Lessons from the Demoulas Market Basket Saga

This post is a section from a longer article written by the Business Transition Academy.

 

In New England, USA, a high-profile family business battle over the Demoulas Market Basket grocery store chain has been dominating the headlines. Founded by Greek immigrants in 1916, the company is one of the oldest family-run, private businesses in the US with $4.6 billion in revenue and 71 stores across Massachusetts, Maine, and New Hampshire. A feud for control of the company between the sons and grandsons of the founders has been publically played out since 1971 and recently culminated in the ousting of one grandson (Arthur T. Demoulas), the CEO, by another grandson (Arthur S. Demoulas), the chairman of the board, at the end of July 2014.

 

After a month of the stores essentially being shut down, resulting in millions of lost revenue, there was a resolution on August 27, 2014. The CEO, who was ousted by the board, has been reinstated. The owners of Market Basket have agreed to a deal that will sell the Arthur S. Demoulas stake, or 50.5% of the company, to Arthur T. Demoulas for $1.5 billion. The deal brings closure to a 40-day-long drama that brought a popular grocery store chain to its knees.

 

This very public family feud highlights many of the worst issues that can arise within a multi-generational family business. There are many things that should be considered if you wish to keep a family business running across the generations.  Some are obvious and practical - finanical and property planning, consulting transition planners and other experts.  Yet the bit often missed out until too late is....

 

....Family Peace.


Most owners consider keeping family harmony of utmost importance. You want to be able to enjoy the holidays together and function as a family, regardless of what is occurring with the business. Unexpected tension and discord can occur when a family member in the business becomes the new owner through sale or gift.

 

Here are just a few examples of things to consider.

  • Do you have other immediate family members who are not active in the business?
  • Do those family members derive any economic benefit from the business?
  • Have you made provisions in your estate planning for other heirs to be adequately compensated without splitting up the company?

 

Often owners assume the rest of the family is fine with the owner's chosen family member in the business taking over the ownership. More often than not, this has not been openly discussed. Many owners believe that their other children have their own lives and careers and have no interest in the business. The family may, however, still view this sale or transfer as an economic event and hold resentment towards the sibling(s) who take(s) over. The worst cases involve an owner leaving the business equally to several family members, not all of whom are actively involved in the business, in an attempt to be fair. There is no quicker way to destroy a business than have as co-owners children in the business and those not in the business.

 

In regard to the Demoulas family saga, it appears that the passing of the torch to the second generation (the two sons of the founders) went smoothly from 1954 until the sudden death of one of the brothers in 1971, which basically broke the family into two factions. This begs the question: If proper, ongoing planning had been done, would this current situation, which has played out in the local media, have happened at all?

 

This last sentence makes perfect sense to us, as we can help you with looking the human relationship side of the future - thinking things through, perhaps negotiating or re-positioning something or someone an advance, and handling those tricky interpersonal issues. You might find yourself giving us a call to check what we can do for you in your particular circumstances.

Suffering is our experience of the distance between what we are and who we wish to become
Robert Fripp