Dutch Grocer Tries to Calm Furor Over Pay

17 September 2003

Dutch Grocer Tries to Calm Furor Over Pay

NIJMEGEN, the Netherlands, Sept. 17 – Hoping to quell a national outcry over corporate compensation here that has spread to its own supermarkets, the Dutch food retailer Royal Ahold said today that its chairman would resign and that it would overhaul its chief executive’s multimillion-dollar pay package.

By GREGORY CROUCH, © The New York Times

The scandal-plagued Ahold, having already admitted to some $1.1 billion in accounting irregularities, is now trying to quell a tempest surrounding a two-year contract given to its new chief executive, Anders C. Moberg, that is worth 6 million euros ($6.8 million), as it lays off hundreds of employees at its flagship grocery chain, Albert Heijn.

By Dutch standards, Mr. Moberg’s salary is high, and everyone from cabinet ministers to coupon-clippers reacted badly to news that he was guaranteed an annual bonus of 1.5 million euros as well as a large severance package, regardless of how Ahold performed.

Mr. Moberg had threatened to resign if shareholders refused to approve his pay package, but today he appeared to have had a change of heart.

"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," Mr. Moberg said in a statement.

The controversy surrounding Mr. Moberg’s compensation contributed to the departure of Ahold’s supervisory board chairman, Henny de Ruiter, said his spokesman, Charles Huijskens. Mr. de Ruiter was heavily criticized for not informing investors about Mr. Moberg’s compensation package until just minutes ahead of a scheduled shareholders’ vote earlier this month.

Ahold watchers said Mr. Moberg’s decision was an effort to fend off store boycotts and protest campaigns that sprang up as a way to protest what many Dutch see as corporate greed.

"It’s pure damage control," said Lukas Daalder, an analyst with the Amsterdam brokerage firm Oyens & van Eeghen.

One coalition, the World Is Not for Sale, called on the Dutch to boycott Albert Heijn stores this Friday.

Some shoppers had already done so. Television news programs have shown empty store aisles and forlorn-looking Albert Heijn cashiers. Albert Heijn confirmed that its sales had fallen at least 5 percent in recent days, but declined to discuss potential causes for the drop.

The Socialist Party began an Internet campaign against Ahold and Albert Heijn, contrasting Mr. Moberg’s salary with the elimination of 440 jobs at the supermarket chain. In a play on the chain’s discounts, the Socialists posted a logo on their Web site: "Pay for 1, take 440."

Organizers were pleased by Mr. Moberg’s decision and said they were ending - at least temporarily - the boycotts and protests. "We are delighted," said Agnes Kant, a Socialist member of Parliament.

"Remember the famous line in ’Wall Street’ from Gordon Gecko, ’Greed is good?’ " said Remko van Broekhoven, coordinator of the World Is Not for Sale. "We don’t feel the same way."

Nevertheless, some analysts cautioned that the changes in Mr. Moberg’s compensation might be mostly cosmetic.

Even though Mr. Moberg is no longer guaranteed an annual bonus of 1.5 million euros, he will receive that amount if he helps Ahold reach certain undisclosed targets. Should the company exceed those goals, Mr. Moberg could receive up to 3.75 million euros in extra compensation on top of his base salary of 1.5 million euros. He has already received 1 million stock options and 125,000 shares of Ahold since he took the job in May.

"The weak part is that we don’t know the targets he has to meet to get his bonus," Mr. Daalder said.

One significant change is that Mr. Moberg is no longer automatically entitled to a multimillion-dollar severance package.

Ahold said today that Mr. de Ruiter, who was not available for an interview, would step down at a shareholders’ meeting in October.

Karel Vuursteen, the former chairman of the Dutch brewer Heineken, was named as Mr. de Ruiter’s successor, the company said.

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