Market Basket Case: Business is Inherently Cooperative

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As a libertarian, I begin to suspect every time my liberal friends hear me defend capitalism, they envision a bunch of corporate fat cats in suits gleefully sipping gin mixed with the tears of child slave laborers. I’ve been observing a story the past month, however, where the market is truly illustrating the inherent cooperation needed between employers and employees.

In New England, there’s a regional supermarket chain called Market Basket currently engaged in a 40-year family feud which has spilled out into the public sphere. Market Basket was founded in the 1950s by the Demoulas brothers, Mike and George. As of this year, the company boasts 71 stores and 25,000 employees. It’s privately held by the Demoulas family, and is said to be worth over $3 billion dollars.

Family drama, legal battles and other management troubles have plagued the business since George died in the early 1970s. This caused a dispute regarding shares of the company, ultimately settled in court with George’s side of the family getting 50.5% of the company. Mike’s son, Arthur T. Demoulas, was President and CEO until he was fired from his seat on the board of directors in late June of this year. George’s son, Arthur S. arranged the vote that unseated Arthur T. 

What happened next was a bit unexpected. Employees of the company immediately protested the change in management, gathering outside company headquarters, as well as inside the supermarkets themselves. Employees put their jobs on the line in a stunning show of support for their ousted CEO, and some were even terminated in the process. It’s been approximately seven weeks and supporters continue to rally. Massive strikes took out supply chains and caused Market Basket to host a job fair to replace workers, while cutting hours for part-time employees.

Arthur T. the ousted CEO, actually offered to buy Market Basket from his family, an offer they claim to be considering. Protestors seem concerned of a competitor buy-out or massive changes in company culture. Meanwhile, according to sources, some locations are reporting a 90% drop in business. Some have asked the state to intervene, but the governor of Massachuetts, Deval Patrick, has refused requests to get in the middle of the fight, stating that “I want the workers to be treated justly, but the centerpiece of the dispute is who they want their boss to be, and that’s not something governors normally get involved in.”

Governor Patrick is right. This isn’t a dispute for government to solve. It’s for the parties involved to figure out, and the market to reward or punish. There are a lot of ways this could go, and each group has choices to make:

Will the board of directors sell their share of the company to the competition or their cousin? Will they let Arthur T. return to his old position? Will they keep it and carry on, attempting create new appeal to their customers?

Will the striking employees go back to work or seek new jobs? Will they try to find a company that breeds the sort of loyalty that the Market Basket run by Arthur T. did? Will they come up with additional demands?

Even if a resolution between employer and employees is met, there’s still the unpredictable outlier:

Will the customers come back if Arthur T. returns? Will they choose the slightly higher prices of competitors in order to spite the board of directors? Will they give up caring about it and go back, enticed by lower prices when the supply has returned?

All of this is far from the common liberal fear that in capitalism, workers are powerless and subject to the whims of their “corporate masters”. This impressive display of non-unionized workers fighting to control the direction of their company, while customers actively boycott against the decisions of the board, really illustrates how business is inherently a cooperative effort (not an exploitative one) and how the market self-regulates.

“The most important single central fact about a free market is that no exchange takes place unless both parties benefit.” – Milton Friedman

The popular rhetoric that suggests a continuous war between corporate boards and the labor force does this situation a disservice. One party can’t just “win”, there has to be mutual benefit for everyone to get back to business as usual. As the two sides try to find a satisfactory resolution, I think everybody knows that they do need to get their act together and get back to work soon – the customers are the ones who pay all of them, and the customers aren’t happy.

  • Ian Osmond

    The thing is, Avens, Market Basket actually shows a case where a union would be a really, really GOOD thing. The argument is entirely between the sides of the deMoulas family. If Market Basket was unionized, they could actually, genuinely, and LITERALLY have a seat at the table. There could be a genuine actual real human being in a suit sitting in the room with the other genuine actual real human beings in suits who are yelling at each other about what to do.

    As it is, the employees and customers don’t have any direct representation. We can talk on Facebook and in the papers, hold signs and protest, and all sorts of things like that. But what we CAN’T do is be in the boardroom when the actual decisions are being hashed out.

    A union would help that. Unions need not be adversarial between management and labor — but, right now, “labor” can’t significantly influence the direction of the company in favor of one part of management, because there’s no unionization.

    • MaineShark

      Except that unions almost always represent their own interests, not the interests of the workers.

      By the way, latest news says that a deal has been accepted, and is lacking only ink to make it complete, so apparently things have been resolved by the market, without heavy-handed intervention by third parties…

  • Amanda Giles

    I’ve been a loyal Market Basket customer for years and have been following the action. I think it’s so wonderful and rare that employees are protesting for a CEO’s return. From everything I’ve read, I can understand why employees have stood by him. Arthur T has represented the sort of “what’s good for the community” values which seem long gone in modern companies. I’ve stood behind the employees and stopped shopping there, but I hope it gets resolved soon so I can return (the other grocery stores are way more expensive).

    This should be Capitalism 101. The market is speaking, but is the board listening?

    I know if Arthur T is not reinstated in some manner, I will have a tough choice between my values and my pocketbook.

    • Avens O’Brien

      This was a very interesting article on the subject of what he’s done that 1. potentially made his employees love him and 2. made the rest of the board really hate him:

      http://www.theguardian.com/money/2014/aug/14/market-basket-arthur-millions-investing-protests

      • Amanda Giles

        I think it’s so fascinating that he, yes, made an investment mistake that could have hurt everyone’s bottom line, but then he wanted to correct it (at least for the employees). In my experience, management isn’t so big on admitting fault, just in “changing direction”.

        The supermarket analyst at DJL Research said (in that article):“You don’t buy another grocery company to have low prices and overpay your people. That’s not the point. The point is to make money.” But that’s why Arthur T is such a folk hero now because both his demeanor and actions seem to demonstrate that he cares more about people than making money. Of course, everyone is human. You could look at that and suggest that making the employees love him is ensuring his own gain, at least. And this Globe articles cites some court findings revealing another side of Arthur T as well:
        http://www.bostonglobe.com/business/2014/08/21/arthur-demoulas-profile-personal-touch-that-can-cut-two-ways/IqkmJ1i7A4AFKpLenN8vBM/story.html

        But frankly, I think it’s shrewd to take care of your employees. As is emphasized by this struggle, if you lose the employees you can lose everything. If your employees love you, a lot of unexpected things can happen. Love triumphs over money (at least for a while).

  • Amanda Giles

    Have you seen what the Super Secret Project out of NH has to say (same folks who brought you Granite State of Mind)… funny and spot on.

    DEAR MARKET BASKET… (Protest Song by The SSP)

    (all their stuff can be found here: http://www.thesupersecretproject.com/)