The Week in Ethics: How Market Basket’s Board Misread Employee Engagement

In a battle of cousin against cousin, how important is the culture of a family owned business?  Thousands of voices among the 25,000 employees and the customers who shop at the 71 New England locations of Market Basket (a supermarket chain with $4 billion in annual sales) have made clear in their rallies and online petitions that culture does trump everything.

They are demanding the reinstatement of former CEO Arthur T. Demoulas ousted last month by his cousin Arthur S. Demoulas and a majority of the board now controlled by him.

It is hard to imagine employees of Goldman Sachs, or most other companies for that matter, taking to the streets and putting their jobs on the line in support of an ousted leader. Or that customers would also stand up to fight for the value they received.

However, employees on a Save Market Basket Facebook page align with customers and vendors saying “Together We are Market Basket.” They took to Facebook to make clear they will refuse to work for anyone beside the ousted Demoulas. While the impact of the protests has huge business implications (reports indicate business was down 70 percent this week), it also demonstrates what employees are willing to risk for jobs they love and a leader who inspired the culture behind it.

As a result of protests this month, store shelves are depleted, deliveries aren’t made, and customers are staying away at the request of employees to put pressure on the board to rehire Arthur T. Demoulas. The drama continues to escalate as the board already hired two co-CEOs to replace him, the new leadership team has fired some employees for their role in the protest, and the ousted CEO made an offer to buy out his cousin and other family members. The board said in a statement July 25, 2014 that it will review Arthur T. Demoulas’ bid and others they receive, but they expect all employees to return to work (promising there will be no retaliation for the protests).

Current and former Massachusetts and New Hampshire state and local elected officials praised the company as a leading corporate citizen with most announcing support for the employees’ position:  The Lowell Sun reported that a statement by a number of officials said in part: “…the leadership of Arthur T. Demoulas is the reason Market Basket has been able to keep prices low while delivering quality products to mainly under served areas. The current actions of the board and officers is one motivated by greed and will only serve to destroy the legacy the Demoulas family has worked generations to establish.”

The “good guy” stories that employees have shared about the former CEO reaffirm what they say it felt like to work for a company where they felt respected — paid more than industry average — and part of a culture where they were seen, heard and cared about. Employees give Arthur T. Demoulas high marks for walking the talk about what it means to be a family business.

Interviewed at rallies, employees gave examples of things Arthur T. Demoulas had said or done that mattered: he remembered employee names, knew who had a child or spouse with a health crisis and would seek that employee out in store visits to see how things were going and then remember the conversation the next time.

Customer and employee loyalty is in short supply in most businesses, especially where relationships are simply transactional. When a leader makes it more than that, he or she can inspire trust, allegiance and transform how those who work and shop there experience a business. It can feel like community.

Market Basket under Arthur T. Demoulas apparently demonstrated it was a business that had soul.

In a tug of war of competing visions, Market Basket’s new board majority misread how compelling soul was to employees and customers. Or without it just what it is they will have to sell.

The Week in Ethics

Gael O’Brien, July 26, 2014

Gael O’Brien is The Ethics Coach columnist for Entrepreneur Magazine. She is also a columnist for Business Ethics Magazine where her July column is “American Apparel: Sex, Power and Terrible Corporate Governance.”


7 thoughts on “The Week in Ethics: How Market Basket’s Board Misread Employee Engagement

  1. Sylvia J. Heath

    I wish customers would take this same concern for Market Basket and protest the greed being exhibited by food chains across the USA. Unfortunately our free market system is out of control. Competition no longer exists. Without naming names, if you examine our food chains in the USA you will find one or two major corporations running the show. The greed these corporations are showing is impacting the average American’s ability to place food on the table. Just because you can squeeze American citizens for their last cents so that you can increase your billion dollar coffers doesn’t make it right. Every time I question an injustice in this country these days, I get the same response: “That’s just the way it is.” Americans need to lift their heads and start questioning that ideology. In a recent scan for a product online, I found the same item ranging in price from $10.00 to $108.00. Greed is now “just the way it is”.

