What exactly is the Market Basket board doing?
The next Market Basket board should be made up of grocery clerks. Seriously. They know how to get the job done.
They keep the stores running, and when they want to, they know how to make the business grind to a halt.
They’ve managed to outsmart Market Basket’s seven board members, who despite their fancy degrees can’t figure out how to get the company back on its feet after employees began protesting.
And sadly, it’s not for lack of trying. The directors say they have been working “around the clock” to resolve the standoff between employees and management, which has paralyzed the 71-store chain.
To which I must ask: What exactly has this all-male board been doing during these conference calls and face-to-face meetings?
It would almost be better if the directors admitted they’ve been doing something else all this time. Maybe they’ve been debating where to take the yacht this summer, sharing tips on how to improve their golf games, or trying to answer the most vexing quibble of them all: Which is better — the Four Seasons or the Mandarin Oriental?
When I reached out to the board, I was assured the directors are acting responsibly and are trying to keep the company together. Despite the very public fight over the future of Market Basket, the directors are taking what they believe is the high ground on the matter and prefer to not respond to employees who liken current management to evil oligarchs.
But the directors still believe they made the right decision in June to oust Arthur T. Demoulas as CEO after he defied their policies on numerous occasions. “It’s unprecedented for a board to pass a policy — and management to say no,” Eric Gebaide, one of three independent directors, told me in a phone interview Tuesday.
Arthur T.’s departure set off a monthlong protest, during which some employees have refused to work until he is reinstated, and customers boycotted stores in solidarity.
The board could have decided to fire and replace many of Market Basket’s 25,000 employees, but it felt they were innocent victims in the war between Arthur T. and cousin Arthur S. over the control of the grocery chain. I imagine that also would have been a PR nightmare — bigger than the one they are living in now — and further alienated customers.
Despite issues with Arthur T., the board wants to bring him back in some fashion. It would love a happy ending in which he waltzes back, and so do employees. Two governors have intervened to help broker a deal. Under the ideal scenario, Arthur T. buys out Arthur S. to keep a century-old business in local control.
“We are hoping we can resolve things still,” said Gebaide, a New York banking executive who joined the board last year. “We should not leave one possible pebble unturned.”
On the one hand, you want to feel for Gebaide and the rest of the board, who are caught in a decadeslong feud between two factions of the warring Demoulas family. But talk to business school professors and people who sit on boards, and they’ll tell you that any director worth his hefty stipend should have risen above the fray, with so many jobs and the fate of a multi-billion-dollar company on the line.
These directors are supposed to serve in the best interest of the shareholders and company — and they’ve done neither.
The chain has bled tens of millions of dollars in revenue and is apparently on the brink of financial ruin. Instead, directors seemed to be taking sides rather than trying to do the right thing, which is to get a deal done and everyone back to work as soon as possible. But that’s what happens to a board serving two masters who despise each other.
In case you’re wondering, let me just name the non-family board members at Market Basket so that if they ever apply to serve on your board, you know who they are. In addition to Gebaide, they are Keith Cowan, Terry Carleton, Gerry Levins, Bill Shea, and Ronald Weiner.
“There are two very bad Arthurs, and it’s a very bad board,” said David D’Alessandro, the former John Hancock chief executive who has also served on the boards of four public companies, four private equity firms, and countless nonprofits.
D’Alessandro has never witnessed a board behaving this badly. A good one, he said, would have resolved this crisis in a week. He said the moment employees started walking out and customers starting boycotting in solidarity is the moment the board should have owned up that it made a mistake in firing Arthur T.
I’ve been calling this a Greek tragedy, but D’Alessandro believes it’s more like Snow White meandering through the forest of a Brothers Grimm fairy tale.
“You walk into the boardroom, and there are the seven dwarfs,” he said. “How is it possible that a privately run company supposedly with competent members of the board find themselves to the point you have to get two governors to hold your hand?”
If the Market Basket directors went to Harvard Business School, Jay Lorsch would be giving them all an “F.”
“You can blame the two cousins, you can blame their two parents,” said Lorsch, a professor who studies corporate governance. But “at the end of the day, the only persons that have both the power and responsibility to do something is the board.”
In particular, Lorsch blames the so-called independent directors: Cowan, Gebaide, and Weiner. They’re supposedly beholden to no one and should be able to break a deadlock on a seven-member board. Of course, some wonder how independent they are because they were elected by shareholders who support Arthur S.
“These outside guys should have the guts and brains to figure it out,” Lorsch said.
From what I can tell, the Market Basket board members wouldn’t have done anything differently — and some may be even proud of their work.
Now it’s up to the Demoulases to decide whether to sell the company. Let’s just hope there is something left by the time they make up their minds.