Corporate Governance at Ahold|Corporate Governance|Case Study|Case Studies

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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Introduction Contd...

Peter Paul de Vries, Director, VEB said, "It's a very quick solution and leaves behind a black chapter at Ahold. They can focus on the future."6 The shareholders' lobby (VEB) which acted as the mediator was compensated with € 2.5 million to cover its expenses. Investors also expressed their optimism over the deal.

One investor commented, "The damage is not too big and can easily be paid out of Ahold's cash pile."7 Ahold considered the settlement as the last significant civil case it would have to face because of the accounting scandal. However, Ahold was still under investigation by U.S. Department of Justice (DoJ).

The financial scandal caused serious trouble for Ahold. For the year 2002, Ahold showed losses of around € 1.2 billion. The period following the scandal, the company faced a severe cash crunch and was close to bankruptcy. In 2003, it was rescued by an emergency credit line offered by its banks.

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Some of Ahold's ex-employees including the vice-president of US Foodservice were facing criminal charges. Many members of the management who had occupied responsible positions were forced to resign in the months after the fraud came to light.

The company vowed to comply strictly with the revised Dutch Corporate Governance Code which came into effect on January 01, 2004. In 2004, the new management embarked on an ambitious revival program christened "Road to Recovery". Corporate Governance was to be an integral part of the three-year program.

Background Note

The origins of Ahold can be traced back to 1887, when 22 year-old Albert Heijn (Heijn) took over his father's small grocery store in Zaandam, Holland. Due to Heijn's untiring efforts, the store, which was named after him, became popular for its high quality, reasonably priced products and services. Soon Heijn opened a second store in Alkmaar, also in Holland. By 1897, Heijn increased the store count to 23. These were located in different parts of Holland including The Hague and Amsterdam.

In 1911, the first Albert Heijn branded products was introduced (cookies baked by Heijn himself). In 1948, Albert Heijn was listed on the Amsterdam stock exchange. Albert Heijn opened its first self-service supermarket chain in 1955.

In 1973, to take the growth story forward, the Heijn family established Ahold as a parent company with Albert Heijn as the main subsidiary. In the same year, Ahold entered into specialty retailing with Alberto (a liquor chain) and Etos (a health and beauty care chain)...

 Excerpts >>

6] Alexander Hudson & Wendel Broere, "Ahold settles US lawsuit for $1.1 billion,", November 28, 2005.

7]  "Ahold settles scandal suit for $1.1 billion,", November 28, 2005.


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