Market Basket CEO Ousted, Slammed As a ‘Dictator’ by Board | Invesloan.com

The CEO of the family-owned New England grocery chain Market Basket has been fired by the supermarket’s board of directors following a long-running power struggle and a recent probe into allegations that he was secretly planning a work stoppage.

Arthur T. Demoulas, who served as the president and CEO of Market Basket, was slammed as a “dictator” by the board in a 35-page complaint filed on Tuesday in the Delaware Court of Chancery in connection to his removal from the company.

“Mr. Demoulas forced the Board to choose between accepting his autocratic control of Market Basket or terminating him in order to protect a vibrant and growing business that cannot flourish over the long-term under the leadership of a dictator,” the court papers read.

Market Basket’s board voted unanimously on Tuesday to remove Demoulas as president and CEO after a failed mediation, the board’s chair, Jay Hachigian, said in a statement to Business Insider on Wednesday.

“Despite extensive efforts by the Board and Mr. Demoulas to come to terms, the mediation was not successful,” Hachigian said.

The board met with Demoulas last week in a confidential mediation in Delaware, and both sides agreed not to comment publicly during that time, said the board chair.

“We assure our valued associates and customers that, as we have demonstrated over the past several months, Market Basket will not change its operations, profit-sharing, bonuses or culture, and will continue to offer the best groceries at the lowest prices anywhere in New England—well into the future,” Hachigian said.

Demoulas “contests” his termination, the board’s Delaware complaint says. A spokesperson for Demoulas did not immediately respond to a request for comment by Business Insider on Wednesday.

Market Basket’s board placed Demoulas and two other executives on administrative leave back in May over allegations that Demoulas had started planning a work stoppage intended to disrupt the company’s business and operations.

“If the Board were to take disciplinary action against him for refusing to comply with its directives, he would instigate through his closest lieutenants a disruptive employee work stoppage and customer boycott, attempting to repeat what occurred in 2014 during a dispute between him and his cousin, Arthur S. Demoulas, over Mr. Demoulas’s termination at that time for insubordination,” the board’s complaint says.

Those two other employees whom the board has referred to as Demoulas’ “lieutenants” — Market Basket’s former director of operations, Joseph Schmidt, and the chain’s former store and grocery director, Tom Gordon — were fired in July.

Schmidt and Gordon were barred from the company’s 90 stores last month after a judge approved a temporary restraining order.

In the complaint filed on Tuesday, attorneys for Market Basket’s board wrote that 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.”

The court papers said that even though Demoulas is a minority stockholder, owning 28.4% of the company, he has for years “acted as if he were the sole owner of the Company and rejected any form of even the most basic oversight by the Board.”

Demoulas, the board said, wouldn’t provide it with basic information about the company or comply with its directives.

The board called Demoulas’ resistance to oversight and his attacks on the board “the last straw.”

“Mr. Demoulas’s conduct has been at all relevant times contrary to the best interests of Market Basket and all its constituents, and is directed only at preserving his own power,” the complaint says. “That is not how the leader—the President and CEO—of an iconic company like Market Basket is supposed to or required to act.”

The Demoulas family founded the grocery store in 1917, and it has been engulfed in family disputes and public power struggles for decades.

In 2014, Demoulas was fired from his CEO role following a family dispute.

The firing sparked a widespread workers’ protest, and Demoulas was reinstated after he bought the rival family faction’s $1.5 billion majority stake in the company.

The Market Basket board’s Delaware complaint says that Demoulas at one point “openly dared” the board of directors to fire him, “rather than submit to meaningful Board oversight, apparently banking on an employee walkout and customer boycott—like the one that followed his temporary ouster in 2014.”

That work stoppage cost the company hundreds of millions of dollars, the court papers say.

The complaint says that Demoulas’ sisters collectively own 61.3% of the company, with 10.3% held in a trust for the fourteen children of the four Demoulas siblings.

Market Basket’s board is seeking a court declaration that Demoulas was validly terminated.