The Market Basket board voted unanimously late Tuesday night to remove Arthur T. Demoulas as president and CEO of the beloved New England supermarket chain that has been caught up in a yearslong family feud over its ownership.
The move comes after failed mediation to resolve differences between the two parties.
In May, the board placed Demoulas and five other employees on paid leave while it launched an investigation into what it called “credible allegations” that Demoulas planned to disrupt Market Basket’s business operations with a work stoppage. The board’s executive committee alleged the stoppage plan was “improper retaliation” for directives the board had given Demoulas last year.
The situation was complicated by the fact that two of the employees put on leave were Demoulas’ daughter and son. At the time, a spokesperson for Demoulas said his three sisters and their three appointed board members were responsible for placing Demoulas on leave. Demoulas owns 28% of the company, while his sisters own 60%. The remainder is in a family trust.
An investigation was conducted by the law firm Quinn Emanuel, and a confidential mediation was held Sept. 3 and continued on Sept. 9, according to the board.
“Despite extensive efforts by the Board and Mr. Demoulas to come to terms, the mediation was not successful,” Board Chair Jay K. Hachigian said in a statement Wednesday.
Justine Griffin, a spokesperson for Demoulas, said the ex-CEO is “deeply disappointed” that mediation didn’t work despite his efforts to reach a resolution.
“Over time, it became clear to us that this was not a good faith effort by the board or his sisters to reach agreement on the issues created by their abrupt actions placing Arthur T. Demoulas, his family and members of his senior management team on leave,” Griffin said. “It is now crystal clear that they had no intention of reinstating Mr. Demoulas.”
Market Basket was started by the Demoulas family in 1917. It now boasts 90 stores across New England, which generate nearly $8 billion in revenue annually. The grocery store chain, which has over 30,000 employees, has been embroiled in a long-standing family saga as different relatives have fought for control over the company.
Demoulas was previously ousted as CEO in 2014, which led to massive protests by employees. Eventually, Demoulas bought out his cousin and was restored as the company’s leader.
As part of the latest scuffle, the board also filed action in the Delaware Court of Chancery. In the complaint, the three board members allege Demoulas “had a long-standing history of exercising his own unfettered discretion as to virtually every important decision at the Company — while ignoring and stonewalling the Market Basket Board.”
According to the complaint, previous board members had given in to Demoulas’ “bullying tactics” or willingly did his bidding, but the current board members sought to “put their foot down” and carry out their fiduciary responsibilities of overseeing the company’s operations.
That did not sit well with Demoulas, the complaint alleges. Board members alleged that Demoulas has said “[t]here’s only one boss in the company. There’s not two. There’s not three. There’s not five.”
The complaint further claimed that Demoulas rejected basic oversight, refused to provide information about the company and its plans, and did not follow board directives, as required by law. The board said Demoulas never gave them an annual budget, didn’t give them advance notice or seek guidance on significant capital expenditures, refused to allow them to meet with senior staff except the chief financial officer and prohibited them from entering Market Basket headquarters in Tewksbury. The board said it would meet in a local hotel instead.
Board members also alleged that Demoulas insisted that he — not the board — would select his successor, and also insisted that he would install his children into top positions when he left the company — despite the board’s views and efforts to engage in succession planning.
The board contends it has tried to get Demoulas to cooperate for years, but he instead began “plotting with his closest lieutenants to sabotage” the company and gain leverage over the board — leading to his suspension and eventual firing.
“No company, no matter how successful, can tolerate this type of behavior from a corporate officer,” board members wrote in the complaint.
The board is asking the Delaware court to declare its actions “valid and effective” as Demoulas contests the termination.
Griffin, Demoulas’ spokesperson, called the board’s actions dating back to the forced leave in May “a farcical cover up for a coup.” She said Demoulas was fired in a 10:30 p.m. board meeting last night without being given an opportunity to be heard, “in violation of the company bylaws.”
“The so-called investigation was designed from the start to falsely tarnish the reputation of Mr. Demoulas and his leadership team,” Griffin said.
In her statement, Griffin alleges that the board members and Demoulas’ sisters removed senior leadership at the company and all independent board members “in clear violation of their fiduciary duty.”
“They took a company that was operating at peak performance and recklessly threw it into turmoil and did so in a needlessly public manner and on baseless grounds fabricated from the start,” Griffin said.
She added that Demoulas’s “passion for the company and his care for the associates remains unchanged.”
The board has not indicated any plans to name a new or interim president and CEO in the meantime. But Hachigian, the board chair, said employees and customers can be assured that “Market Basket will not change its operations, profit-sharing, bonuses or culture,” and will continue to offer low-priced groceries.
This article was originally published on WBUR.org.
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