Royal Ahold

In: Business and Management

Submitted By orindam123
Words 2323
Pages 10
Contents
BUSINESS ETHICS REPORT 1
1. Introduction 3
2. The Growth Story: Expanding Boundaries 4
3. Problems Due to Expansion 5
4. Response towards the Problems and Further Issues 6
5. Accounting Issues 6
Fraudulent Accounting at U.S. Foodservice 7
6. The Aftermath 7
Role of the Auditor 8
Regulatory Bodies 8
7. The Verdict 8
8. The Road to Recovery program 8

1. Introduction

Headquartered in the Netherlands, Royal Ahold is one of the world’s largest international retail grocery and food service companies. At its peak in 2001, Ahold’s reported sales and profits were €66.6 billion and €1.1 billion and it operated 5,155 stores in 27 countries with nearly a quarter of a million employees. Ahold was started as a family firm in 1887 by the Heijn family. It was a family-controlled business, operating primarily in the Netherlands for over 100 years. The company went public in 1948. In 1989, Ahold underwent a major transition from a family-controlled to a management controlled firm. This transition resulted in a phenomenal period of success for the firm. It generated over a 1,000% return for its shareholders and had a market capitalization of €30.6 billion by November 2001.

In February 2003, Ahold witnessed a reversal of fortunes and suffered a complete meltdown. The firm was in a complete disastrous state with nothing going in their favour: a failed strategy, an accounting scandal, the firing of professional management, and litigation filings from all parts of the world. Shareholders lost most of their returns generated since 1989. Ahold scandal gave Europe a reason to believe that corporate governance and accounting problems were not restricted U.S. only. Ahold became “Europe’s Enron” (The Economist, March 1, 2003). It caused Dutch and European policymakers to rethink their approach to corporate governance and accounting policy. The Royal Ahold…...

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