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The Boston Globe

Business

Market Basket CEO faces vote on ouster

Market Basket chief is target in family feud

In a reprise of the bitter fighting that has riven the family in charge of one of the state’s largest supermarket chains, the board of the Market Basket food stores is poised to fire chief executive Arthur T. Demoulas at a meeting next week.

The company’s board, split between two sides of a family long at war, will take up a motion for his removal next Thursday, resurrecting a notorious and seemingly intractable feud over the highly successful Demoulas Super Markets Inc.

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In the latest dispute, the faction that opposes Demoulas, led by his first cousin, has gained control of the board and is accusing him of steamrolling directors and spending money recklessly, including transactions with companies owned by his wife and brothers-in-law. They argue he must be removed to restore the board’s authority.

In a recent interview, Arthur T. Demoulas said that Market Basket has performed well under his five-year tenure as chief executive, recording net income of $217 million in 2012 on $4 billion in revenue. He said the deals involving his wife and brothers-in-law were fully vetted, and that relatives who oppose him are trying to enrich themselves at the company’s expense.

His attorney said that those opponents have repeatedly pushed for Market Basket to borrow heavily in order to finance payouts to shareholders of more than $1.5 billion. The company is owned by nine shareholders, all members of the Demoulas family.

This is the latest flashpoint in a two-decade battle. The two sides fought for control of the company in a court case that lasted through most of the 1990s and ended with the family of cofounder George Demoulas, including his son, Arthur S. Demoulas, winning majority ownership.

Since then, the company’s management has remained divided between two sides of the family.

Arthur S. and other family members recently gained the upper hand in a board election and began pressing for the removal of Arthur T., who is the son of the company’s other cofounder, Telemachus “Mike” Demoulas.

The matter landed in Suffolk Superior Court in June after board members who support Arthur T. failed to appear for meetings to consider his removal, preventing a quorum needed for directors to take action.

Judge Linda E. Giles then issued an order for a meeting to be held July 18.

While it is unclear what action will be taken, Arthur S. and his allies have argued in court documents that Arthur T. has mismanaged the company and ignored the authority of its board.

“He is frequently unwilling to provide the board even the most basic information about company operations,” an attorney for the Arthur S. supporters, Thomas Fitzpatrick, wrote in a complaint.

Arthur T., who has worked at the company for 40 years, argued that he has worked closely with the often contentious board over the years to build one of the largest and most successful supermarket companies in New England, with more than 70 stores and 20,000 employees.

He has shown no signs of giving up his post, saying he intends to continue to make the case that the business is better off for his management.

“I enjoy this business so much,” he said. “We’ve done the best job we can of trying to separate the board matters and behind-the-scenes family matters as much as possible. I think we’ve done a good job of it.”

Casey Ross can be reached at cross@globe.com.
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