Corporate Governance at Ahold
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Case Details:
Case Code : CGOV005
Case Length : 14 Pages
Period : 2000 - 2005
Pub Date : 2006
Teaching Note :Not Available
Organization : Ahold NV
Industry : Retail
Countries : Holland, USA
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"This (granting of an inquiry) is a huge victory for the
shareholders. Until yesterday Ahold was hoping that our request for an inquiry
would not be granted. The pressure that Ahold has been exerting on the VEB -
from placing the VEB's activities on the shareholder agenda to placing display
ads asking us to call a halt to these activities - has yielded no result. The
Court too shares the view that the background to the biggest stock exchange
fraud in Dutch history cannot stay under wraps."1
- Peter Paul de Vries, Director, VEB2 in 2005.
"We learned that as a company you can lose your reputation
overnight, but it takes some time to rebuild it and restore trust."3
- Anders C. Moberg, CEO and President, Ahold in 2004.
"Ahold has put in place a series
of measures that will give the company the ability to more closely
monitor the financial activities of its operating companies."4
- Peter Wakkie, Chief corporate governance
counsel, Ahold in 2004.
Introduction
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In November 2005, Ahold NV (Ahold), the Dutch retail giant with several
operating companies in US and Europe, (Refer Table I for Ahold's operating
companies) reached a worldwide settlement worth US$ 1.1 billion with
shareholders who had purchased its stock between July 30, 1999 and February 23,
2003.
The compensation was intended to settle the class-action suit which Ahold's
shareholders had filed against it after serious accounting irregularities were
unearthed at US Foodservice, its subsidiary in the US. Ahold derived more than
60 percent of its revenues through its subsidiaries in the US.
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To the shock of investors, Ahold announced on February 24th 2003 that it had
overstated profits by almost 1 billion euros for the period between January
2000 and September 2002.
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Compared to the compensation demands that WorldCom Inc. and Enron Corp.
faced, the US$ 1.1 billion settlement was seen as small. The settlement was
welcomed by Ahold's management.
Peter Wakkie (Wakkie), executive board member and chief corporate governance
counsel, Ahold observed that the settlement was fair to all parties
concerned, including the company itself. He said, "It is a substantial
compensation for shareholders of between US $1 and US$ 1.30 per share. This
is not so high that it will bring Ahold into problems."5 The VEB shareholders
lobby also was happy with the deal. |
Corporate Governance at Ahold
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