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Pressure is mounting on Ahold's embattled supervisory board following the Dutch grocery group's decision to pay its new chief executive more than C= 10m to lead its recovery from a ruining accounting scandal.
Anders Moberg's pay package-and the timing of its disclosure at a shareholder meeting last week-has confronted Ahold with a new credibility crisis as it struggles to restore confidence after the C=970m ( $1 bn) scandal.
The dispute-evident in a sea of critical media comment in the Netherlands at the weekend threatens to divert management from its recovery strategy, built on significant divestments and a likely rights issue to reduce C=11bn in net debt. Units deemed unable to attain first or second position in food retail within three to five years will immediately be put up for sale.
The board's position appears all the more delicate following comments made by Mr. Moberg to the Financial Times, in which he criticized non-executive directors for ignoring his advice to disclose his salary in May, when he agreed his contract.
Instead Ahold waited more than four months to make the announcement, on the day share-holders were asked to approve Mr. Moberg's appointment.
"I was the one who said I liked transparency, and I had hoped [the supervisory board] had shown [the salary package] in May to avoid a situation like this," Mr. Moberg told the FT.
As the row prompted the left-leaning Dutch Daily to call for a boycott of Ahold's Dutch Albert Heijn supermarket chain where only last week Ahold announced 440 redundancies-it was clear the supervisory board had badly misjudged the reaction.
While Henny de Ruiter, supervisory board chairman, said the salary was a fair reflection of what a company in Ahold's unfavorable circumstances had to pay to attract a top manager,furious investors accused it of pushing through the package regardless of investor opinion.
Furthermore, Dutch media commentators noted that the scandal at Ahold had been the trigger for the Dutch government to appoint a commission to strengthen corporate governance.
That commission has recommended a limit on executive bonuses, far below the potential two-and-a-half times annual salary that Mr. Moberg could earn.
Meanwhile, Mr. Moberg is trying to distance himself from the row and focus on strategy. He told the FT that measures had already been taken to raise its stake in the ICA-Ahold joint venture in Scandinavia.
Ahold had included in its forecasts an amount necessary to buy the shares of either of its joint venture partners, who should exercise a "put option" and sell their stake from April 2004.
1. The decision on Anders Moberg's pay package has _____.
[A] incurred much criticism from the shareholders
[B] helped restore public confidence in Ahold
[C] saved the supervisory board from another crisis
[D] put pressure on the new chief executive
2. The recovery strategy by Ahold's management includes _____.
[A] avoiding the next accounting scandal
[B] diverting investment to other fields
[C] issuing rights to more retailers
[D] selling the retailers with poor performance
3. Anders Moberg thought that if his salary had been announced earlier, _____.
[A] the board's position would have become less difficult
[B] he would have agreed to the contract with Ahold
[C] more time could have been devoted to his recovery plan
[D] the shareholders wouldn't have strongly opposed
4. Before the scandal at Ahold, the executive bonuses in Dutch companies _____.
[A] were higher than what Moberg earned
[B] were regulated by a commission
[C] were not monitored by the government
[D] were not set by corporate management
5. According to Moberg's recovery strategy, Ahold will _____.
[A] sell its stake to other joint venture companies
[B] buy shares of its Scandinavian partners
[C] choose to put money in its chain shops in Scandinavia
[D] exercise its potential influence on partners
