Annual report 2006
Ahold's Supervisory Board determines the number of its members. The composition of the Supervisory Board must be such that the combined experience, expertise and independence of its members best enables the Supervisory Board to carry out its responsibilities. As Ahold is an international retailer, the Supervisory Board Charter provides that the composition of the Supervisory Board should preferably reflect knowledge of European and American market conditions, financial institutions and corporate governance. If a Supervisory Board member is concurrently a member of another company's Supervisory Board, the Supervisory Board Charter states that the main duties arising from and/or the number and nature of the memberships on any other company's Supervisory Board must not conflict or interfere with that person's duties as a member of Ahold's Supervisory Board.
The following changes were made or announced to the composition of Ahold's Supervisory Board in 2006.
The General Meeting of Shareholders appointed Judith Sprieser on May 18, 2006. She is serving as member of the Audit Committee and member of the Remuneration Committee. As announced Jan Hommen will not be standing for re-election at the end of his term following the annual General Meeting of Shareholders in 2007 due to a restriction on the number of directorships under the Dutch Corporate Governance Code of December 9, 2003 (the "Dutch Corporate Governance Code"). The Supervisory Board is grateful for the dedication and wisdom that Jan Hommen has given to the Company in the years he served on the Supervisory Board. His Chairmanship of the Audit Committee in difficult times has been a major contribution to the recovery of the Company and the strengthening of its controls. The Supervisory Board has nominated Tom de Swaan for appointment as one of its members.
Leadership education is an important part of good governance. New members of the Supervisory Board attend a full-day induction program at Ahold's offices in Amsterdam where senior management briefs them on their responsibilities as members of the Supervisory Board and the financial, legal and reporting affairs of the Company and its businesses. Throughout the year, all members of the Supervisory Board visit several operating companies and other parts of the business to gain greater familiarity with key management, and to develop deeper knowledge of local operations, opportunities and challenges.
| Name | Date of birth | Date of initial appointment |
Date of possible reappointment |
|---|---|---|---|
| Jan Hommen | April 29, 1943 | May 13, 2003 | not applicable |
| René Dahan | August 26, 1941 | June 2, 2004 | 2008 |
| Karen de Segundo | December 12, 1946 | June 2, 2004 | 2008 |
| Derk Doijer | October 9, 1949 | May 18, 2005 | 2009 |
| Myra Hart | August 5, 1940 | May 18, 2005 | 2009 |
| Stephanie Shern | January 7, 1948 | May 18, 2005 | 2009 |
| Judith Sprieser | August 3, 1953 | May 18, 2006 | 2010 |
The Supervisory Board meets at least six times a year. On each of six occasions in 2006, two days were scheduled during which one or two Supervisory Board meetings, one Audit Committee meeting and one Remuneration Committee meeting were held. At five of these occasions a Selection and Appointment Committee meeting was held. In addition, the Supervisory Board met before the annual General Meeting of Shareholders. Additional meetings or conference calls were held as deemed necessary.
Except for parts of certain meetings which were restricted to Supervisory Board members only, the members of the Corporate Executive Board attended the Supervisory Board meetings. The external auditor attended the meeting in which the financial statements and Annual Report 2005 were approved. In March 2006, in a separate private meeting, the Supervisory Board assessed its own performance, that of its committees and its individual members, as well as the performance of the Corporate Executive Board and its individual members. When necessary, the Chairman and other members of the Supervisory Board had contact with the CEO or other members of the Corporate Executive Board outside the scheduled meetings of the Supervisory Board.
The Company's strategy is one of the main areas of focus for the Supervisory Board. In 2006 the group strategy was discussed regularly. The Supervisory Board was involved in and consulted on the initiation of the retail review team in May 2006 and received regular updates on the progress of the review. The results of the review and the announcement thereof on November 6, 2006 were discussed and agreed with the Supervisory Board.
During 2006 the Supervisory Board agreed to nominate Dick Boer for appointment to the Corporate Executive Board and Tom de Swaan for appointment to the Supervisory Board. The Supervisory Board was informed and consulted on the changes to the leadership of Ahold's U.S. retail and Central Europe operating companies.
The Supervisory Board increased its knowledge of the business through special reviews of the operating companies. In 2006, meetings were held at offices or facilities of operating companies in Sweden, the Czech Republic, the Netherlands, and the United States. These meetings enabled the Supervisory Board to interact with senior management of these operating companies and to enhance its understanding of the culture throughout the organization.
