3Qs: Food fight for the family business

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The recent ouster of long­time Market Basket CEO Arthur T. Demoulas by the board of direc­tors, which is con­trolled by his cousin Arthur S. Demoulas, has led to a public battle over the family busi­ness. Thou­sands of employees and cus­tomers have expressed their loy­alty to Arthur T., leading protests, ral­lies, and boy­cotts, while the board has mulled the future of the com­pany, which may include its even­tual sale to one of sev­eral report­edly inter­ested buyers. Here, Ted Clark, exec­u­tive director of the North­eastern Uni­ver­sity Center for Family Busi­ness in the D’Amore-McKim School of Busi­ness, dis­cusses the ongoing battle in the con­text of other family busi­nesses as well as the effect the public rela­tions fight will have on the Market Basket brand.

Ted Clark, executive director of the Northeastern University Center for Family Business, discusses the public battle for control of Market Basket and the lessons other family-run businesses can learn from this situation. Photo above via Thinkstock.

Is the situation unfolding with Market Basket unprecedented for a family business?

Conflict among family members in a family business is not all that uncommon. Given the long and troubled history between the two sides of the Demoulas family, conflict among them seemed inevitable. What is unusual with the Market Basket situation is how the conflict is playing out in public, and how consumer and employee opinions are being used to apply pressure to the board. Arthur T. has done a masterful job developing employee loyalty and public perception of the brand of Market Basket over the years. While typical family businesses prefer to fight in private, this public battle and use of the court of public opinion is unprecedented for a private company.

Will Market Basket’s brand be damaged in the long term as a result of this public dispute?

In some ways I believe the conflict between the two Arthurs has improved the brand reputation of Market Basket. Given the tremendous media attention and the outpouring of positive sentiment from customers and employees through this conflict, the Market Basket brand has been elevated to an almost mythical level. Should ousted leader Arthur T. prevail, I believe that their customers will return and a legion of non-customers will follow to see what Market Basket is all about, which could prove to be a very positive public relations coup for the company. Financially, however, there is probably little upside for anyone except perhaps for Market Basket competitors. If Arthur T. wins and he buys the company back, there may be significant debt incurred and this debt could negatively impact prices, wages, and future expansion plans.

In a recent interview, you noted of family businesses that "when they are run well, no one can beat them." What are some hallmarks of a successful family business and what lessons can other family businesses take from observing what's played out with Market Basket?

When a family business runs well, it can achieve significant advantages over a public corporation, and some of these advantages are clearly on display at Market Basket. For example, having a long-term management team and family member figurehead running the company provides that “family” atmosphere that a corporation can’t create. Employees become loyal long-term partners who feel that they have a stake in the success of the business. Additionally, a family-controlled business can take a long-term investment strategy and take advantage of opportunities that shareholders may not permit from a traditional corporation. Other family businesses can look at the masterful job Arthur T. has done gaining public support and employee loyalty. Although his side of the family owns and controls a minority share of the company, he is able to generate significant levels of power based on the court of public opinion. Another lesson to be learned here is to manage the perception of the owners and the board. Although Arthur T. had done well for many years and maintained control of the shareholders and the board, for some reason he seems to have lost that influence and trust with them and ultimately the control of the business.

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