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Editorial: Loyalty and Profits at Market Basket

Pity the beleaguered American worker, who in recent years has seen wages stagnate and benefits cut and has learned that job security is sometimes built on beach sand. Meanwhile, back in the cabanas, happy days are here again: Forbes calculated last year that the average CEO earned 273 times what his average employee made, a figure wildly higher than 1965, when the multiple was 20. Corporate earnings are high, and surf’s up in the stock market.

So why would retail workers rally around a deposed CEO? Not only rally, but put their jobs on the line?

Consider the story of Market Basket, the New England company whose travails seem clipped from a Frank Capra movie (progressive American idealism embodied by Jimmy Stewart). When longtime CEO Arthur T. Demoulas was forced out this summer after a prolonged family battle over control of the company, and its profits, eight senior managers protested and were fired.

The power play could have ended there, but ordinary workers came to the defense of Demoulas and the managers, and many walked off their jobs in the non-unionized company. As many as 6,000 attended one raucous rally, pledging loyalty to the CEO as if he were a rock star. Shoppers have also joined in, and warehouse operations are in such disarray that some store shelves are bare. The current CEOs issued a warning to workers that they must return to work on Monday or be replaced. State attorneys general from Massachusetts and New Hampshire warned the executives Thursday to mind the law if they take action.

The details of how Demoulas ran Market Basket are eye-opening. The company, known for low prices, paid workers better than the industry standard, with experienced cashiers making more than $40,000. It also made generous retirement contributions and awarded regular bonuses. Demoulas was said to operate like an old-time Massachusetts pol — he shook hands with workers, bothered to learn their names and remembered the state of their families’ health.

How could a low-price store in a low-margin industry avoid squeezing labor costs? According to a published interview with Kevin Griffin, who runs a food industry trade publication, Market Basket eschewed debt, and ran its headquarters with far fewer managers and buyers than chains of similar size. That worked because the buyers knew their business after staying with the company for decades. Company-wide, the lack of turnover also reduced recruiting and training costs in the 71-store chain, which has 29 markets in New Hampshire, including one in Claremont.

The attachment to “Arthur T.” is almost unprecedented in these times. “He’s like George Bailey,’’ a company district manager told The Washington Post, referring to the hero of It’s a Wonderful Life. “He cares more about people than he does about money.” Note that it’s been reported that the company made $500 million in the last decade, so Demoulas perhaps found a way to serve both man and Mammon.

It’s speculated that Demoulas’ extended family, which now controls Market Basket, wants to extract more profits, although they say they will continue to treat the 25,000 employees well. Arthur T. Demoulas hopes to buy back control, and other bidders are in the picture.

How this will turn out is anybody’s guess, but Market Basket’s culture stands in sharp contrast to the trend in some corporations: a race to the bottom in which employees work part-time and must collect government aid to get by — the social contract that held that labor should share in the fruits of a company’s success unilaterally broken.

But the Market Basket saga is one case, at least, of loyalty rewarded. The public outcry over Demoulas’ ouster may even hint at a sea change.