Arthur T. Demoulas’s return to the helm of Market Basket is a victory for the family-owned grocery chain’s employees, who walked off the job after Arthur T.’s cousins ousted him in June and refused to come back without him. It’s also a victory for a farsighted business model, in which maximizing the immediate returns for owners is a lesser goal than preserving a company’s long-term sustainability.
Yet Arthur T.’s $1.5 billion buyout of the rival Arthur S. Demoulas faction doesn’t mean that everything can go back to exactly the way it was. The deal leaves the company with a loan obligation it previously didn’t have, not to mention a $550 million loan from a private equity firm. Especially under these new pressures, Arthur T. must preserve the values that made Market Basket special. But if he hopes to prevent a repeat of this saga in the future, he must also professionalize the governance of this all too unusual chain.
During their remarkable six-week revolt, thousands of employees showed that they understood the nature of the company’s business far better than the group of heirs who had gained control of it. Under Arthur T.’s stewardship, the company paid its shareholders smaller dividends so that workers could receive better pay and consumers could enjoy lower prices. That approach paid off in the form of high sales volumes and low employee turnover. When the Arthur S. faction pushed him out and seemed to lay the groundwork for a more traditional corporate culture, employees recognized the threat to the chain’s very essence and responded accordingly.
Yet the chain was subject to such an abrupt shift because it’s an overgrown family business, with all the idiosyncrasies and baroque grudges that often come with family businesses. Arthur T.’s much-vaunted personal touch with employees didn’t extend to the Arthur S. side of the family, whose members felt cut out of the company’s affairs. They wanted, out of pure self-interest, to extract greater payments from it, but they also had some legitimate questions. (Why, exactly, does a supermarket chain own a golf course?) Arthur T. dismissed such concerns, declaring that “there’s only one boss in this company.” But it only took a change in one heir’s allegiance for Arthur T. to be replaced with corporate executives from two major national retail chains. Keeping Arthur T.’s allies and creditors together over time will require, at the least, greater diplomacy.
With the support of employees, Arthur T. successfully maneuvered his way back into control. But the victorious faction of the Demoulas family must seek to cement its values into Market Basket’s long-term business plan — and not simply rely on the personal appeal of Arthur T. to carry this unique enterprise indefinitely into the future.
For the record: An earlier version of this editorial mischaracterized the nature of a private equity firm’s involvement in the sale of Market Basket. The $550 million is a loan, not an equity investment.