Ahold management bows to pressure

Related tags Ahold Corporate governance Board of directors

Henny de Ruiter, chairman of the Supervisory Board at embattled
Dutch retailer Ahold, has agreed to stand down, bowing to pressure
from shareholders. De Ruiter was blamed for agreeing a €10 million
pay package for new CEO Anders Moberg, who has also agreed to
modify his salary demands.

Much maligned in recent weeks by investors and shareholders alike, the management of Dutch retail group Ahold​ has given in to pressure and decided to stand down.

Shareholders were concerned that the company's Supervisory Board, headed by chairman Henny de Ruiter, had acted slowly to the revelations of accounting fraud at Ahold's US Foodservice business, and to protestations regarding the remuneration package awarded to new chief executive Anders Moberg.

Rumours have been circulating​ for the last week or so concerning the likely resignation of de Ruiter, and Ahold has today confirmed that the 69-year-old will indeed stand down at the shareholder meeting planned for next month, when Ahold will finally publish its revised audited accounts for 2002.

He will be succeeded by Karel Vuursteen, who joined Ahold's Supervisory Board in May.

Following the revelation of the US Foodservice scandal in February, the Supervisory Board took charge of the company's affairs, and while the board successfully secured a €2.656 billion credit facility to help stabilise Ahold's financial situation, and appointed former Ikea executive Moberg as new chief executive, shareholders remain deeply concerned about the Board's links to the 'old regime' at Ahold, considered largely to blame for the company's current parlous state.

As a result, a number of other Supervisory Board members are to stand down at the company's AGM in May 2004, and Ahold said that a nomination committee had been established to consider retirements and new appointments to the Board.

"The Supervisory Board now believes that a predominantly new team should assist Ahold in shaping its future,"​ the company said in a statement.

The man charged with leading the retailer into the future, Anders Moberg, has also been widely criticised for his remuneration package, which many shareholders believed was excessively high in light of the company's profit shortfall. In fact, many shareholders threatened to vote against the appointment of Moberg at the company's EGM earlier this month, although they eventually backed down on the grounds that not appointing him would be even more disastrous for the company.

However, Moberg has not been indifferent to the criticism, and has decided to accept a lower offer.

"I understand that my current severance benefits and my guaranteed bonus are considered unacceptable in the Dutch environment, so I have taken the decision to modify both,"​ he said in a statement.

"I have today advised the Ahold Supervisory Board and they have accepted that any severance benefits, should they be necessary, will be established on the basis of all the relevant circumstances prevailing at the time. So, there will be no guaranteed severance compensation. In addition, we also agreed that my bonus compensation will be fully performance-related and will not contain any guaranteed elements."

Moberg's pay package would have given him up €10 million in pay and bonuses, and it was the revelation of the agreement which led not only to the increased pressure on de Ruiter but also on the company's flagship retail chain Albert Heijn, which was boycotted by consumers for several weeks, leading to a downturn in sales.

But Moberg also defended his decision to seek such a costly package in the first place. "In April 2003, when I decided to accept the position of CEO of Ahold, there was very little financial or other information that could be provided at the time to help guide a personal decision to accept a very great risk,"​ he said.

"Without such information, I felt that there was the distinct possibility that events which happened before my arrival would prevent me from fulfilling my duties as CEO. In addition, I felt that my reputation as a successful business leader could also be damaged.

Being at Ahold over the past months, I have gained more insight into the company. No one should underestimate the magnitude of the challenge in turning this company around. But it is my strong belief and my commitment that by working together with my associates we can get the company back to where it could be, should be and will be."

He concluded with a call for unity. "Please give me the opportunity to devote my resources and energy to the task for which I have been hired. This task is to return Ahold to prosperity, to create value for our customers and our shareholders and to create a company of which our associates can be proud. A healthy company is in everyone's interests."

Although these measures will clearly help ease their concerns, shareholders are unlikely to be entirely satisfied until they hear what Moberg has planned to turn the company around - and whether these plans eventually bear fruit.

So far, the new CEO of Ahold has been tight-lipped about his strategy, although more details should be revealed at the shareholders meeting next month. In a recent interview with the Wall Street Journal​ newspaper, he said that a number of "significant operations"​ could be sold off, although this was hardly a major revelation as the company has a €12 billion debt burden to reduce.

Analysts suggest that these businesses are likely to be in Spain, Portugal and Poland, and there is no lack of potential buyers, with Carrefour already hinting that it would be interested in the Spanish unit while Tesco, Wal-Mart or Auchan, among others, could snap up the Polish business.

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