Just in time for Labor Day, two well-known local companies are grappling with how generous to be to their laborers.
At the Market Basket supermarket chain, the Demoulas family that owns the company has been deeply split over — among other issues — a profit-sharing plan that one faction deems far too generous to the company’s longtime employees.
Meanwhile, at Liberty Mutual Insurance, a company that made news not long ago for the outlandish pay and perks bestowed on senior management, employees will soon see retirement and other benefits reduced, even as profits soar.
They are companies divided by the way they treat their workers, but united by decisions driven by greed.
Let’s start with the Demoulas clan, simply because they’re more fun. CEO Arthur T. Demoulas and his cousin Arthur S. Demoulas have fought for years over control of the company founded in the 1960s by their grandfather.
The ugly battle is best remembered in some circles as the long-running legal skirmish that led to the disbarment of two of the lawyers in the case before being settled a few years back.
The family again finds itself at odds, and one of the key issues is that the Arthur S. branch of the family believes that Arthur T. is far too generous to the help.
Under the profit-sharing plan, the company invests a certain percentage of each employee’s salary in the stock market. The plan is fully funded by the company. Any employee 21 or over who works 1,000 hours a years is eligible.
As I said, certain members of the Demoulas family believe that far too much of their money is going to the produce managers. They have felt this way especially strongly since the plan lost $46 million in one quarter during the downturn in 2008 and Arthur T. generously insisted on replacing the lost profit-sharing money out of the company’s coffers.
So his cousins spent much of the summer trying to fire him. Instead a compromise was reached in which the Arthur S. Demoulas faction will receive $250 million in cash. No one believes that payment will settle the war over the profit-sharing plan. They also wrested control of its board of trustees, and every expectation is that they will continue to push for more money for themselves, and less for their employees.
Likewise, the brass at Liberty Mutual believe that the benefits to employees need reining in. The company recently announced that profit-sharing the match for the company’s 401(k) plans will drop from 7 percent to 6 percent. In addition, pension plans for current employees and insurance for retirees are being trimmed as well.
Those decisions were defended as being in line with industry practice. But they come at a company where the brass has no compunction about spending on themselves as profit booms. This is a company that paid $4.5 million to renovate chief executive David Long’s office suite in 2011. This summer it opened a $300 million office tower in the Back Bay, built in part on $46 million in various tax breaks.
Then there are the eye-popping pay packages for Liberty Mutual executives themselves. Long made $8.9 million last year. His predecessor, Edmund “Ted” Kelly, made $200 million in the four years before his retirement in 2011. Yes, you read that right: $200 million. Kelly’s pension is an estimated $3.3 million a year.
Liberty Mutual’s profits doubled in 2012 over the year before to $829 million, and it would certainly seem to be making enough not to cut benefits. But this much seems certain: Its management will never be embroiled in a Market Basket-style controversy. No one is taking to the boardroom to complain about excessive generosity.
As for the Demoulas family, there seems to be no amount of money that will settle the family feud. No matter how much they take back from their employees, history says some relative will insist that it just isn’t enough.