed by Arthur S. Demoulas has reportedly sought as much as $1.5 billion.”
This debate over paying out high dividends versus reinvesting in the company, particularly workers, extends well beyond Market Basket. The idea of maximizing shareholder value is a goal that reshaped corporate America, writes the Washington Post’s Jia Lynn Yang. “It used to be a given that the interests of corporations and communities … were closely aligned,” Yang wrote in 2013. “But no more. Across the United States, as companies continue posting record profits, workers face high unemployment and stagnant wages.”
Some are hopeful that this way of doing business is on its way out. The Drucker Institute’s Richard Warztman says sure, some people will be greedy, but most people go into to business to add value to society. “They hate the pressure, from Wall Street and elsewhere, to focus on short-term financial metrics,” Warztman argued in TIME. He added that he and others need to step up “attempts to devise unconventional, but highly credible, measures that give a more holistic picture of what a healthy company looks like—how such an enterprise is not only profitable, but also fosters customer satisfaction, treats its employees well, continually innovates and plans effectively for the future.”
It seems clear Market Basket is just the type of company he is describing.
Employees at Market Basket fear that the ultimate resolution will be the sale of the company to someone other than Arthur T, who has put in his own bid to buy out the other shareholders. The governors of Massachusetts and New Hanpshire have both stepped into the protracted negotiations. The stakes are high—everyday this fight remains unresolved is costing the company millions. Esquire Magazine’s Chris Faraone argues it’s the fate of the middle class that’s on the line. “If Arthur T. fails in his attempt to buy the company back, and the cousin who booted him sells out to a conglomerate as expected, there’s a chance this grand experiment will disappear forever,” Faraone writes. “It would become a bellwether for a corporate America that has created a caste for itself, where workers can only expect to be treated fairly until the rug they have made is eventually pulled out from beneath them.”
Even more striking, the incident has opened up the question of shareholder ownership more broadly, writes Drexel’s Daniel Korschun in Washington Post. Market Basket protesters refuse to “concede an ownership claim on the company to shareholder” and instead he says “present a more malleable idea of ownership, one which distinguishes between owning shares and being a genuine owner.” He adds that recent Supreme Court rulings such as Hobby Lobby, may invite new legal questions what corporate personhood means and the relationship to shareholder ownership.
Regardless of the final outcome, all U.S. CEOs should to take note. Market Basket is a shining example of why valuing low-level workers is part of the business value chain. Many service workers have recently taken to the streets to fight for higher pay and better treatment. Here workers are fighting for a profitable company they value as an employer. Seems like a no brainer which is the better business scenario. Hopefully it will spark a wider discussion on short-termism’s effect on labor.
UPDATE: The standoff has come to an apparent end, with the New York Timesreporting the success of Arthur T.’s bid to purchase the 50.5% share of the company not already owned by him and his allies. He will return immediately to the daily business of running the company, although he will not officially have the CEO title until the deal closes:
Thomas A. Kochan, a professor of work and employment research at the Sloan School of Management at M.I.T., said the episode showed that “the employees are the most valuable asset in this business. …Market Basket has done more to educate us on how to manage a business than any business case study that’s been written to date,” he said.
In a moving speech to his cheering employees, Arthur T. said “I am in awe of what you have all accomplished, and the sterling example you have all set for so many people across the region and across the country.”
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