Market Basket protests

Market Basket logo

On June 23, 2014, the Board of Directors of DeMoulas Super Markets, Inc. (led by Arthur S. Demoulas), the company that runs the Market Basket chain of supermarkets, fired President and CEO Arthur T. Demoulas.[1] Demoulas's dismissal resulted in protests from the company's employees and customers.[1] The protests ended on August 27, 2014, when the company's shareholders, including Arthur S. Demoulas, agreed to sell their shares to Arthur T. Demoulas.[1]

Company history

In 1954, brothers Telemachus "Mike" Demoulas and George A. Demoulas purchased Demoulas Market, their parents' mom and pop-style store in Lowell, Massachusetts, for $15,000 and converted it into a modern supermarket. The brothers eventually expanded their business into a chain of supermarkets, with locations through Massachusetts and New Hampshire. George Demoulas died in 1971. In 1990, the widow and children of George Demoulas (including his son, Arthur S. Demoulas) sued Telemachus Demoulas, alleging that they had been defrauded out of their shares in the company. Arthur S. Demoulas later filed a second suit, this time alleging that Telemachus Demoulas had diverted assets from the jointly-owned family company to ones controlled by him and his children. Both cases were decided in favor of the plaintiffs. Judge Maria Lopez awarded George's family about $206 million and 50.5% of the company. She also ordered that Telemachus Demoulas be removed as president of the company.[2][3][4][5]

Presidency of Arthur T. Demoulas

In 2008, Telemachus's son Arthur T. Demoulas was named President and CEO of DeMoulas Super Markets, Inc. During his tenure as CEO, sales grew from $3 billion a year to over $4 billion and the number of employees increased from 14,000 to 25,000. During the same time, competitors Stop & Shop and Shaw's closed many of their stores due to financial troubles. Market Basket also faced new competition from discount-grocer Wegmans.[6] Demoulas was known for his ability to remember his employees' names, birthdays, and milestones, attending many of their weddings and funerals, checking in on ill employees, and asking about the spouses and children of his workers.[4][3] He was seen as a father figure by a number of his employees and compared to It's a Wonderful Life protagonist George Bailey for his willingness to put people over profit.[7] However, Demoulas's opponents criticized him for being "openly defiant" of the board of directors and having a "dictatorial" management style.[6]

Attempted removal of Arthur T. by Arthur S.

In 2010, Arthur S. Demoulas accused Arthur T. Demoulas of "plundering" millions by arranging deals to create Market Basket stores that would pay companies he controlled millions of dollars in excessive real estate prices and paying his brothers-in-law excessive development fees. The Board of Directors hired Mel L. Greenberg, a retired judge, to investigate Arthur S.' claims. Greenberg found that there was no wrongdoing by Arthur T. in the purchase of real estate, also finding that fees paid to Retail Development and Management, the company owned by Arthur T.'s brothers-in-law, were not disproportionate to the amount of work done. However, he did find that Arthur T. and the Board of Directors had neglected their fiduciary duties by not looking into whether or not the company would have been better off if it had exercised its option to purchase its store in Somersworth, New Hampshire (1 of the 71 Market Basket stores at that time) instead of renting it from a company in which Arthur T. and his family owned a 55% stake.[8]

In mid-2013, shareholder Rafaela Evans, the widow of Arthur S. Demoulas's brother Evan, switched loyalties, tipping the majority vote from Arthur T. to Arthur S.[6][9] On July 18, 2013, the board did not adopt a motion to dismiss Arthur T. as CEO after protesters gathered outside the meeting.[10][11] Five days later, the board voted to distribute $250 million to family shareholders, an action opposed by Arthur T.[12] In March 2014, two board members elected by Arthur T., William Shea and Terence Carleton, skipped a meeting in which it was anticipated that there could be a vote to remove Arthur T. as CEO. Arthur S.'s side of the family sued Shea and Carelton, alleging they had intentionally missed the meeting so there wouldn't be enough members to have a vote. A judge sided with Arthur S. and ordered Shea and Carelton to attend the next meeting.[6]

