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A Family of Workers Rises Up to Save Their CEO

By Tom Moroney
August 08, 2014 3:49 PM EDT 117 Comments
In a decades-old family feud, Demoulas, 58, was fired as chief executive officer of the closely held Market Basket supermarket chain by a board controlled by his cousin, Arthur S. Demoulas.
Photographer: Joanne Rathe/The Boston Globe via Getty Images
In a decades-old family feud, Demoulas, 58, was fired as chief executive officer of the closely held Market Basket supermarket chain by a board controlled by his cousin, Arthur S. Demoulas.

The saintly visage of Arthur T. Demoulas hangs over the New England summer like a rock star.

His balding head and five o’clock shadow are plastered on posters and placards, his name scrawled across the back windows of pickups. In song and verse, the demand is the same: Bring back our beloved Artie T.!

In a decades-old family feud, Demoulas, 58, was fired as chief executive officer of the closely held Market Basket supermarket chain by a board controlled by his cousin, Arthur S. Demoulas. The 25,000 nonunion workers rose up in revolt, holding rallies, halting deliveries and leaving shelves unstocked at the 71 stores after his abrupt departure in June. From warehouse workers to store managers, they’ve cost the company tens of millions of dollars. As improbable as it seems, they are risking it all for one man.

“We are a family and they messed with our dad,” said Charlene Kalivas, 57, who has worked for Market Basket for 18 years and manages the sandwich shop in one of two Tewksbury, Massachusetts, locations.

How did a single CEO in an age of stratospheric executive pay, outsourcing and downsizing generate such uncompromising loyalty?

Personal Bond

Employees say the pay is good, the benefits generous. One store manager told Bloomberg News she makes $140,000 a year. Her cashiers start at $12 an hour, $4 above the Massachusetts minimum wage, and Christmas bonuses go even to part-timers. Yet, the money runs a distant second in importance to the intensely personal bond they say Demoulas has fostered with employees during his 11-year reign.

Dozens of workers interviewed by Bloomberg from stores in Massachusetts, New Hampshire and Maine could remember at least one close encounter with their paterfamilias that cemented their trust and ignited their anger when Demoulas was dumped.

Rosa Pereira, a 28-year veteran and deli manager in North Andover, Massachusetts, was out for two weeks -- with pay -- after her mother died three years ago. Her first day back, the phone rang. It was Demoulas wanting to know how she was.

At the opening of a new store where she was assigned a year before, Demoulas headed straight for her with his hand out.

“Congratulations on our new store,” Pereira, 46, remembered him saying with a handshake. “He didn’t say ‘my store,’ he said ‘our store.’”

Condolence Calls

Sean Morse, 44, assistant manager at the Londonderry, New Hampshire, store, said his father died three years ago. Demoulas called him at home to offer his condolences. A short while later, after a store opening, he yelled for Morse from across the parking lot to come meet his wife.

“He introduced us, told her what happened to my father and he remembered the diagnosis,” Morse said. “You can call me back in a month and we’ll still be picketing if we have to.”

Corporate America often ignores the power of employee loyalty, according to Emily Collins, an analyst at Forrester Research Inc. in Cambridge, Massachusetts. Satisfied workers stay longer, reducing long-term training costs, and their loyalty often creates a steadfast customer loyalty that is invaluable to any business.

Showing Solidarity

Collins speaks from personal experience. In a show of solidarity, she said she hasn’t shopped at her local Market Basket since the workers took action.

“I’m rooting for Artie T.,” she said.

Demoulas hasn’t given any interviews since his ouster and, except for a few brief sightings, is rarely seen. A call to his home phone number was not immediately returned.

On Aug. 3, his side of the family released a statement saying, in part, that he would agree to return as CEO at midnight that day “to stabilize and begin to restore the business.” The other side reaffirmed its support of his replacements.

