F36; G38; K22; M40 Keywords:
In this paper I will focus on the case study of Royal Ahold and the large accounting fraud that took place within the company.
Sorry, but full essay samples are available only for registered users Choose a Membership Plan The shareholder approach focuses mainly on creating shareholder value by maximising profits, with a lot of pressure on short term financial performance. Stakeholder theory on the other hand also takes into account the interests of parties other than the shareholder, e.
All aspects of the company are dependent on which of these approaches it follows. Transparency is a key element to successful corporate governance. Internal control functions provide central monitoring roles in corporate governance and I will show that weaknesses within these mechanisms, contributed significantly to the fraud scandal at Ahold.
By first of all introducing the agency theory, I will examine why such internal forms of control is necessary at all within a company.
The reason why companies need such extensive monitoring of management could be argued to be rooted in agency theory. Agency theory is rooted in the separation of ownership and control.
The agent is believed to be purely self-interested and will act opportunistically. The actions of the agents the managers need to be monitored in order to protect the interest of the principals the owners. Internal and external governance mechanisms are used in order to decrease managerial opportunism Solomon, The agency theory thus examines potential conflicts that may arise between management and shareholders.
The manipulation of the control mechanism, the auditing function, can be explored in order to get a better understanding of the disclosure and transparency weaknesses in Ahold. We shall see that the lack of transparency contributed to increasing and not decreasing the agency problem.
Disclosure of information is a critical function in reducing agency problems. Disclosure refers to different forms of information produced by companies. It also includes voluntary communications such as management forecasts, analyst presentations, press releases, corporate websites and many more Solomon, The voluntary information disclosed by Ahold was also affected by its fraudulent activity.
Market analysts could for example not analyse the company according to its real potential, seeing that the information disclosed was not living up to reality.
Financial reporting is one way of reducing information asymmetry, as it helps investors to make better informed decisions Solomon, I will now take a bit more detailed look at how Ahold was able to disclose the wrong information, leading to a serious lack in transparency in the firm.
US Foodservices USF received a large number of promotional allowances, if it purchased a large volume of merchandise. The problem was that managers systematically manipulated the books in order to compensate for any shortfall in their predicted earnings.
They managed these fraudulent activities in several ways. They coaxed suppliers to confirm their false promotional allowances, by threatening them through their powerful market dominance.
They furthermore manipulated their accounting entries by for example incorporating discounts into the accounts before the actual sale was made or into the wrong time period. This was also done despite shareholders agreements that provided joint control for Ahold and its joint ventures.Europe's Enron: Royal Ahold, N.V.
Michael C. Knapp and Carol A. Knapp ABSTRACT: Royal Ahold, N.V., is a large multinational company based in The Neth- erlands that was founded in by Albert Heijn. Three generations of the Heijn family oversaw the company's retail grocery business.
In , the company hired a professional management team. 1.
A vendor may offer a customer a rebate of a specified amount of cash or other consideration that is payable only if the customer completes a specified cumulative level of purchases or remains a customer for a specified period.
In this paper I will focus on the case study of Royal Ahold and the large accounting fraud that took place within the company. The issues I will address include Ahold’s transparency and disclosure weaknesses, its demanding culture focused on economic growth regardless of certain ethical principles, the weaknesses of corporate governance.
Ahold claimed to have effective control over numerous joint ventures, in cases where it owned only 50% of the shares. This was also done despite shareholders agreements that provided joint control for Ahold and its joint ventures.
Ahold claimed to have effective control over numerous joint ventures, in cases where it owned only 50% of the shares. This was also done despite shareholders agreements that provided joint control for Ahold and its joint ventures. • The case describes Ahold's global and U.
multi-format. What are the advantages and disadvantages of the growth strategies pursued by Ahold. Their first and foremost culture is to be a local operating company where their customers perceive them as the local guy.S.