    Sylvia J. Heath

    1. Sylvia J. Heath

      It was a misnomer that I didn’t expand on the above example of an online item ranging from $10.00 to $108.00. At least, in that example I had a choice of which to buy. (By the way, this was the
      exact same brand name item across the price range). Without Market Basket operating in my area, as it has, with civil and moral discipline, I do not have the same choice with the food I buy.

      Thank you for posting my concerns.

      Sylvia J. Heath
      (same post with spelling correction of “by” to “buy”

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  3. Kathy M

    Arthur T’s side of the family was found guilty of defrauding Arthur S’s side of the family since the 70s when Arthur S’s father died. It was discovered something funky was happening in the late 80s by the Mass Revenue Service because false tax reports were being filed in the name of Arthur S’s older brother by Arthur T and his father slowly moving stocks and funds to themselves. This opened a whole fiasco that went on for over a decade, involved the Arthur T’s side and their Demoula’s lawyers committing all kinds of crimes up to and including trying to setup and bribe the Judge’s clerk which got the lawyer’s disbarred.

    This in fact is why Market Basket was formed and the Demoulas stores were being fazed out. Market Basket was owned only by the Arthur T side and they were illegally moving funds and stocks there from the Demoulas stores owned by the whole family.

    Arthur T fought and fought giving Arthur S’s side their fair share that had been defrauded until either 1999 or 2000 when it was finally settled for good.

    Arthur T and immediate family are not good people.

    All of this is a matter of public record and can easily be found out.

    The details are the stuff of blockbuster movies about gangsters and corporate criminals. Really!!! They should make a movie about it all.

    1. Gael O'Brien Post author

      Thanks for your comment. One of the links in the column provides background on the history of the “family feud.” I think what will be telling as the Market Basket crisis gets resolved is whether there will be leadership that values the company’s stakeholders in addition to the family.

  4. Wenxin Lin

    I completely agree that Market Basket under Arthur T. Demoulas’ leadership was a business that had soul. The ousted CEO Arthur T. Demoulas depicted a leader who has strong character and have a moral imperative to successfully build integrity in the workplace. What he demonstrated is what business needs. Business world is full of transactions. Both employees and employers would like to take advantage of the other side to seek their own benefits. It is so difficult to combine all the employees and employers into a community because of huge difference in individuals, like different thoughts and goals. Yet in this case of Market Basket, the former CEO made it. He built trust in his company. All the employees respect and love him and are willing to follow him. Based on the book, Ethical Obligations and Decision Making in Accounting, “people of integrity are self-driven to do the right thing. Leaders of integrity act on the knowledge that their actions are ethical and provide the basis for others in the workplace to follow their lead.” Similarly, I think that’s why business under Arthur T. Demoulas was so successful. He showed his responsibility, respect, trustworthiness, etc. to employees as a leader. In turn, employees expressed their loyalty for him. Leaders’ ethical behaviors can positively impact employees’ perception and behaviors. I feel it was a touching snapshot when employees stood in front of the stores protesting to support their loved leaders.

    Nevertheless, to settle down the issue, the new leadership team fired some employees in the protest. This is a bad solution. The punishment probably could control the issue on surface, but it did not essentially solve the problem and was likely to bring about ethical issue in the company from long-term perspective. The actions that new leaders took would make employees feel they were not cared and respected, unlike their former leader. The punishment would result in fear of reprisals. This is a dangerous sign of ethical collapse in the future of a company.

    To sum up, leader’s behaviors influence employees’ role. Integrity plays an important part in workplace to foster a community. It helps to shape a culture that everybody fits in, thus decreasing ethical problems and driven profits up. Instead of punishment, the new leaders in Market Basket should come up with approaches to deliver their caring and respect to employees all through the way.

    1. Gael O'Brien Post author

      Thanks very much for your comment about leadership, Market Basket and culture. It is evidence of your comments that Arthur T. Demoulas has been successful in maintaining the culture and sustaining profitability since he bought out his cousin’s share of ownership in Market Basket after the strike.


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