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Seattle University Law Review

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corporate governance - directors of corporations


Business Organizations Law | Law


In June of 2014, the board of directors of Demoulas Supermarkets, Inc.-better known as Market Basket, a mid-sized chain of grocery stores in New England-decided to oust the man who had been CEO for the previous six years, Arthur T. Demoulas.' Most likely, the board of directors did not anticipate what happened next: Thousands of employees, customers, and fans of Market Basket boycotted the stores and staged noisy public protests asking the board to reinstate "Arthur T., The reaction by employees and customers made what had been a simmering, nasty, intrafamily feud within the closely held Market Basket chain into national news. In this era of overpaid and aloof CEOs, who expects employees and customers to go to bat for the CEO? The Demoulas clan feud provides useful context for thinking about the institutional mechanism for resolving disputes at the heart of corporate law: the granting of decision making authority to a board of directors. Most, if not all, long-term relationships do not go smoothly all the time. When people make a decision to live together, work together, own property together, or build something together, they should anticipate that disagreements will arise, sometimes major disagreements. This is as true in a business endeavor as it is in other aspects of life. For this reason, institutional arrangements that are successful at supporting collaborative activities over time are likely to have some sort of dispute resolution mechanism, or decision rule about resolving disputes, imbedded in them. In this Essay, I highlight and explore the dispute resolution function of the corporate law requirement that corporations have boards of directors with "all corporate powers."



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