Tuesday Reads: Two Business Models and Their Effects on Workers, Customers, and Corporate Profits

Good Morning!!

I love this painting by American impressionist Frederick Childe Hassam. Just looking at it relaxes me. The colors are gorgeous and somehow surprising. I wouldn’t normally expect orange to have a calming effect, but it does for me in this work. It’s interesting that Childe Hassam used the color orange quite a bit in his paintings. The subject of this painting is a startling contrast to what’s happening in the world right now, and that’s why I decided to use it and others by Childe Hassam today as a reminder that there is still beauty in the world despite the ugliness of world events.

I’m going to focus on a local Massachusetts story today, and I hope you’ll share your thoughts on it; but please feel free to discuss any topics you wish in the comment thread. I’m going to be focusing on working people and working conditions, so I’m going to begin with this great piece by Robert Reich at Truthdig, The Disconnect Between Workers’ Pay and Social Worth.

What someone is paid has little or no relationship to what their work is worth to society.

Does anyone seriously believe hedge-fund mogul Steven A. Cohen is worth the $2.3 billion he raked in last year, despite being slapped with a $1.8 billion fine after his firm pleaded guilty to insider trading?

On the other hand, what’s the worth to society of social workers who put in long and difficult hours dealing with patients suffering from mental illness or substance abuse? Probably higher than their average pay of $18.14 an hour, which translates into less than $38,000 a year….

Or consider kindergarten teachers, who make an average of $53,590 a year.

Before you conclude that’s generous, consider that a good kindergarten teacher is worth his or her weight in gold, almost.

One study found that children with outstanding kindergarten teachers are more likely to go to college and less likely to become single parents than a random set of children similar to them in every way other than being assigned a superb teacher.

And what of writers, actors, painters, and poets? Only a tiny fraction ever become rich and famous. Most barely make enough to live on (many don’t, and are forced to take paying jobs to pursue their art). But society is surely all the richer for their efforts.

At the other extreme are hedge-fund and private-equity managers, investment bankers, corporate lawyers, management consultants, high-frequency traders, and top Washington lobbyists.

They’re getting paid vast sums for their labors. Yet it seems doubtful that society is really that much better off because of what they do.

Read the rest at the link. Robert Reich is a treasure, isn’t he? He never gives up.

Childe Hassam, French Tea Garden

Now to the local story, which I see as related. I have posted links recently in morning posts and comments about a work stoppage that has been going on here in Massachusetts and that has implications for retail and other low-wage workers around the country. I posted this article from Esquire last week, but I’m going to link to it again: The Last Stand for the Middle Class is Taking Place in a Parking Lot in Massachusetts, by Chris Farone.

Americans have grown to accept that corporations will invariably take advantage of their low wage workers, and executives have done nothing recently to pretend like this isn’t the case. When asked if his multinational beast would fight a federal hike in employee compensation, Walmart U.S. President Bill Simon told reporters in May, “We are not opposed to a minimum wage increase, unless it’s directed exclusively at us.” Compassionate stuff.

It’s a dangerously low bar set by the nation’s largest retailer — don’t expect your bosses to support an acceptable living wage for workers, let alone bonuses or a 401k, or even respect.

But at one of the most popular grocery store chains in New England–Market Basket–there is a struggle going on that could be turning point similar to the fight by fast food workers for better pay and benefits. Farone writes:

Here’s the most unusual part: Protesting employees are demanding the return of their beloved CEO, ousted by a board focused solely on the bottom line. After store workers were fired for skipping shifts to rally outside Market Basket headquarters last week, their then-chief executive, Arthur T. Demoulas, said in a statement, “This is not about me. It is about the people who have proven their dedication over many years and should not have lost their jobs because of it.”

Demoulas was ousted by his cousin Arthur S. Demoulas, who had managed to take over control of the company’s board of directors and whom workers suspect want to take the company in a different (anti-worker) direction. The reason Arthur T. is beloved is that he paid his workers a living wage, provided them with outstanding benefits, all the while attracting customers with quality local produce and low prices–underselling every other grocery chain in New England, including Walmart–all this while making handsome profits.

Market Basket’s formula proves that executives and managers and cashiers can all profit, together. Employees get the benefits of a 15 percent profit sharing plan provided by Market Basket, while the groceries the store sells are less expensive, on average, than Walmart’s. As for the register: Market Basket rang in $4.6 billion in revenue last year, and is the 127th biggest privately owned company in America.

And it proves that none of this matters in the American economy if those at the top aren’t getting more than enough. Executive pay is the only beast America’s brand of the free market is designed to feed in 2014. CEOs made 331 times what an average worker made in 2013, and it’s clear that there will be no exceptions.

The American economy no longer exists to support a thriving middle class, or to help the weakest among us attain a livable wage for an honest day’s work. It is solely in existence to add to the pile of wealth for the unchecked at the top.

Childe Hassam, Church at Old Lyme (Connecticul)

You can see how the Market Basket formula threatens other corporate bosses. Because it’s successful.

