The Market Basket conflict is going into its third week, and both sides are holding firm. Based on the the way things have always worked in the past, it should be an unequal playing field. It's the Board of Directors, and the controlling shareholders of the company, against the company's associates. The Board should hold all the cards and be in control, but this is not the usual 'us vs. them' situation. It's something that really hasn't been seen before. It looks to be the entire company against 7 individuals--five on the board and 2 new co-CEOs.
What's happened is that the entire company--all the associates at every level, including cashiers, warehouse workers, truck drivers, baggers, distribution managers, store supervisors, store management, and corporate management, PLUS most customers, have all said NO to what the Board, under the control of 50.5% of the ownership, wants to do, and the associates are winning on every front. It's unprecedented.
The Board, and the A stockholders who control them, haven't yet conceded, but they have reached the stage where delays are costing them personally--the shareholders and their company, millions of dollars a day. Here's a look at what's happened and what it means:
What’s the latest co-CEO statement (at end of story) and soon to be held job fair mean? And what's with not paying some salaried workers?
There is one thing that’s obvious from the latest BOD/F&G (The Market Basket Board of Directors and the new CEOs, Felicia Thornton and Jim Gooch) statement—the Market Basket Board of Directors doesn’t want to accept Arthur T.Demoulas’ offer to purchase all of Market Basket, even though in all probability it’s the best offer they have, and quite likely the only one they have. There are two possible reasons why they don’t want to accept it—either the offer is considered too low, or animosity is getting in the way of clear reasoning. My guess is that is mainly the former—the offer from Arthur T. is considered by the board to be too low. Not that it actually is too low, especially given the current state of Market Basket, but I’ll bet they had a higher offer, or at least were anticipating a higher offer, before they fired Arthur T. and all hell broke loose.
What this means is the Board’s actions--firing Arthur T. and hiring the new co-CEOs, has lopped a huge amount of money off the value of the Market Basket brand to an outside buyer. This upcoming ‘job fair’ looks like they are making a last attempt to stabilize the situation so they can hold out for or solicit a higher offer. This whole scenario definitely didn’t work out as planned, and the consequences to the Board and shareholders are probably tremendous—in the hundreds of millions of dollars.
Not that it’s a game to the associates or anyone else involved, but this job fair reminds me of a 'Hail Mary' pass in a football game. The clock is winding down, marking time in millions of dollars lost per day rather than in seconds, and although the Directors thought they had the game in hand and were marching down the field to spike the ball in the end zone, they fumbled the ball. Instead of a victory dance in the end zone, they are now suddenly trapped back on their own two yard line, and it’s fourth and ten with time running out. There is time for one last desperate try to snatch victory from the jaws of defeat.
The Hail Mary pass is the job fair. If the co-CEOs can get the stores stocked, and then temporarily cut prices to the bone to lure customers back in, there’s still a chance to eke out a win. This was a very, very, very costly fumble, and every day this situation continues they’re throwing more good money after bad. When you are in a hole and want to get out, the first rule is ‘stop digging’, but this job fair is one last shovel full, to see what’ll happen. I’m just estimating numbers now, but if Market Basket was worth $3.5B before the fumble, they are lucky if it’s worth half that now to an outside buyer. Customer good will, loyal associates, and a great reputation are all out the window unless Arthur T. comes back. What a mess!
Realistically, it’s the Board's last chance. There was an opinion piece in the Wall Street Journal on July 31 by Holman Jenkins that implied customers are staying away not out of solidarity or belief in the cause, but because there’s nothing to buy in the stores. That attitude gives the Board hope--If the customers start coming back, maybe there’s a chance. All the receipts taped to the Market Basket store windows, the ads running in local newspapers, and public opinion argue otherwise, but people want to believe what they hope will happen.
That’s what this job fair is all about. It’s an oblivious and last-ditch attempt, in a poor economy, to lure desperate job seekers willing to throw their pride out the window, to replace workers standing up for what they believe in. Will it work? Quite unlikely, but nothing is impossible, so everyone needs to play some very tight defense and do everything possible to make sure no one catches this last pass--because if the job fair flops, the game is over. You can stick a fork in the new CEOs—they’re done.
