What can we learn from the Demoulas debacle?

Business Leader Post, August 13, 2014

Thomas D. Davidow, Ed.D.

The Arthur S. family has a right to feel betrayed by Arthur T.’s family.  According to "The History of Market Basket" on the company's own website, (http://www.mydemoulas.net/history/) their respective fathers, George and Telemachus ("Mike") Demoulas had promised each other that they would provide for one another's families if either of them died. George (father) died in 1971. A lawsuit filed in 1990 by the heirs of George Demoulas (including Arthur S.) claimed that Mike had defrauded them out of all but 8% of company stock by moving assets into shell companies, such as ‘Market Basket Inc.’ and ‘Seabrook Sales Inc.’ and claiming that these were separate companies from Demoulas itself.  

There is no question that the jury ruled correctly and fairly in that lawsuit. Judge Lopez’s ruling that Mike's family had to return the stock and lose their status as majority shareholders was also just. Mike had broken the law.

We don’t know what Mike was thinking, and/or why he felt justified (after having promised otherwise) in excluding his brother’s family from the increased equity/value that he would bring to the business after his brother passed away.  But we can guess:  Frequently, when two siblings share the responsibility for ownership and management in the family business, one sibling plays the dominant role, which creates problems. There may also be other issues between and among the siblings which create conflict and resentment.

We can also play Devil's Advocate: Even when siblings get along, and one sibling passes away, while everybody would agree that being supportive and emotionally available is the right thing to do, we might not all agree that the surviving sibling should have the financial responsibility for the family of his deceased sibling.  While it is  reasonable for the deceased sibling’s family to be entitled to the inheritance and value of the existing wealth, should those heirs have the right to share in the increased wealth of the surviving siblings as some kind of "tag along?" From the perspective of family alone, Michael might have been selfish, but he was not wrong.

The reality is that it is impossible to fully separate family reality from business (the law) reality. Presently, the pundits and the professionals all have skill sets that discuss and address business solutions. The problem is that you can't use legal means to solve family dynamics. For that, you need the presence of a skill set that can understand and address the family dynamic.  Given that the business and the family are symbiotic, i.e. the business is connected to the family, and the family is connected to the business, what is needed is an interdisciplinary approach that includes professionals with expertise in law/ business as well as a professional with an expertise in family dynamics.