As it turns out, the Market Basket formula does work. In a recent study of Massachusetts grocery store chains, the nonprofit Washington DC-based Center for the Study of Services found “DeMoulas Market Basket’s prices averaged about 22 percent lower than the average prices at the Shaw’s stores [they] checked and 10 to 21 percent lower than the prices at the Stop & Shop stores.” Despite paying starting full-timers $12 an hour and having many career employees on the payroll who make six figures, the survey found that Market Basket had, on average, lower prices than all of their competitors — including Walmart.

Despite such presumably tight profit margins, Market Basket pays its roughly 19,000 workers yearly bonuses that often equal up to several months worth of salary, plus invests the equivalent of 15 percent of every paycheck into a retirement plan. At the same time, the company is impressively profitable. Shareholders have pocketed in excess of $1 billion since 2000, while the business is currently the 127th biggest privately owned American company according to Forbes. In 2013, Market Basket reportedly rang in $4.6 billion in revenue.

Demoulas workers began protesting in store parking lots, store shelves are empty because the workers who deliver goods and stock the shelves aren’t doing so, and loyal customers are refusing to shop at Market Basket until Arthur T. is back in charge. And please note these are non-union workers.

Last week, Arthur T. offered to buy out Arthur S’s share in the company. That offer is still on the table. But over the weekend, the board announced that workers who had been protesting would be fired if they didn’t come to work yesterday. They also announced a job fair to attract replacement workers. The protesting workers announced they would continue to protest. So how did the job fair work out?

From the Boston Globe: Few Show Up for Market Basket Job Fair as Protests Enter Third Week.

Day one of Market Basket’s job fair did not seem to turn out many current employees looking to change positions within the company. Dozens of protesters marched back and forth across the entrance to the company’s Andover facility, continuing the remarkable worker and customer protest into its third week. At one point a shuttle bus brought in fresh protesters, who took a shift on the picket line as grateful protesters handed off signs and pictures to them.

Few vehicles took the left turn into the facility’s parking lot. Those that did were met with leers and jeers from the crowd, which quickly followed police orders whenever a car did come through.

“I don’t think anyone will show up,” said Mike, a North Andover Market basket employee who declined to give his last name for fear of retribution from the company. “Most of us believe this is a scare tactic to get us back to work.”

Childe Hassam, Acorn Street, Boston

After the failure of the job fair, executives announced that people could apply for Market Basket jobs secretly by e-mail.

AP, via ABC News: Market Basket Workers Plan Huge Rally for Ex-CEO.

Employees who have organized massive protests over the past two weeks say they are expecting up to 15,000 employees, customers and supporters to attend a rally Tuesday outside a Market Basket store in Tewksbury.

The family-owned chain has been in turmoil since June, when a board controlled by Arthur S. Demoulas fired his cousin, CEO Arthur T. Demoulas.

Hundreds of warehouse workers and drivers who support Arthur T. Demoulas have refused to deliver food to the chain’s 71 stores, leaving store shelves severely depleted and prompting customers to defect to other supermarkets.

Workers are hoping Arthur S. Demoulas’ side of the family will accept an offer from his cousin to buy the company, which is known for its low prices.

As for the firings that took place yesterday, Mass, NH Attorneys General warn Market Basket.

The Attorneys General in both New Hampshire and Massachusetts have sent the Market Basket CEOs a warning saying if anyone is fired they better get the wages they are owed.

“Even though they may have the right to terminate employees we want to make sure the company knows that for payment, wages, for benefits may have accrued over a time period, those are due on the day of termination,” said Attorney General Martha Coakley.

And there will be lawsuits, Fired Market Basket Supervisors Plan To Sue. So, to sum up, the board of directors of Market Basket seems willing to bring down the company to support one side of a family dispute over contrasting business models–on the one hand, a focus on the bottom line and making profits for the fat cats; on the other, a focus on sharing profits with workers, making customers happy,  and in the process making plenty of money for all concerned. Who will win? I don’t know, but, IMHO, this is an important struggle.

What do you think?

Childe Hassam, Bowl of Goldfish

More Headlines:

The Guardian: US fast-food workers fight McDonald’s as battle for better wages heads to court.

Bloomberg: Israel Pulls All Troops From Gaza as New Cease-Fire Holds.

New York Times: Eight Days in Gaza: A Wartime Diary, by Atef Abu Saif.

AP on a crazy scheme to bring down the Cuban government–why do we keep doing stupid stuff like this? US Sent Latin Youth Undercover in Anti-Cuba Ploy.

New York Times: Behind Toledo’s Water Crisis, a Long-Troubled Lake Erie.

The Guardian: The case of baby Gammy shows surrogacy for the repulsive trade it is, by Suzanne Moore.

The Hill: US won’t turn back flights over Ebola.

Politico: Congress approval hits new low (poll).

The Daily Beast Exclusive: ‘Pro-Troop’ Charity Pays Off Tea Party Cronies Instead.

What else is happening?