Bloomberg News

Market Basket Shows Workers Risk It All for Right Boss

July 31, 2014

Market Basket Rally

Employees and customers hold a rally in support of Arthur T. Demoulas and Market Basket, in Tewksbury, Massachusetts, on July 25, 2014. Photographer: Suzanne Kreiter/The Boston Globe via Getty Images

A protest by thousands of workers at one of New England’s largest grocery chains has left store shelves empty and customers scarce as employees demand the return of their fired chief executive.

The turmoil is the latest twist in a decades-old feud among members of the Demoulas family, whose Demoulas Super Markets Inc. controls 71 Market Basket stores across Massachusetts, New Hampshire and Maine.

On June 23, Arthur S. Demoulas, whose side of the family controls 50.5 percent of shares, fired his cousin, President and Chief Executive Officer Arthur T. Demoulas, whose side controls 49.5 percent, and replaced him with two co-CEOs.

Many of the 25,000 employees rose up in support of “Artie T.,” who they say is committed to high wages and generous benefits for themselves, and low prices for customers. Employees past and present recount times when he covered the extraordinary medical bills of someone’s sick family member, or kept paying an employee who was too ill to work.

A groundswell of popular support has followed, with rallies attended by thousands. The Tewksbury, Massachusetts-based company’s firing of eight employees who spearheaded the protests further galvanized the movement.

“I support Artie T. 100 percent without a doubt,” said Stephanie Schwechheimer, 45, a store manager in Haverhill, Massachusetts, who makes $140,000 annually.

Hired 29 years ago as a part-time clerk, her pay is “probably on the lower end since I have a lot less experience than a lot of managers,” she said. Other managers interviewed said they’d been with the company 40 and 45 years.

Topping Minimum

Schwechheimer said most of her full-time associates start around $12 an hour, $4 more than the state’s minimum wage.

Kevin Levesque, 53, assistant manager at the Tewksbury store, said his colleagues worry that their compensation won’t be nearly as generous in the future.

“They know the changes will come,” he said. “They have seen it in other companies and businesses in corporate America.”

Worker frustration, such as seen in the fast-food strikes of a year ago, is rampant across the economy, said Thomas Kochan, a professor at Massachusetts Institute of Technology’s Sloan School of Management.

“Market Basket’s message to corporate America is that you better start paying attention,” he said.

Empty Shelves

It’s not clear how many employees are staying away. All Market Basket stores remain open and at least some managers and workers are showing up. Shelves are especially empty in the produce and meat departments because warehouse drivers as well as outside vendors have refused to make deliveries.

About a dozen customers wandered the aisles of the Ashland, Massachusetts, location July 29. At other stores, shoppers have taped receipts from rival grocers to the windows. Cars and trucks honk as they pass protest vigils that continue in front of many stores.

“It hurts every single one of us to have to do what we are doing to our beloved company,” read a posting on a workers’ Facebook page yesterday. “But we know it is the right thing for the long term bigger picture.”

Market Basket’s new co-CEOs, Felicia Thornton and James Gooch, himself a former CEO of RadioShack Corp. (RSH:US), issued a statement yesterday telling all employees to return to work by Aug. 4 or they may be replaced.

Replacement Threat

“We understand that some associates may choose not to return, consequently we will begin advertising for employment opportunities,” they said in the statement.

Some industry analysts put the loss from the job action at $10 million a day. Supermarket News, a trade publication, ranks the company as the 34th largest U.S. grocery retailer with $4.3 billion in annual sales.

“What’s happened here is extraordinary,” MIT’s Kochan said. The banding together of workers from different tiers of a company to rally around their chief executive is unprecedented in modern American labor history, he said.

“Many grew up in the business or grew up in the town or both,” Kochan said. “They know each other, their families know each other and their customers know them. That makes a big difference.”

The fired Demoulas has offered to buy the company, as have an unspecified number of others, according to the board.

‘One Alternative’

“While Mr. Demoulas’ offer provides a path toward solving many of the problems he has helped to create, it is but one alternative among the options the board is reviewing,” the company said in a statement July 29.

Kochan said the board has a fleeting grace period before too many customers bail and the business is ruined. He said he believes action must be taken by the end of the week.

The Demoulas family has been feuding in the Massachusetts courts for almost 25 years, an odyssey that has included a courtroom fistfight, wiretaps and an attempt to blackmail a judge’s clerk, according to court documents.

The split began in 1990 when the family of George Demoulas, who died in 1971, claimed his brother Telemachus Demoulas had wrongfully transferred almost all their shares in the company to himself. The court found in 1996 for George’s family and gave them 50.5 percent ownership.

Since then, members of both families nominate two board members each, joining three independent members with no connection to either side. The result was keeping Arthur T. in charge until last year, when one director flipped allegiance.

Wealthy Shareholders

Amid the acrimony, Market Basket has made the various Demoulas shareholders wealthy. The company has paid out more than $1.1 billion in special dividends since 2001, according to a 2013 legal document.

The richest among the family is the ousted Arthur T., who is worth $675 million through his 19 percent stake and accumulated dividends, according to the Bloomberg Billionaires Index. Arthur S. is worth about $575 million.

Mike Pieslak, assistant manager at the store in Bellingham, Massachusetts, less than 10 miles north of the Rhode Island line, said he’s been with Market Basket for 35 years, starting as a grocery bagger. His wife has been there 30 years, and their 17-year-old daughter, four years, he said.

While Pieslak knows that he and others are sticking their necks out and may face termination, he said he likes to stay positive.

“I keep waiting for the phone to ring to say Artie T.’s back,” he said. “We want our customers back. This is where they belong and this is where they get treated right.”

To contact the reporters on this story: Tom Moroney in Boston at tmorrone@bloomberg.net; Brendan Coffey in Boston at bcoffey10@bloomberg.net; Kelly Blessing in Boston at kblessing1@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Pete Young, Theo Mullen


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