Firing of Arthur T. Demoulas

On June 23, 2014, three top-level executives - CEO Arthur T. Demoulas, Vice President Joseph Rockwell, and Director of Operations William Marsden - were fired by the board.[13] The Chief Executive position was filled by former Radio Shack executive James Gooch and former Albertsons executive Felicia Thornton, who were appointed to share the position.[14]

Protests

Chelsea Market Basket store

In response to Demoulas's firing, six high-level managers resigned, and 300 employees held a rally outside Market Basket's Chelsea, Massachusetts flagship store on June 24.[14] The protesters criticized the Market Basket board for putting money before people by choosing to pay its shareholders more instead of reinvesting in the business.[4] Many employees also feared that the new leadership would cut benefits, wages, profit-sharing, and bonuses and raise prices.[15][16] Employees also speculated that the removal of Arthur T. Demoulas was the first step in the process of selling the company.[17] Most employees did not go on strike, but rather participated in the protests on their own time, including during breaks.[18]

Shortly after Demoulas's dismissal, the Board of Directors signaled that it was willing to replace the management at Indian Ridge Country Club, a golf club owned by the company. This led to a protest by employees of Indian Ridge Country Club and Market Basket. On June 26, a member of the company's board of directors who was loyal to Arthur S. Demoulas, accompanied by a police detail, went to the club to fire its management, who were loyal to Arthur T. Demoulas. Later that day, Gooch and Thornton released a statement announcing that they intended to keep the club's management.[15]

On July 16, employees at Market Basket's headquarters in Tewksbury delivered an ultimatum to Gooch and Thornton. They demanded that the Board of Directors reinstate Arthur T. Demoulas as CEO by 4:30 pm the following day.[17] Gooch and Thornton responded the following day by announcing in a letter to employees that the board would meet by phone on July 21 to address their demands. They also warned that any employee who walked out would be fired. A message on the Save Market Basket Facebook page said that the employees at Market Basket headquarters would not be reporting to work the next day (July 18).[19] On July 18, protests with between 2,500 and 3,000 employees and customers were held at the company's Tewksbury headquarters and other locations demanding the reinstatement of Arthur T.[20][21] 300 warehouse workers and 68 drivers refused to make deliveries, which left store shelves severely depleted.[22][23][24] Customers chose not to shop at Market Basket due to the lack of product or as a form of protest.[22] Stores that usually had over 100 customers in them at one time now had only a few. Most employees did not strike, thus the stores remained fully staffed but employees had little or nothing to do. Many of them joined the protesters outside or performed acts of protest inside the store, such as writing "Boycott Market Basket" on the window, placing signs encouraging customers to not shop there, leaving frozen dairy products out to spoil, or refusing to stock shelves.[18]

On July 20, eight employees were fired for their roles in organizing the protests. The next day, an estimated 5,000 people rallied outside the Market Basket store in Tewksbury. Leaders of the movement said that the protests must now head to the stores. Employees, as well as state politicians, began to call for a boycott of Market Basket stores. By mid-week, Market Basket's sales had fallen about 70%. That night, Arthur T. Demoulas issued his first statement since his firing, calling for the reinstatement of the fired employees. The protests included both management and rank-and-file employees, all of whom are non-union.[16][25] On July 22, protests were held at all 71 of Market Basket's stores.[26]

On July 30, it was reported that managers and assistant managers from 68 of Market Basket's 71 stores prepared to present Gooch and Thornton with a petition stating that they would resign if Arthur T. was not reinstated.[27]

Supporters of Arthur T. Demoulas kept the rallies going through August. On August 5, the workers held their fourth-largest demonstration, as thousands protested at the Market Basket store in Tewksbury.[28] Beginning on August 7, a handful of protesters gathered outside of a home in York, Maine, that reportedly belonged to a Market Basket shareholder.[29] On August 15, hundreds of employees continued to protest, including 200 outside of Market Basket headquarters, despite management threatening to fire a number of employees if they did not return to work.[30] That same day, a replacement driver for Market Basket got out of his truck with a hammer and approached protesters at the company's headquarters in Tewksbury in a threatening manner. He was arrested by Tewksbury police and charged with assault by means of a dangerous weapon and disorderly conduct.[31]

