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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"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.


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.

Corporate Governance | Case Study in Management, Operations, Strategies, Corporate Governance, Case Studies

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.

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 - Next Page>>

1]  "Major investigation into mismanagement at Ahold,", January 13, 2005.

2] VEB (Vereniging van EffectenBezitters or Dutch Investor's Association), headquartered in The Hague, is an independent association which represents investor's interests.

3] Kerry Capell, "Royal Ahold: From Europe's Enron to Model Citizen?",
May 17, 2004.

4] "Former Ahold executives indicted over fraud,", July 28, 2004.

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


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