Market Basket Drama Has Wall Street Quaking In Its Boots - Opinion

In recent weeks everyone has been treated to a live drama of magnificent proportions. It might even be called the “Capitalist Play of the Century.”

The great Market Basket dilemma has been “covered” by virtually all of the public media, making it a national show originating here in the Bay State. But the media—large and small— failed to grasp the underlying story; there has been no attempt to reveal what this powerful drama illustrates.

Media coverage so far is like viewing a Shakespearean play and failing to find any meaning in it. But Market Basket is similar to an 8.0 earthquake striking at the foundations of Wall Street. It is shaking the greedy practitioners of crony capitalism.

Everyone has been privy to an astounding show of employee support for a chief operating officer, with employees on every level revolting when Arthur T. Demoulas was fired as CEO; but then an even more amazing thing happened: customers joined in the non-union boycott. Incredible!

Artie T. was fired when, after years of acrimonious board meetings, at least one senior stockholder shifted support from Arthur T. Demoulas to his cousin, Arthur S. Demoulas. It was no secret for decades that Arthur T. Demoulas and Arthur S. Demoulas could barely stand to be in the same room together, yet the earth-shaking question is not such personal antipathy, but the business approach of the two closely related men.

The fact that this important phenomenon—revealing true differences in how capitalism can operate in a democracy—actually involved family members whose names are divided by middle initials is truly Shakespearean.

Yet this is also a purely American drama. It is a clash of concepts that should have national ramifications. What is unexpectedly revealed is shockingly simple; hidden in plain sight was a company that for decades followed the most humanistic of capitalist concepts and in the process made its owners wealthy while workers prospered and customers realized this company offered quality at honest prices. Not surprisingly, Market Basket also influenced price levels in competitors’ outlets.

Clearly thousands of people who worked for, or shopped, at the Demoulas Market Basket stores understood this, or at least perceived that this supermarket chain was far different from others.

From a distance, it’s not possible to determine whether Arthur T. Demoulas was a congenial CEO at board meetings; he probably wasn’t, given that his cousin has opposed him so strongly for so long. But it is possible to assess his work.

He kept his family wealthy while building a supermarket chain that both employees and customers found extraordinary. Stories abound of Artie T. giving bonuses and maintaining salary levels that made the management of other supermarket chains cringe, while simultaneously keeping prices low.

Artie T. also attended funerals and usually left a financial “remembrance” as well as attending happier events and acting similarly. He knew his people by name and understood where problems existed and where operations were running smoothly.

It is not surprising to learn that long-term employees are among the thousands of workers who have stepped away from their various jobs at Market Basket’s 71 stores in Massachusetts and New Hampshire. Some workers, on all levels, have been with the company for decades and many have younger family members following them.

What other modern companies, of any nature, can makes such claims?

Currently, Americans live in a world of Wall Street cynicism, where everyone is expected to believe low wages and constricted benefits are the norm and prices are fixed at what the market will bear. Americans have long been told, repeatedly, that it is all about stockholder value. The stockholders must see an ever-increasing rate of return on their investment or the company is not considered competent or worthwhile, which opens the rightly feared door leading to rapacious mergers and acquisitions.

Corporate philosophy is currently rooted in the concepts of economist Milton Friedman, who asserted the primary obligation of business is to maximize profit, while operating in “an open and free competition without deception or fraud.” His second postulation was that corporate executives are obligated to move in accord with the desires and wishes of stockholders, again while obeying the law and “ethical customs of society.”

The problem with Friedman’s dictum is that Wall Street and the corporate world heard only what it wanted to hear. In the decades since Friedman became famous for his postulations, the details regarding adherence to the law and upright refusal to be involved in fraud or deception were often found burdensome and were discarded. Think of the mortgage crisis and the creation of phony credit instruments, et cetera, et cetera.

What emerged is corporate cronyism, where the excuse given the public for low wages, bare-bones benefits and near price-gouging is necessary because stockholder benefit is the only purpose of the corporation. The great irony, of course, is that before Mr. Friedman’s constructs corporations were meant to serve their markets well in order to maintain the legal protection afforded by the statutes creating corporate structures, and stockholders in general reaped stronger benefits in the process.

But even as stockholders are now held up as the end-all, it is the CEOs and the corporate boards that reap the great profits. That was not the case in Market Basket. And that is likely the root of the current crisis.

Stripping the issue bare, what emerges is remarkable, even astounding. Arthur T. Demoulas ran a major corporation in the incredibly competitive food industry while building such loyalty that employees on every level, from senior and middle managers to truckers, loaders and baggers have walked out and held firm. And perhaps most revolutionary of all is how the customers have rallied around the employees and called for Artie T’s. return.

This is the 8.0 earthquake that is shaking Wall Street and corporate America.

The great fear is that Americans will realize that using stockholders as a foil for every corporate ill and a cover for corporate greed is simply a mask for the ugliest, greediest form of capitalism.

At this point there is no way of knowing exactly how Arthur S. Demoulas would run the family business, but a solid indicator is the fact he quickly put in place a pair of CEOs and made it clear he is not going to run the company hands-on.

It’s not surprising that the employees and the customers suspect that under Arthur S. the Market Basket stores will become just another corporate supermarket, where worker salaries are lowered and pricing will push consumers as far as possible for what is, after all, an absolute necessity: food.

Anyone who doubts this should talk to people who recently shopped for food in areas where Market Basket is no longer a presence. Ask them what they paid for food today as compared to what they paid in competing supermarkets when Market Basket was fully operational?

Prices have gone up remarkably among other supermarkets.

Arthur T. Demoulas clearly seems to have been cut from a different cloth than his cousin and his cousin’s supporters. Arthur T. kept his relatives well off, but apparently he didn’t make them wealthy enough.

What should be perceived and discussed nationally is why Americans should tolerate the “stockholders are all that matter” corporate philosophy. Why shouldn’t more corporations follow the philosophy and, yes, even the style of Arthur T. Demoulas? There is no good reason, save the advantages already discussed.

It wasn’t always this way. Corporations operated differently before Milton Friedman’s concepts were absorbed and turned to the benefit of Wall Street. That is why Wall Street, et al, is trembling, hoping against hope that the Market Basket disaster will be resolved in favor of Artie S. Demoulas and then fade from public view.

If the news media was doing its job, that difference in capitalist approach between Arthur T. and Arthur S. would be what everyone is talking about, creating an 8.0 earthquake amid the halls of power. Instead the media focuses on the surface only; think about the constant coverage of the picketers and the recent uproar over the black trucker who jumped from his truck to confront the picketers.

But perhaps, by default, the nation will ultimately be talking about the difference in corporate operating philosophies.

If the Market Basket board of directors moves to let Artie T. Demoulas buy the controlling shares, his style of capitalism will return. If that happens, Market Basket will no longer be a local company operating very differently yet under the radar; it will be a well-publicized example of a different form of capitalism in operation, setting an example that is the very opposite of Mr. Friedman’s corporate offspring. If the company is sold to another firm, or remains with Artie S., the story may be more to Wall Street’s liking, and relief.            


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