BOSTON — Arthur T. Demoulas remains CEO of the highly successful Market Basket grocery store chain, but there are storm clouds on the horizon for the popular executive, according to a source who was briefed on the outcome of a board meeting held Thursday at the Prudential Tower.
While there was no vote to remove Demoulas, the board did vote to distribute $250 million in company operating funds to shareholders, a move he opposed, and to hire an executive search firm.
The board has met at least four times recently — on July 18, July 25, Aug. 8, and Aug. 22 — with another meeting tentatively scheduled for Sept. 19, and appears to be determined to shake-up the leadership of the organization, the source said.
The location of Thursday's meeting was changed at the last minute to the offices of a Boston law firm located in the landmark skyscraper, as employees sympathetic to the incumbent CEO began to gather at the Harvard Club on Commonwealth Ave., where the meeting was expected to take place.
Market Basket employees turned out by the hundreds at the July 18 meeting in North Andover, some keeping vigil until late evening, in support of the executive who had enjoyed a controlling majority on the board until recently. He has been at odds with his cousin, Arthur S. Demoulas, over the control and direction of the company for decades.
The Arthur S. Demoulas faction recently gained a majority on the board and set into motion a series of actions that have troubled the company's 22,000 employees working at its 71 stores in Massachusetts and New Hampshire.
They are concerned that plans to pay millions more in dividends to a handful of shareholders, all of whom are wealthy Demoulas family members, will derail the company's success, impede its growth, drain their profit-sharing plan and demoralize an effective workforce.
In a lawsuit filed on June 26 to force a board meeting, attorneys for the Arthur S. Demoulas faction maintained that the CEO's tenure was "littered with related-party transactions between Market Basket and entities owned by Arthur T . or his family members, and by a remarkable unwillingness to defer to the board."
According to the source, the board also voted on Thursday to explore establishing a line of credit, which further concerns employees who have spoken proudly of the fact that the company carries no debt.
"It's interesting that this new board is meeting so frequently and making such drastic decisions on a lot of these issues," the source said.
A memo from two directors aligned with Arthur T. Demoulas — Terry Carleton and Bill Shea — suggests that the directors who support Arthur S. Demoulas believe the employees are misguided, according to the Lowell Sun, which published excepts from the memo on Wednesday.
"It has frankly been stunning to us," Carleton and Shea said in the letter, "that not once has anyone stopped to ask, 'What if these really are the feelings of our people?'"
"We think it is absolutely reckless to just assume it is all inauthentic, orchestrated, bought and paid for and then all our votes contend with that assumption," they added. "It appears clear that the majority of the board has no interest in these people's opinions and concerns other than to try and hang them on Arthur T. as one of the reasons that is going to be used to justify firing him."