Royal Ahold or currently known as Ahold was a major international supermarket operator. The business was based in Amsterdam, Netherlands. When it comes to the lesson of corporate governance, the success and downfall of Royal Ahold is an important event and serves as a good example. During the 2001 expressive performance of Ahold, their sales was and profit was reported reaching about €66.6 billion and €1.1 billion with 5,155 stores operating in 27 countries and comprises of about 250,000 employees. Ahold was actually an old company started in 1887 as a family business, transformed to management-controlled firm and became public in year 1948. As stated, Ahold was a family-controlled business managed by Heijn family which was operating in the Netherlands for more than hundred years.[1]
After a hundred year of becoming a family-controlled business. Ahold was transformed and become a management-controlled firm in 1989. With this transition, the company shows an expressive performance and can be considered as their fruitful years whereas the company made over a 1,000% return for its shareholders and made a market capitalization of about €30.6 billion by November 2001. But in 2003, Ahold suffered a complete downfall.[2]
Due to the downfall of Ahold, it created significant shock waves through the corporate governance landscape. With this, the family used the Dutch corporate law and a small blockholding in order to grasp Ahold with a detached ownership composition. The shift to professional management in 1989 left Ahold with scattered shareholders but no key blockholder. When professional management lifted capital from institutional investors, management had shorn of them their voting rights by taking advantage of regulations that permit Dutch companies to issue non-voting certificates instead of voting shares. As a result, blockholders were not able to replace the role of the family as a supervisor of professional management. With a scattered ownership organization and weak minority rights, supervision was unhindered. The unexpected facet of the Ahold history is that it is ambiguous why the family and professional management must have done something in a different way. The abuse of regulatory configurations is not distinctive but rather a common feature with propositions beyond Ahold.
[1] Fink, R. Royal ambition: with supermarkets on four continents, Royal Ahold offers lessons in cross-border acquisitions. CFO Magazine (April 1),2001. 46.
[2] Ibid.
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