The atmosphere of the Market Basket protests was described as being like an "outdoor rock festival", "tailgating party", and "campaign rally".[28][32][33] At a rally at the Tewksbury store, protesters threw beach balls in the air as loud music played from large speakers set up around the parking lot.[28] Also in Tewksbury, a stage adorned with red, white and blue bunting was set up where protesters delivered speeches.[32] At the company's headquarters, protesters put up tents and roasted a lamb in a fire pit. They also brought an American flag to hang from a flag pole on the property after the company went days without putting up a flag.[31] Protesters carried signs with blown-up pictures of Arthur T. Demoulas. Giraffes also appeared on signs and some employees held up stuffed giraffes, as the employees were "sticking their necks out" for Demoulas. Protesters received many donations, including food, signs, and portable toilets.[31][32]

Response from company

On July 30, CEOs Gooch and Thornton released a statement that promised that "any associate that wants to return will be welcomed and not penalized". It also stated that the store would "begin advertising for employment opportunities" on August 8 to replace employees who chose not to work.[34] The letter prompted a response from Massachusetts and New Hampshire Attorneys General Martha Coakley and Joseph Foster, who reminded the company's executives that their actions had "serious implications" on many small businesses that relied on their relationship with Market Basket for their means of support as well as Market Basket's obligations to compensate fired employees. Thornton and Gooch responded by stating that they “sincerely hope[d]” they would not have to fire any employees and desired to get the "stores back up and running for our customers and, importantly, for the many local vendors that rely on Market Basket to make their own businesses successful”.[35]

On August 4, the company held a job fair for prospective employees. Thornton and Gooch later stated that they had heard that many people were “concerned for their safety” if they attended the fair and they would allow people to apply for jobs through email because those interested “should be given an opportunity without fear of intimidation or harassment.” Steve Paulenka, one of the leaders of the protests, disputed the CEOs' claims. He stated that about 200 employees had demonstrated outside of the job fair and that the protests had been peaceful.[28]

On August 7, 2014, Market Basket stopped scheduling future hours for part-time employees.[36] Beginning August 23, however, some part-time workers were called back to begin working again if available.[37]

On August 12, the company sent a "final" warning to 200 to 700 employees. The letter, signed by Gooch and Thornton, informed employees that if they did not return to work by August 15, the company would consider their jobs abandoned and terminate their employment.[38] According to the Boston Globe, none of the employees that received the ultimatum had returned to work.[39]

On August 16, DeMoulas Super Markets placed security guards at both of the entrances of the company's headquarters. The guards recorded the protesters with camcorders. The company also banned the media from the property.[31]

National impact

The Market Basket protests struck a chord nationally because, as BBC business reporter Kim Gittleson wrote, "the dispute seemed to encapsulate everything that is wrong with corporate America".[4] Chris Faraone described the dispute as "the last stand for the middle class" in an article for Esquire.[40]

Sale negotiations

In the midst of the protests, Arthur T. offered to buy the entire company, an offer that the board said it would consider. The board was reportedly also reviewing additional offers.[41]

Massachusetts Governor Deval Patrick
New Hampshire Governor Maggie Hassan

On July 28, 2014, the Boston Globe reported that Arthur T. Demoulas was the only remaining bidder for the 50.5% stake of the company held by the family of Arthur S. Demoulas. All previous offers by outside parties to buy the company had been withdrawn and the board was reportedly "furiously negotiating" with Arthur T. to resolve the situation. The board denied this report, claiming that several offers were still being considered.[42]

On August 13, 2014, Massachusetts Governor Deval Patrick announced that he had spoken with Arthur T. Demoulas and that it seemed that both sides were close to reaching an agreement that would allow Demoulas to purchase a controlling share of the company. He urged Market Basket employees to "stabilize the company" by returning to work while a deal was finalized. Patrick came under fire for suggesting employees to return to work, as his wife is a co-managing partner and labor attorney for Ropes & Gray, the law firm that represented Market Basket’s independent board members. Patrick stated that he had not known that his wife's firm had worked for the Board of Directors and that once he became aware he filed a disclosure with the state ethics commission.[43][44]

