Royal Ahold: A Failure Of Corporate Governance

Abe de Jong, D.V. DeJong, Gerard Mertens and Peter Roosenboom

ERIM Report Series Research in Management from Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam

Abstract: Royal Ahold (Koninklijke Ahold NV) was one of the major success stories in the 1990s and is one of the major failures in corporate governance, suffering a complete meltdown in 2003. This clinical study analyzes Ahold’s growth strategy through acquisitions and isolates the cause of the failed strategy, i.e. the absence of internal as well as external oversight of management’s strategy. This study details the consequences of the strategy: bad acquisitions, an accounting scandal and the loss of investor confidence. It illustrates how initially a family and later professional management exploited the intent of the law and existing regulatory structures to maintain absolute control of the company. It analyzes in detail the applicable governance mechanisms of Ahold that were designed to hold the self-interest of the parties in check. It asks the reader to consider whether these governance mechanisms, properly implemented, might have helped prevent Ahold or a situation similar to Ahold.

Keywords: corporate governance; financial economics; international economics; law and economics; regulation (search for similar items in EconPapers)
JEL-codes: G3 L10 M (search for similar items in EconPapers)
Date: 2005-01-25
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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