Today at our International Convention, I had the honor of presenting a resolution supporting worker ownership and union co-ops, which was passed unanimously. The resolution can be found here on the USW web site.
Market Basket continues to lose up to $10 million per day, according to the Boston Globe, since Arthur T. DeMoulas was fired and the workers went on strike in late June. As loses mount, the pressure on Arthur S. and his side of the family continues to rise.
The Governor of Massachusetts, Deval Patrick, has reported the parties are close to an agreement to sell the other 50.5% of Market Basket to Arthur T. and has asked employees to return to work. Governor Patrick’s call for an end to the strike is premature, as no deal has been announced.
A deal to sell Arthur T. the other 50.5% of the company may not be in the best interests of the strikers either. Such a deal would likely be financed almost entirely by debt incurred by the company, and we have seen all to often how highly leveraged companies struggle to survive. Since a highly leveraged Market Basket would have to pay a substantial amount of money to meet its ongoing debt payments, there will be fewer profits to distribute as bonuses or profit sharing to the employees. With higher debt payments to make, Market Basket will also have less money to invest in growth and to invest in maintaining its current stores. Prices are likely to go up to offset some of the added costs. In other words, many of the reasons Market Basket has been successful – highly motivated employees dedicated to customer service, low prices, and well maintained stores – would be directly affected by a high amount of debt. Arthur T. may end up with his side of the family owning 100% of the company, but also potentially forced to cut back on the programs that made him so well liked by employees.
A better scenario would be to sell Market Basket to its workers. As a privately held company, reliable information on its finances is hard to find. There are 71 stores, with a total of 20,000 to 25,000 employees depending on the source. Annual revenues are reported to be in the range of $3.5 billion to $4 billion a year. The Boston Business Journal cited the sale of Harris Teeter to Kroger last year for $2.4 billion as one potential benchmark for the valuation of Market Basket.
Using those rough numbers, that would mean it would cost each employee an average of $100,000 to buy out the company completely. That may seem unattainable, but keep in mind that workers wouldn’t have to buy 100% of the company right away, just enough to put the CEO they want into place, Arthur T. If each employee were to put $1.00 an hour in deferred raises or wage reductions into buying stock, they would own over $2,000 in additional stock each year. Over several years, even the lowest paid employee could accumulate a significant share.
There are three main benefits to workers buying Market Basket: (1) the tax savings to the current owners by selling to an Employee Stock Ownership Plan (ESOP); (2) the reduction in the amount of debt needed to complete the transaction; and (3) the long term ownership by the employees when Arthur T. eventually decides to retire.
Employee ownership of a grocery store chain is not unusual. According to the National Center for Employee Ownership (NCEO), grocery store chains that are majority owned by employees include: Publix (160,000 employees), Price Chopper (23,000 employees), WinCo Foods (15,000 employees), Brookshire Brothers (5,600 employees, 100% owned), Harp’s Food Stores (4,000 employees, 100% owned), Homeland (3,740 employees, 100% owned), and Piggly Wiggly Carolina (3,000 employees).
Market Basket workers and the extended DeMoulas families have a unique opportunity to turn this difficult time into a positive result. By gradually selling to employees, the family has an opportunity to wind down its feud, the workers get to invest in themselves and their company, the company doesn’t get overburdened with debt, and the customers get to return to grocery stores that offer low prices and excellent customer service.
If such a deal can be reached, the short-term crisis can be resolved, but further steps ought to be taken: (1) employees should form a union; and (2) workers should plan to transition to a more equitable cooperative structure once they achieve majority ownership. As we have to often seen in the past, an ESOP becomes an important tool to save and/or invest in the company, but the ownership of shares doesn’t necessarily create a stronger “ownership” of the business in the sense of accountability and participation.