On August 17, 2014, Patrick and New Hampshire Governor Maggie Hassan met with both sides of the feud in an attempt to broker a deal.[9] On August 22, Arthur T. made a $1.5 billion offer for the 50.5% of shares owned by the opposing side of the family; several subsequent days of negotiations initially failed to reach an accord.[45] The company was estimated to be in "dire" financial straits due to the months of protests.[9] According to one estimate, the company lost $10 million a day during the protests.[4]

Sale to Arthur T. Demoulas

On August 27, 2014, the shareholders of Market Basket reached a deal to sell the remaining 50.5% shares of the company to Arthur T. Demoulas for $1.5 billion.[46] According to Fortune, Demoulas was backed by The Blackstone Group, a private equity firm that put up over $500 million towards the purchase price.[47] However, according to the Boston Globe, a source reported there was no private equity involved.[48] The sale was officially completed on December 12, 2014.[49]

References

  1. 1 2 3 Moroney, Tom; Staiti, Chris (28 August 2014). "Market Basket Revolt Ends as Arthur T. Demoulas Wins Bid". Bloomberg.
  2. ↑ Nealon, Patricia (16 July 1997). "Wiretap claims are key to DeMoulas fight". The Boston Globe – via Highbeam Research. (subscription required (help)).
  3. 1 2 Borchers, Callum (22 August 2014). "Arthur T. Demoulas’s personal touch can cut both ways". The Boston Globe.
  4. 1 2 3 4 5 Gittleson, Kim (1 August 2014). "Market Basket: Workers risk it all for their boss". BBC News.
  5. ↑ Frisch, Michael S. (Fall 2007). "Zealousness Run Amok". The Georgetown Journal of Legal Ethics.
  6. 1 2 3 4 Welker, Grant (27 August 2014). "How one woman set off the latest chapter in the Market Basket tale". Lowell Sun.
  7. ↑ Tuttle, Brad (23 July 2014). "Meet America’s Most Beloved CEO—Too Bad He Just Got Fired". TIME. Retrieved 25 August 2014.
  8. ↑ Ross, Casey (2 August 2014). "Legal memos trace acrimony between Demoulas factions". The Boston Globe.
  9. 1 2 3 Vaccaro, Adam (25 August 2014). "Updated: What the Heck Is Happening at Market Basket?". Boston Globe. Archived from the original on 26 August 2014.
  10. ↑ Springer, Jon (12 July 2013). "Demoulas CEO Facing Board Challenge". Supermarket News. Archived from the original on 28 July 2014.
  11. ↑ Ross, Casey (18 July 2014). "Market Basket CEO gets reprieve". Boston Globe. Retrieved 25 August 2014.
  12. ↑ Ross, Casey (23 July 2014). "Market Basket board votes to distribute $250 million to owners". Boston Globe. Retrieved 25 August 2014.
  13. ↑ Scott, Christopher. "Market Basket CEO canned". Lowell Sun. Retrieved 24 June 2014.
  14. 1 2 Vaccaro, Adam (24 June 2014). "Leaders Resign While Hundreds of Market Basket Employees Rally in Support of Fired CEO". Boston Globe. Retrieved 25 June 2014.
  15. 1 2 Vaccaro, Adam (27 June 2014). "Market Basket Turmoil Hits Country Club". The Boston Globe.
  16. 1 2 Vaccaro, Adam (29 August 2014). "Timeline: The Summer of Market Basket". The Boston Globe.
  17. 1 2 Vaccaro, Adam (17 July 2014). "Market Basket Employees Demand Reinstatement of Ousted CEO". The Boston Globe.
  18. 1 2 Lepiarz, Jack (23 July 2014). "Shelves Empty As Market Basket Employees Bring Dispute To Stores". WBUR.
  19. ↑ Vaccaro, Adam (17 July 2014). "Market Basket Employees Plan to Walk Out Despite Firing Threat". The Boston Globe.
  20. ↑ Tuttle, Brad (23 July 2014). "Meet America’s Most Beloved CEO—Too Bad He Just Got Fired". TIME. Retrieved 25 August 2014.
