After-July Blog

Here are my comments on what happened after July 2014, as news broke.
To follow in sequence, begin at the foot of the page and scroll up.

August 28th: Victory!
Warm congratulations to everyone who held to their principles in this long conflict; mostly Arthur T DeMoulas, but also the Associates who consistently supported him even when laid off. I'm one customer who will be back buying each week at my local MB and looking forward to full shelves and the consistent good value.
Details of what exactly delayed agreement are sketchy, and perhaps that's no bad thing since this is, after all, a private company. Even so, "inquiring minds would like to know." ATD got $500B private-equity funding in the end; was a difficulty in raising that what held things up? What interest rate will he be charged? - that will be important, for he will have to pay that cost out of profits. Did the delay result from an insistence that during the period prior to "closing", ATD must have full authority to run the company? - if so, and since he and all Associates are being reinstated, that's a sweet victory. Since nothing can be final until money is paid, it's not unreasonable that his cousin stays around as well.
The conflict will form a case study in business schools for years to come, so I think it important to see this outcome for what it is, not for what Socialist idealogues might like it to be. It was a case in which profit-sharing Associates - the employees - took an active part in the firm's management by saving it from a wrong and foolish decision. The unique part of this story is that the staff struck not against the boss but in his favor - the "boss" being ATD, whose wise and profitable management had long been proven. The old myth of labor unions that management and labor are destined always to be opposed has been well and truly busted; Karl Marx has been stood on his head. That's it; and it's a very good lesson.
One other news item is notable: prior to the agreement, the ASD Board was contemplating shutting down sixty stores, rather than yield to ATD. That is extraordinary, and irrational. They would have severely damaged their own interests! Personal hatred would presumably have been "satisfied", but not the rational self-interest usually measured in terms of money and respect. Fortunately, the latter is normal and the former, very rare.
Some wrong lessons have already been drawn, and I will name and rebut them.
1. Two State governors have claimed some credit for the settlement, but they deserve none. Quite possibly, an outside arbiter can help in disputes, but all that's needed is that both sides agree to listen; those arbiters need to be skilled in negotiation, but that's all. Governments are skilled only in the use of force, and so are dangerous parasites. This story must NOT form a precedent for having government interfere in the affairs of companies.
2. Similarly, it's already been said that MB is "more than simply a company, but is rather an integral piece of every community it serves." WRONG! Every company, including MB, is always and obviously a member of its community, the same as every individual is such a member; but not in some special sense. Again, the socialists who coined that phrase are trying to draw this free enterprise into the morass of a communized society run by some kind of Politburo. Every company serves society by offering goods and services for sale, at prices individuals find attractive. That's it, and as all Associates know, it's a huge achievement to succeed! There are not, and must never be, two classes of company - ordinary ones and those that are "more than" ordinary. The free enterprise system works and works well, and you Associates have proved that yet again.
August 15th: The Boycott and the Governor
(a) Word is that the BoD has ordered the removal of all notices in MB stores that call for a customer boycott. Don't worry about that; we customers have got the message! The empty shelves tell us all we need to know. So go ahead, comply; MB's owners have the right to decide what shall and shall not appear on their noticeboards.
(b) Another word says MA Gov. Patrick wants you-all to return to work. Once again: government is a dangerous parasite, and should be ignored.
As it happens, this time I think he has it about right; the BoD has agreed to sell the Company, even to ATD if he comes up with the money as below, so you have achieved a huge success already. If it renages on that semi promise, you can always bring Market Basket to a grinding halt again later, and everyone knows that.
But admittedly, it's a tough decision. Right now you're holding ASD's feet to the fire; by prolonging the closure his side of the family has to resolve this so as to restore ATD as CEO, or else rapidly ruin their own property.
August 11th: "Show us the money!"
The strikers' blog reports a statement over the weekend by the BoD that says it is willing to sell MB to Arthur T at the price he "originally proposed." Excellent news!
However, it also indicates that his offer was and is not all of cash. Some now, plus a schedule of payments over time. In effect, he's asking to borrow from those who do not like or trust him. The ASD side is willing to do that, but expects some guarantees. One of them is that while he owes them money, he won't have total control as CEO.
If you or I were selling a car or house in such a way, we'd feel the same. We'd need recourse and control, in case the payments don't arrive.
So I'm wondering why ATD doesn't raise the needed capital from someone other than his cousin's group. Bankers are in that business; even you 25,000 Associates might like to put up some of the money. ATD's outstanding record of good management over many years should assure such lenders that he can repay them as promised.
However, every day this strike persists loses Market Basket two and a half weeks' worth of profit. That means 2014 will see a loss for the year, and already 2015's profits are in peril. That in turn means the Company's value to any buyer - or lender - is falling fast. It's possible it is now entering a death spiral. A fix is urgent!
August 10th: Situation summarized on Blog
More nationwide publicity: my regular Blog for today describes what's happening. A summary that may be useful for showing to friends and neighbors who wonder.
August 9th: MB situation news goes national
This evening PBS' News Hour broadcast a segment about what's going on. Unfortunately (though no surprise) it slanted the report as one of stakeholder control vs. corporate greed, which is exactly wrong, as I showed here. Associates, and customers like me, can tell the owners what we think is the best policy, but ultimately they own the company just as you own your possessions. Communism has been proven conclusively to be a disaster.
PBS did say that another party is negotiating to buy Market Basket, and that may possibly be Hannafords. If they are bidding at arms-length against Arthur T, fair enough; should they win, as I suggested here, they will be well advised to appoint him CEO. However if there is some kind of back-door arrangement being cooked up, especially one being discussed before Arthur T was fired in the first place, that would not be good news.
August 8th: Part timer layoffs begin
The BoD idea is presumably to economize on staff costs while the new hires in the warehouse are brought up to speed. That might take until October. Meanwhile the Company is losing more and more value.
As a quick rule of thumb, value any investment by multiplying its annual profits by 15. That will yield a healthy 6.7% return. So when MB was producing a $200M profit, it was worth around $3 billion. But now, 2014 will almost certainly see a loss - so by that measure it is already worthless! That's very premature and too rough, but the longer this goes on the less will be bid for it.
This is amazing. Normally, people can be expected to act in their own rational self-interests. But here, the Board seems obsessed with hatred of Arthur T, over and above everything else; it will ruin MB rather than re-appoint him, even though it will cost the owners very heavily.
August 7th: Maggie Hassan sticks her nose in
Please, any reader with influence in the NH Governor's office, tell her to stick it somewhere more... suitable for a politician's nose. Her government may favor Arthur T today, but it will gain the power to oppose him tomorrow. Government is never the answer.
August 4th: Warehouse staff firings begin
No-shows mean lost jobs. The warehouse staff are bearing the brunt of this dispute. When Arthur T is back in charge he will surely bust a gut to get them back, but meanwhile there will be new staff in place and expecting to stay there.
I suggested they should return to work, and still do. Associates won a big victory when the BoD agreed to consider selling MB, and if it fails to follow through on that the strike can resume. Meanwhile, bills need paying.
August 3rd: Arthur T offers to run the Company
Brilliant! MB's lifeblood is ebbing away while the owners decide whether to sell it and to whom, and Arthur T offers to apply a temporary tourniquet. The amazing thing is that if this were accepted, it would tend to damage his interests - because the Company's value would increase or stabilize, meaning he might be outbid by others.
Meanwhile if (when!) the offer is ignored, the present owners are shown up as willing to drive MB into the ground, rather than admit they made a mistake in firing him. What a shame.

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