Founded by Greek immigrants in 1917 as a single food store in the mill town of Lowell, Massachusetts, the company has weathered decades of family squabbling for control of the chain. The deeply divided, seven-member board is led by Arthur S. Demoulas, whose side of the family owns 50.5 percent of the business. Arthur T.’s side owns 49.5 percent.

New CEOs

Trouble erupted this time around on June 23 when the Arthur S. faction voted to fire Arthur T. and replace him with two co-CEOs, James Gooch and Felicia Thornton.

Warehouse workers and drivers walked off the job, employees organized the first of four rallies attended by thousands, each larger than the last, store shelves emptied and customers announced boycotts, taping receipts from rival grocers to the windows of their hometown Market Baskets. Late last month, eight employees say they were fired for spearheading the protests.

Now the stores are open but quiet as workers continue protest vigils outside. In a statement issued yesterday, the company’s new CEOs announced the first reduction in hours since the job action, instructing store managers to adjust “to meet current demand,” while emphasizing that no one was being laid off.

Larry Collins, 56, who works 32 hours a week in the kitchen of the Reading, Massachusetts, store, said he was told tomorrow would be his last shift until further notice. Part-time workers like him were losing all their hours while full-timers at his store were being reduced to 35 hours, he said.

Whether it was called a layoff or not, Collins said he was filing for unemployment benefits.

Governors Speak

New Hampshire Governor Maggie Hassan in a statement called the reductions “incredibly troubling” for the 8,000 Market Basket part-timers in her state and encouraged them to apply for benefits. In a letter to Market Basket’s board today, Massachusetts Governor Deval Patrick offered assistance, saying the disruption “has gotten out of hand.”

Market Basket’s loss of business is estimated to be on the order of tens of millions of dollars. The company has $4.3 billion in annual sales, according to Supermarket News. It was ranked earlier this year by readers of Consumer Reports as the sixth-best grocery chain in the U.S. in terms of prices and cleanliness.

The Market Basket board has said it’s considering selling the company to an unspecified number of potential buyers. One is Arthur T. himself, according to a statement issued by the board. Another was identified by the Boston Globe as Brussels-based Delhaize Group, the parent of Hannaford Bros., a rival grocer.

Issued Ultimatum

Last week, the CEOs issued an ultimatum to workers to resume normal operations or be replaced. Protesters responded with a fourth rally in sweltering summer heat in the parking lot of one of the two Tewksbury stores. About 12,000 workers and customers listened to speeches and chanted “Bring Back Artie T.!”

They ranged in age from 14 to 94-year-old Sal Pilla, a “sacker” or grocery bagger, at the Bellingham, Massachusetts, location. The D-Day veteran was hired when he was 77.

The broad cross-section risking their necks for the boss -- for their mascot they chose a giraffe -- is unprecedented in modern American labor history, said MIT Sloan School Professor Thomas Kochan.

Even those with far less seniority than the decades others have amassed said Artie T. has taken good care of them.

Generous Spirit

Sage Goslin, 18, a part-time cashier in Rochester, New Hampshire, said she fears the $200 Christmas bonus she received last year will be cut under the new management. Goslin used the money to stock up on essentials like diapers for her infant daughter.

“That bonus doesn’t help just me, it helps everyone,” she said, citing an older co-worker who bought a pair of much-needed work boots.

Penny Stocki, 53, has been a part-time cashier in Tewksbury for eight years. She said Demoulas’s generosity of spirit is contagious. She and co-workers often find themselves making up the difference for a customer who doesn’t have enough money to pay the full tab.

Stocki remembers when her son was serving in the military in Afghanistan and Demoulas visited the store.

“He came over to ask about him, and I’m part time,” she recalled. The gesture did more than make her feel good.

“It made me feel like I was part of something important,” she said.

To contact the reporter on this story: Tom Moroney in Boston at tmorrone@bloomberg.net

To contact the editors responsible for this story: Chris Staiti at cstaiti@bloomberg.net Stephen West

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