retail news in context, analysis with attitude

The Market Basket board of directors yesterday voted to fire CEO Arthur T. Demoulas, as well as director of operations Bill Marsden and vice president of grocery sales and merchandising Joe Rockwell, effective immediately. The move prompted a neat-instant call by employees to rally at one of the company's stores in support of their deposed leader.

In a statement, the board said, "“Arthur T. Demoulas, who was not re-elected president and will not retain any management responsibilities moving forward, remains a shareholder of the company … The board believes this new management team will enable Market Basket to maximize its potential and pave the way for continued success in the future."

The Boston Globewrites that "the leadership of Arthur T. Demoulas has been at the center of a simmering family rivalry that has boiled over in recent years. Having gained control of the company’s board, Demoulas’s similarly-named cousin Arthur S. Demoulas has led a fight to oust the CEO due to a conflict over the company’s finances."

The fight over finances is characterized differently by the two sides. The Arthur S. Demoulas faction argues that Arthur T. Demoulas spends money irresponsibly and refuses to take direction from the board. The Arthur T. Demoulas side maintains that his cousin is fueled by greed, only interested in raising prices, cutting employee compensation, and threatening the formula that has built the company.

According to the Boston Herald, "The firings brought the long-running family feud to another head between two factions of the Demoulas family — owners of the 72-store Tewksbury-based chain — after a contentious year. Lawsuits, protests, petitions, stalled store openings and back-and-forth allegations between rival board members and management have marked the transition since the board had a shift in control last June in favor of the CEO’s rival cousin, Arthur S. Demoulas."'

The board named Felicia Thornton and James Gooch to be Market Basket’s chief operating officer and chief administrative officer, respectively, and co-CEOs. The Herald notes that both had been serving as consultants to the company, and that "Thornton most recently served as CEO of Knowledge Universe U.S., a Portland, Ore., early childhood education provider. Her supermarket experience includes prior posts at Albertsons and Kroger. Gooch abruptly stepped down as CEO of the struggling RadioShack Corp. in 2012. He also held financial positions at Kmart Corp. and Sears Holdings."
KC's View:
While it is hard, from the outside, to really know what goes on inside a family, not to mention appreciate the political dynamics of a company's board of directors, I do think it is fair to say that this is one hell of a freakin' mess.

It is hard to know if the two arguments are being accurately characterized, but I do know this - that Market Basket is considered in the Boston market to be an effective, even dangerous competitor, and that if this is the result of a management philosophy that spends too much on labor and keeps margins low, then that ought to be good enough for anyone. Market Basket is said to be a profitable company, and it sounds to me like whatever else may be going on, there is some level of greed at work here.

They could easily kill the golden goose if they lose the support of shoppers and employees, which it sounds like they could easily do. And once that goes, it'll be near impossible to get it back.