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CORPORATE GOVERNANCE AT

AHOLD

 TARAKC R
 AKASH U
 SRIKANTH
 SAIKIRAN
 TALLURI PRASHANTH
BACKGROUND
 Origin Of AHOLD Was Traced In 1887, By
Albert Heijn
 The Store Was Named After Albert Heijn
 In 1897 Increased The Store Count To 23
 In 1948 Albert Heijn Was Listed In
Amsterdam Stock Exchange
 In 1973 Heijn’s Family Established Ahold
As Parent Company And Albert Heijn
As The Main Subsidiary

 In 1977 AHOLD Entered US Market By
Acquiring BI-LO Supermarket chain
 Giant Food Stores, Fianast Etc

 1990 Was A Period Of Rapid Expansion

 In 1998, Joint Venture With Velox Retail


Holdings
 In 2000 AHOLD Acquired US Food Service

 US Food Service Was Epicenter Of The


Scandal That Shook AHOLD

 US Foodservice Executives Colluding With
Employees At Sara Lee Corporation, Conagra
 US Foodservice Was Given Rebates By Sara Lee
For Selling Their Products
 Accused Employees Overstated The Rebates
And Took Bonus From The Company
 Executives At Sara Lee And Other Companies
Who Are Involved In The Scandal Misled The
Auditors Regarding The Value Of Rebate
 US Foodservice Included The Overstated
Rebates In Its Annual Accounts Which
Inflated Their Earnings
 In 2003 AHOLD Announced 4 Joint
Ventures But It Did Not Hold 100%
Stake In These Joint Ventures
 AHOLD Consolidated 100% Of Joint
Ventures Profit In Its Accounts
 Its Auditors (D&T) Warned AHOLD About
The Inappropriateness Of The
Accounting Practice, But Continued To
Approve Its Accounts
 In2003 Ahold Announced That Its
Earnings For 2002 Was Overstated And
Financial Statement For The Year 2000
And 2001 Did Not Reflect The True
Accounts
 Ahold Shareholders Filed A Suit Against
The Company For Compensation
 Succeeding The News Of Overstatement
Of Accounts, News Of Fraud At Some
Of AHOLDS Other Operating
Companies Also Came To Light
AFTERMATH
 Market Standings Went Down
 Long Term Debts Were Down Graded From
Standard To Poor
 CEO And CFO Of The Company Resigned
 Investors Filed Securities Fraud Lawsuit
 Share Value Decreased Drastically
 Accused Employees Were Sacked
 Various Investigations Were Probed On The
Company
 In October 2003 The Company Released The
2002 Financial Report Which Showed Loss
Worth 1.2 Billion Euros
 Moberg Was Appointed As New CEO, He
Launched A Recovery Program Called
“Road To Recovery”
 In November 2005 Ahold Reached World
Wide Settlement Of US$ 1.1 Billion
With Its Shareholders
Reason for ahold to fall
 There was no proper INTERNAL CONTROL
 There was no proper FINANCIAL STRATEGIES
 The Management Control System failed
 Drastic Expansion

 No Future Planning and forecasting of market


 Huge Investment
Getting Ahold of Things
The fraud was simplicity itself. Food
manufacturers frequently pay a fee to
supermarket operators to encourage them to
buy in bulk and then to promote the products
to the ultimate consumers. These
promotional allowances typically are a
function of the volume purchased. The
company then aggressively accounted for
these promotional allowances, but did not
have the volume to justify their recognition.
Prematurely and incorrectly recognizing
these promotional allowances of course
increased their profits for some 500 million
Competitive Fact Sheet
Wal-Mart Ahold
Mission/ To give ordinary folk the chance to Serve the needs of our customers by
Vision buy the same thing as rich people. integrating a close-knit family of
world-class food retail and
foodservice operations that make the
whole of our company worth more
than the sum of its parts
Strategy 1. Respect for the individual 1. Re-engineer food retail
2. High standards of service 2. Recover U.S. Foodservice
3. Constant strive for excellence 3. Reinforce accountability, controls
 Low prices, In-stock positions, and corporate governance
Customer service 4. Restoring Ahold’s financial help

Activities 1. Food retail 1. Food retail


2. Non-Food retail 2. Food distribution (U.S. Food
3. On-line food retailer service)
3. Liquor, beauty care stores
4. On-line food retailer
Ahold Subsidiaries in EU
Slovakia Portugal
2 stores 198 stores
Spain Hypernova
623 stores Pingo Doce,
Supersol, HiperDino, Feira Nova
Netto, HiperSol, Cash Czech Republic
Diplc 203 stores
Albert,
Denmark Hypernova
12 stores
ISO Poland
165 stores
Albert, Mega,
Norway Hypernova
1,104 stores
Rimi, ICA, Maxi
Lithuani
a
Netherlands 38 stores
2,333 stores Rimi, Eko
Albert Heijn, Etos, De
Tuinen, Jasmin, Sweden Estonia Latvia
Gall&Gall, C1000, Ter 1,846 stores 3 stores 26 stores
Huurne Rimi, ICA, Maxi Rimi Rimi, Maxi
Ahold: SWOT Analysis
Strengths Weaknesses
International experience No global brand
Non-food, discount format, wholsale, Not in EU key markets (FR, GB, D)

e-commerce Loss of investors confidance

Strong domestic presence Scale vs Wal-Mart

Ability to integrate acquisitions

Opportunities Threats
Diversification of format Risk of joint-venture failure
Diversification of products Strengthening Euro, weakening

Acquisition of major EU retailers dollar


Presence increase in Asia Too complicated to manage

Wal-Mart position in the US


Internal control
 Internal control is defined as a process
effected by an organization’s structure,
work and authority flows, people and
management information system designed
to help the organization accomplish
specific goals or objectives. it mean by
which an organization’s resources are
directed, monitored and measured. It plays
an important role in preventing and
detecting fraud and protecting the
organization’s resources.
 Objectives

Ø coordinate methods adopted within a


business
Ø safeguard its assets
Ø check the accuracy and reliability of its
accounting data
Ø promote operational efficiency
Ø

FAILURE AND SUCCESS OF THE
EXTERNAL CONTROL

 Deloitte& Touche were the auditors of AHOLD


which was the external control
 The control was a failure at USFood service. The
executives at USFood service and their suppliers
were able to corrupt the audit process
 The control was a success at various operating
companies in Europe and Latin America. They
successfully detected accounting irregularities in
those companies.

A LIGHT ON CORPORATE GOVERNANCE
 Corporate governance is the set of processes, customs, policies,
laws, and institutions affecting the way a corporation (or
company) is directed, administered or controlled
 The principal stakeholders are the shareholders, the board of
directors, employees, customers, creditors, suppliers, and the
community at large
 Key elements of good corporate governance principles include
honesty, trust and integrity, openness, performance orientation,
responsibility and accountability, mutual respect, and
commitment to the organization
 After the scams of WorldCom, Enron and recently Satyam
Corporate governance became an important part of every
organization
Flawed fundamentals
 Absence of any mechanism for
centralization or decentralization of
operations and management
 Failure of reward system

 Failure of strategic planning process

 Inefficient internal controls

 Correcting responsibility structure



Conclusion
 Loss of credibility & trust tarnishes an
image of the company
 Ahold though managed to pull itself from
the brink of bankruptcy
 We don’t see any difference between
political scandals and their
counterparts in private offices
 For us maintaining ethical standards is
critical for development of any society
and that is the ultimate profit which
any society can cherish