The biggest crowd I've ever seen at Hannford's Deli on a Saturday evening
And here's another puzzler--what are the Board of Directors and the new CEOs thinking? They are in the spotlight, with the news media, the associates, politicians, customers, and everyone-and-their-brother watching every move they make, and they are making some incredibly dumb moves. Eric Gebaide (a Director) sent out a tweet stating "Back from a Boston board meet. Very interesting to be on the other side of the protestors. They are much better looking than I remember." Now it's not exactly an insult to say the protestors are good looking, but it sure conveys an air of not getting the gravity of the situation, and taking your responsibilities lightly. The Tweet has since been deleted, but what a bonehead. Didn't he know this would get picked up and appear in the media?
Worse, the co-CEOs sent out messages by certified mail, to certain salaried managers, that they wouldn't be paid this coming pay period for an "ongoing failure to report to work". However, it looks like there are some problems with this, including that some have been reporting to work or were on vacation. The Market Basket CEOs heard from the Massachusetts Attorney General for a second time on this one. Again, this situation is in the national and even international spotlight, so they can't do anything wrong. Firing or not paying workers is one of those things you have to do absolutely correctly, and this looks like yet another screw up. It's hard to believe.
I find this situation tricky to write about because I can't easily describe the Board of Directors and co-CEOs side of this situation, without saying the same thing over and over again, because it really does appear to be just them. I can't say it's the associates vs. Market Basket, or vs. the company, because it's the company that's in rebellion. It truly seems like it's just the Board members allied with Arthur S. and two new CEOs who were just hired, against everyone else. I really don't see any way for this to resolve except a sale to Arthur T. If there are 25,000 Market Basket associates, then it's 24,998 vs. 5 board members and 2 CEOs. Who is going to train anyone they do manage to hire at the job fair? I pride myself in figuring out how to resolve situations gone wrong, but I'd be truly at a loss if I were in either Felicia Thornton or Jim Gooch's shoes.
I can't figure out the A Class shareholders either. It reminds me of the fable about killing the Goose that laid the Golden Egg. It's as if there's an ax poised over the Goose's neck, and each day it swings a bit closer. If it were me, I'd be flipping out--"End this thing. I want my dividend checks to keep coming!" Once again, it's as if they don't understand the gravity of the situation. Not only is each day costing Market Basket millions of dollars, but it's also costing customers, which represent a long term revenue stream.
Let's face it. For Shaw's, Stop and Shop, Price Chopper and Hannaford, this whole fiasco is the best opportunity they've ever had to increase their customer base. Radio ads are almost non-stop this week. I don't think you can count on their management to be asleep at the switch and not take advantage of it. I was in Hannaford today, and not only was it crowded, but the prices seemed lower. Coincidence?
The next days are crucial. I didn't like the Esquire article on the Market Basket rebellion, but I loved the title--The Last Stand for the Middle Class, although it might well be the "first stand" instead. We'll see how it all works out very soon.
In the #YouCantFireCustomersWeQuit department: Market Basket customers raised over $15,000 in a very short time frame to purchase a full page advertisement in the Lowell Sun as well as in Maine and New Hampshire newspapers. The wording of the full page advertisement: “To the current CEOs of Demoulas Market Basket, Board of Directors, and Shareholders: A full boycott does not depend on Associates; it depends on CUSTOMERS. It is YOUR CUSTOMERS who are boycotting your stores. It is YOUR CUSTOMERS who bring in the money. It is YOUR CUSTOMERS who are your bottom line. It is YOUR CUSTOMERS who will not shop at Market Basket until Artie T. is back as CEO. It is YOUR CUSTOMERS who paid for this ad. #YouCantFireCustomersWeQuit”
There is a customer and associates rally being held on Tuesday, August 5 at 11am in the parking lot of Market Basket Store #8 at 10 Main Street, Tewksbury, MA.
“We want Market Basket associates back to work and reiterate that they can return without fear of penalty. We again acknowledge and understand how difficult this situation has been for associates. However, we also need to have associates working to support stores, customers and vendors. We need associates to return to work on Monday August 4th. We understand that some associates may choose not to return, consequently we will begin advertising for employment opportunities. Our hope and strong preference is to have Market Basket’s incredible associates return to work. Again, any associate that wants to return will be welcomed and not penalized.”