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 case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Excerpts Contd...
The Aftermath
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The accounting scandals had a significant impact on the market standing of Ahold.
Soon after the news about the scandals spread, Merrill Lynch gave a neutral
rating on Ahold's stock and one of its analysts, Andrew Fowler, published a note
titled 'The beginning of the End' in which he said "The emergence of the
accounting irregularities and the fact that Ahold will now be a forced seller in
a global bear market prevents us to turn any more positive on its shares."
Ahold's long term debt was downgraded by Standard & Poor to BB+ or junk status.
Criticism poured in from all quarters.
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Christopher Gower, Analyst, Lehman Brothers observed, "With
no management, no clarity on accounts, no clarity on financing, future strategy,
or disposals, it's a long road back." However, some industry observers expressed
optimism about Ahold's revival, given its high sales turnover...
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Major Investigation
On January 6, 2005, the Enterprise Section of the Amsterdam Court of Appeals
granted the request made by VEB to verify Ahold's practices and whether the
company was professionally managed during the period leading up to the
scandal.
VEB had filed the request on February 12, 2004. The court concluded that the
request was valid and that there was a need to check whether sound
management principles had been followed in Ahold... |
Ahold's Atonement
The magnitude of the accounting frauds at Ahold shook Europe, particularly the
company's home country, Holland. The irregularities at Ahold brought to the fore
the need for a revision of existing corporate governance standards in the
Netherlands. At the instance of several government and non-government bodies,
the Tabaksblat committee adopted and published the Dutch Corporate Governance
Code (Refer Exhibit VII for a brief write-up on Dutch Corporate Governance Code)
in December 2003, which replaced the Corporate Governance in the Netherlands
Reports: the Forty Recommendations of the Peter's Committee...
Exhibits
Exhibit I: Ahold's Acquisitions (1991-2001)
Exhibit II: Ahold's Financial Data
Exhibit III: Restatements
Exhibit IV: Ahold's Stock Market (NYSE) Performance (2001-05)
Exhibit V: Ahold's Divestment Spree
Exhibit VI: Brief Write-Up on Dutch Corporate Governance Code
Exhibit VII: Revised Corporate Governance Structure at Ahold
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