Family Owned Company Troubles By Poorly Constructed Board of Directors

Posted in Board Development by Jim
05 Aug

This week grocery store chain Market Basket fired long time CEO Arthur T Demoulas by the board of directors much to the dismay of the employees. Here is an example of a poorly constructed board of directors. Since Market Basket is a private company there are no rules on the number of truly “independent” board members there are. One side could, as it appears, have “stacked” the board with followers of the chairman of the board.

A truly independent director primary responsibility is to represent the stakeholders in the company. This includes shareholders, customers, suppliers, employees and the community. It appears that at least four (or 4 1/2) stakeholders were not represented in this action!

Recently in the CBS News article “Family Feud Sparks Revolt At Grocery Store Chain” explains that

“Market Basket stores have long been a fixture in Massachusetts. The late Arthur Demoulas – grandfather of Arthur S. and Arthur T. and a Greek immigrant — opened the first store in Lowell nearly a century ago. Gradually, Market Basket became a regional powerhouse, with 25,000 employees and 71 stores in Massachusetts, New Hampshire and Maine.

The feud dates back to the 1970s, but the most recent round of infighting began last year when Arthur S. Demoulas gained control of the board of directors. Last month, the board fired Arthur T., sparking the current uprising.

Workers are fiercely loyal to Arthur T.

“You know the movie, ‘It’s a Wonderful Life.’ He’s George Bailey,” said Tom Trainor, a district supervisor who worked for the company for 41 years before being fired last weekend over the protests. “He’s just a tremendous human being that puts people above profits. He can walk through a store, and if he’s met you once, he knows our name, he knows your wife, your husband, your kids, where they are going to school.”

Employees said they believe the fight between the family members loyal to Arthur T. and Arthur S. is largely over money and the direction of the company. They say Arthur S. and his supporters have pressed for a greater return to shareholders.”

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