Why form a union? Market Basket workers have already taken part in an extended collective action and seem to be succeeding without a union, right? Although many workers have been able to find work elsewhere, many appear to not be so lucky. By pooling resources, aka dues, unions are able to provide at least some money and benefits to striking members that need it the most. Unions are also able to hire experts, such as attorneys and financial analysts, to advise and assist members in such difficult situations. Without a union, striking Market Basket workers have none of these resources.
Another reason to have a union, even when employees own the company, is that the collective bargaining process helps to keep management accountable and due process language helps to ensure workers are treated fairly. Having a union helps to ensure that “ownership” will mean more than just the value of a share.
As the situation at Market Basket continues to gain national attention, it has also created a unique opportunity to consider how we want companies to be managed and how we want them to be owned. Too often we have seen the greed of the bottom line overrun the lives of the workers and the needs of the community. Let’s help Market Basket workers continue to make history and support an employee buyout.
“The mass of men lead lives of quiet desperation. What is called resignation is confirmed desperation.” – Henry David Thoreau, Walden
Resignation that we are stuck in a quickening race to the bottom by working harder every day for less pay and fewer benefits, with little job security, all aimed at being “competitive”. Resignation that we get to buy cheap stuff, because that’s all we can afford, by allowing companies to exploit workers and pollute the environment elsewhere in the world. Resignation that billions of us live in poverty. Resignation that the wealthiest 85 people in the world have as much wealth as the poorest 3.5 BILLION people. Resignation that our most of kids will have to take on decades of debt to pay for four years of college, while half of them will end up unemployed or underemployed when they graduate. Resignation that maybe the American Dream is dead.
Perhaps poisoned with cynicism and resignation, there is still hope. Take a minute and imagine. Imagine the world you want to live in, the world you hope for. Did you hope that you can provide your kids with a better life? Hope for “life, liberty, and the pursuit of happiness”? Hope that you will have a job that not only provides a good wage and good benefits, but also is enjoyable and fulfilling? Hope that someday you will be able to retire with dignity and good health? Hope that you will be able buy a nice home in a good neighborhood? Hope that you can send your kids to college? Hope that your kids will have the opportunity and freedom to be who they want to be and to do what they want to do?
Hope is the foundation of the American Dream. A world full of inequity, poverty, disease, prejudice and pollution is not what any of us hope for, it is the world we have resigned ourselves to.
We can own a better future.
How? By not only having the hope that things can be changed for the better, but also the courage to make change happen. There is no silver bullet, no road map, and no guarantees, but certainly we can keep working to make inroads and together begin to shift the momentum towards a better world. One such inroad might be to start reclaiming ownership of some of things that now see beyond our control. A community standing up to a polluter to reclaim ownership of their environment. A neighborhood that others have resigned to be a ghetto, coming together to reclaim ownership of vacant lots in order to plant community gardens. A laid-off worker reclaiming ownership of their livelihood by starting their own business.
Why ownership? Because if it’s your land, you’re not going to pollute it. If it’s your job, you’re not going to give it to the lowest bidder.
Worker owned businesses, including worker owned cooperatives, root jobs and money in their communities. The community, in turn, supports the worker owned businesses. Two important examples of this ecosystem are the Mondragon cooperatives, located in the Basque region of Spain, and the thousands of worker owned cooperatives in the Emilia Romanga region of Italy.
Although unemployment in Spain is currently 26%, the unemployment rate in the Basque region is half of that. Why? Because the worker-owners in the Mondragon cooperatives prioritize their own employment over the maximization of their profits, layoffs and closures are the absolute last resort rather than the first option. Rather than syphon off profits to anonymous global shareholders, worker-owners in the Mondragon cooperatives keep their profits and give 10% to their communities. Because money stays in the community, it supports other jobs in the community as it recirculates from one community-based business to another.
Owning our own jobs, our own livelihoods, gives us the power and ability to work for the kind of world we hope for. As worker-owned cooperatives, we can share the risk of ownership in order to minimize it, without giving up the power of ownership. The power of ownership, the control of our own lives, becomes a power antidote to the poison of resignation and desperation.
To learn more about worker ownership and union co-ops, visit: