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The Boston Globe

Business

Ouster at the top in Market Basket family feud

Board removes Arthur T. Demoulas

Arthur T. Demoulas greeted supporters as he arrived for a board meeting last year.

Wendy Maeda/Globe staff

Arthur T. Demoulas greeted supporters as he arrived for a board meeting last year.

A decades-old fight over one of the state’s largest grocery store chains took a dramatic turn Monday when Market Basket president Arthur T. Demoulas and two other top executives were ousted by a board controlled by Demoulas’s chief rival — his cousin.

The episode was the latest in a real-life soap opera that has played out between feuding members of the family-owned grocery chain for more than 20 years, with epithet-filled board meetings, several stints in court, and even a fistfight between the cousins.

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Most recently, Demoulas was under attack from relatives who say he ignored the board and spent money recklessly. He, in turn, claimed that they wanted the company to pay them bigger dividends at the expense of employees and customers.

“The board’s action today is driven by greed, pure and simple,” said William Marsden, the director of operations ousted along with Demoulas.

“Our crime was our commitment to Arthur T. Demoulas, the employees, and the promise to customers to always honor the Market Basket commitment to high quality and value.”

Despite the drama, the chain has prospered. Today, the chain, formally known as Demoulas Super Markets Inc., has 71 stores and about 25,000 employees in Massachusetts, Maine, and New Hampshire. It is reported to have had revenue of $4.6 billion in 2013 and is ranked by Forbes as the 127th largest private company in the United States.

Ted Clark, executive director of Northeastern University’s Center for Family Business, said he expects the company to prosper because of a cadre of experienced middle managers who run the chain effectively. “Two top dogs fighting doesn’t mean the whole operation is going to be in an uproar,” Clark said.

Monday’s ouster was the culmination of the most recent round of infighting between Demoulas and cousin Arthur S. Demoulas,who gained control of Market Basket’s board last year. They are sons of two brothers: Arthur T. is the son of the late Telemachus Demoulas, and Arthur S. the son of the late George Demoulas.

The cousins, both in their 50s, are named after their grandfather, who founded the company in Lowell nearly a century ago.

After his cousin gained control of the board, Arthur T. Demoulas, popular with employees and customers, was initially able to stave off being removed. But he lost the battle Monday, when board members voted to replace him with a pair of former retail and grocery executives who have been acting as consultants for Market Basket.

In addition to Demoulas and Marsden, the board fired vice president Joseph Rockwell.

In a statement, the board said Demoulas “was not re-elected president and will not retain any management responsibilities moving forward.”

Arthur T. Demoulas had run Market Basket for the last six years, but he and his cousin have long been at odds. Their fathers purchased the store in the 1950s and turned the business into a company with dozens of locations, shopping malls, and other holdings.

But after George Demoulas died of a heart attack in 1971, his children accused their uncle, Telemachus, of stealing their shares in the company — allegations that would embroil the family in a lawsuit two decades later. During the years-long court battle, family members lobbed accusations of drug abuse, extramarital affairs, underhanded tactics, and greed back and forth.

The antics in the courtroom included a fistfight between Arthur T. and Arthur S. And two lawyers for Arthur T.’s side were disbarred and a third suspended after an elaborate scheme to discredit the judge on the case came to light.

Ultimately, George Demoulas’s side of the family won a legal victory in the late 1990s that gave them a slight majority ownership of the company, and set up Arthur S. Demoulas to eventually gain control of Market Basket’s board.

Last year, a judge ruled that the company should proceed with a $300 million payout to its nine shareholders, all family members, that Arthur T. Demoulas had opposed.

On Monday, the board replaced Demoulas, who remains a shareholder, with a former Albertsons supermarkets finance chief, Felicia Thornton, and a former RadioShack Corp. president, James F. Gooch.

Thornton will be Market Basket’s operating chief, while Gooch will be chief administrative officer. They will also share the title of chief executive.

“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 board said in its statement.

Related:

Adrian Walker: Squeezing the laborers

Judge OK’s $300m Market Basket payout to shareholders

Editorial: Market Basket’s descent into greed

Market Basket CEO faces revolt led by his cousin

Erin Ailworth can be reached at erin.ailworth@globe.com. Follow her on Twitter @ailworth.

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