Saturday, August 9, 2014

Making Sense of Market Basket: Stakeholder Capitalism

Paul Solman

Until last night's Paul Solman's PBS piece on the Market Basket brouhaha, Mad Dog was mystified by the "family feud" story of Market Basket.

What Solman showed was this not so much a family feud but a struggle between good and greed, between the capitalist system and a new idea of what the American capitalist system can be.

At the heart of this is the $500 million which Market Basket had accrued in profit. One cousin, Arthur S, saw that hunk of cash and said, "Give it to me," and the other cousin, Arthur T, said, "No, that money does not belong to you, or to the members of the board of director or even to the stockholders, but it should be plowed back into making improvements in the company, and ultimately, to rewarding our employees and customers."

The trouble with the  "Wall Street" version of American capitalism is the boards of directors, who are actually in place in the boardrooms can rape the companies they have been given to govern, and they can award themselves huge bonuses and stock options worth millions while the hundreds of thousands of stockholders, who are spread out from Tewsbury to Omaha to Los Angeles cannot see any of these pillagers at work. All the stockholders know is whether the stock price has gone up or down, and possibly, whether or not a dividend got paid out. As long as the stock price maintains or rises, the distant, ignorant stockholders don't care whether they sell rat meat at Market Basket.

But the Market Basket employees had a different idea of the raison d'etre for the corporation:  The company existed once to serve the customers first, the employees second and the stockholders last.  This is what Solman calls, "Stake holder" as opposed to "Stock holder" capitalism.  

And the Arthur T cousin was the consummate practitioner of "stake holder" capitalism, paying $12 minimum wage, plowing back profits into employee bonuses, and generally treating his employees like members of a beloved family. Apparently, he loved the family he chose (his employees) more than the family foisted upon him by the accident of birth (Arthur S.)

So, it turns out this is not a family feud, after all. There is a right side and wrong side here. This is Main Street vs Wall Street, benevolence for the many vs greed of the few.

Long live Arthur T.  
Power to the workers.
God Bless the customers.
Let Freedom Ring. 


  1. Mad Dog,
    Still no resolution and you think this is only a battle between two competing business models? Oh no, Art S. is bringing the company to the brink of disaster because the thought of Art T triumphing is so distasteful he probably still cannot put the pen to the paper. No, this is an example of the passionate bitterness present in a family feud, if it were just business it would have already been wrapped up..Hopefully we'll hear tonight that Arthur T. is back at the helm and all those loyal employees can return to work knowing they, on their own, brought a billion dollar company to it's knees..if the outcome is what we hope, it will send a message to employees and boardrooms alike-employees can be more than just pawns, they can be the most powerful component, if they play their cards right and remain unified...

  2. Maud,

    My grandfather would have loved you. (He was a loyal member of the ILGWU and fought goons and police and all the silk hat robber barons of his time.)
    You would have been right there in the front line, throwing punches.
    My first reaction to MB was, "Hey, you don't get to choose your boss."
    But you actually have hit closer to the real truth. For Arthur S, this is all about him. He can walk away with Market Basket in ruins, and it's just another day at the office, and he can cruise off on his yacht. For the employees, it's their livelihood.
    Some great version of capitalism we are running here...
    Mad Dog