  21. ↑ Unknown, Unknown (July 21, 2014). "Thousands Rally Outside Tewksbury Market Basket". Boston Globe. Retrieved 28 July 2014.
  22. 1 2 "Market Basket Board Will ‘Seriously Consider’ Ex-CEO Proposal To Buy Chain". WBUR. 25 July 2014. Archived from the original on September 5, 2014.
  23. ↑ "Market Basket shelves look bare during corporate strike". WMUR. 19 July 2014. Retrieved 27 July 2014.
  24. ↑ Associated Press (25 July 2014). "A tale of two Arthurs: Market Basket family feud sparks workers' revolt". The Guardian (West Bridgewater, Massachusetts).
  25. ↑ Vaccaro, Adam (21 July 2014). "Market Basket Employees ‘Stick Necks Out’ at Huge Rally in Tewksbury". The Boston Globe.
  26. ↑ "Worker arrested as Market Basket protests continue". WMUR. 22 July 2014.
  27. ↑ "Market Basket managers turn up heat on chain". Seacoastonline. 30 July 2014.
  28. 1 2 3 4 "Market Basket Workers Rally, Keeping Pressure Up". WBUR. 5 August 2014.
  29. ↑ Morse, Susan (13 August 2014). "Protesters gather around York home reportedly owned by Market Basket shareholder". The York Weekly.
  30. ↑ "Despite Ultimatum, Market Basket Workers Continue Protests". WBUR. 15 August 2014.
  31. 1 2 3 4 Clauss, Kyle (16 August 2014). "Market Basket workers defiant as deadline passes". Lowell Sun.
  32. 1 2 3 Nickisch, Curt (6 August 2014). "Vote For Arthur T.? Market Basket Rallies Echo Political Campaign". WBUR.
  33. ↑ Salahi, Lara; Vaccaro, Adam (15 August 2014). "Market Basket Protests Persist on Day of Deadline to Return to Work". The Boston Globe.
  34. ↑ Conway, Abby Elizabeth (30 July 2014). "Market Basket CEOs Ask Employees To Return To Work". WBUR.
  35. ↑ Conway, Abby Elizabeth (31 July 2014). "State AGs Remind Market Basket Of Laws Protecting Fired Workers". WBUR.
  36. ↑ "Market Basket slashes part-timers' hours as protests continue". WCVB. 7 August 2014. Retrieved 25 August 2014.
  37. ↑ Saffir, Doug (25 August 2014). "Market Basket Managers Inquiring About Part-Timers’ Availability to Work". Boston Globe. Retrieved 25 August 2014.
  38. ↑ Nickisch, Curt (12 August 2014). "Market Basket CEOs Give Protesting Workers ‘Final’ Warning". WBUR.
  39. ↑ Newsham, Jack (15 August 2014). "Market Basket workers stay off the job". The Boston Globe.
  40. ↑ Faraone, Chris (29 July 2014). "The Last Stand for the Middle Class is Taking Place in a Parking Lot in Massachusetts". Esquire.
  41. ↑ Ross, Casey; Newsham, Jack (July 24, 2014). "Market Basket has several suitors". Boston Globe. Retrieved 27 July 2014.
  42. ↑ Schreiber, Jason (29 July 2014). "Market Basket board insists it is weighing several potential buyers". Seacoast Daily. Retrieved 25 August 2014.
  43. ↑ Cassidy, Chris (16 August 2014). "Governor's transparency eyed in Market Basket feud". Boston Herald.
  44. ↑ Murphy, Matt (11 August 2014). "Patrick offers help, says Market Basket situation 'out of hand'". Nashoba Publishing.
  45. ↑ Ross, Casey; Newsham, Jack (24 August 2014). "No accord in Market Basket discussions: Sides at odds over terms of sale". Boston Globe. Retrieved 25 August 2014.
  46. ↑ "Deal reached to sell Market Basket to Arthur T. Demoulas". 27 August 2014. Retrieved 27 August 2014.
  47. ↑ Primack, Dan (28 August 2014). "Exclusive: Blackstone Group is Market Basket's mystery backer". Fortune.
  48. ↑ Vaccaro, Adam (12 December 2014). "Market Basket Deal Completed". The Boston Globe. Retrieved 12 December 2014.
  49. ↑ Ross, Casey; Healy, Beth (12 December 2014). "Arthur T. Demoulas closes deal to buy Market Basket". Boston Globe. Retrieved 12 December 2014.
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