As part of the reporting process the Supervisory Board approved the financial statements and Annual Report 2005 and the quarterly earnings press releases and interim financial statements.
The Supervisory Board was regularly updated and consulted on the general status of the affairs of the Company and on major legal proceedings.
The Audit Committee provided regular updates to the Supervisory Board on the operation of the internal control and risk management systems and corporate governance, including an update regarding compliance with the Dutch Corporate Governance Code and Section 404 of the Sarbanes-Oxley Act as of December 31, 2006. The Supervisory Board reviewed reports relating to the whistleblower procedure, addressed the necessary follow-up and discussed the risks of the business and the result of the assessment by the Corporate Executive Board of the structure and operation of the internal risk management and control systems, as well as any significant changes thereto.
The Selection and Appointment Committee informed the Supervisory Board on management development and succession.
The Remuneration Committee prepared and recommended the amended remuneration policy, as well as the individual compensation of Corporate Executive Board members to the full Supervisory Board where details were discussed and agreed.
No Supervisory Board member was frequently absent from the meetings. The Supervisory Board confirms that as of March 21, 2007 all Supervisory Board members are independent within the meaning of provision III.2.2 of the Dutch Corporate Governance Code and the applicable U.S. securities regulations and NYSE listing standards.
The remuneration of the members of the Supervisory Board is determined by the General Meeting of Shareholders and currently the annual remuneration is as follows:
| Chairman Supervisory Board | EUR 55,000 |
| Vice-Chairman Supervisory Board | EUR 47,500 |
| Member Supervisory Board | EUR 40,000 |
| Chairman Audit Committee | EUR 10,000 |
| Member Audit Committee | EUR 8,000 |
| Chairman Remuneration Committee, or Selection and Appointment Committee |
EUR 5,000 |
| Member Remuneration Committee, or Selection and Appointment Committee |
EUR 3,000 |
In addition, for each meeting of the Supervisory Board and the Audit Committee, each member receives an attendance fee of EUR 1,250, or EUR 3,000 in case the meeting is held in a location that requires intercontinental travel from the residence of a member.
For detailed information on the individual remuneration of Supervisory Board members, see Note 8 to Ahold's consolidated financial statements in this Annual Report.
The Supervisory Board has established three permanent committees to which certain tasks are assigned, the composition of which is reflected in the following table.
| Audit Committee |
Remuneration Committee |
Selection and Appointment Committee |
|
|---|---|---|---|
| René Dahan, Chairman | Chairman | ||
| Jan Hommen, Vice-Chairman | Chairman | ||
| Karen de Segundo | Member | Member | |
| Derk Doijer | Chairman | Member | |
| Myra Hart | Member | Member | |
| Stephanie Shern | Member | Member | |
| Judith Sprieser | Member | Member | |
The Audit Committee assists the Supervisory Board in its responsibilities to oversee Ahold's financing, financial statements, financial reporting process and system of internal business controls and risk management. The members of the Corporate Executive Board, the Chief Internal Audit Officer and the external auditor are invited to the Audit Committee meetings. Other members of senior staff are invited when the Audit Committee finds it necessary or appropriate. The Audit Committee determines how the external auditor should be involved in the content and publication of financial reports other than the annual accounts. The Corporate Executive Board and the Audit Committee report their dealings with the external auditor to the Supervisory Board on an annual basis, including the auditor's independence in particular. The Supervisory Board takes this into account when deciding its nomination for the appointment of an external auditor, to be submitted to the General Meeting of Shareholders.
In 2006 the Audit Committee had six meetings and five conference calls.
Throughout the year the Audit Committee closely monitored the progress of the financial closing process, the steps taken to address the material weaknesses, which were cited in the Company's 2004 Annual Report and which, as stated in its 2005 Annual Report, no longer exist, and the Company's efforts to improve and strengthen its internal controls and the functioning of the internal audit department. During all Audit Committee meetings updates were provided on internal controls and the status of the project to comply with the requirements of Section 404 of the Sarbanes-Oxley Act as of December 31, 2006. The Audit Committee was informed regularly on litigation and the related exposure. The Audit Committee reviewed and received regular updates on the whistleblower program and reviewed the calculations of the annual bonus program.
Further subjects of the meetings were the review of quarterly earnings press releases and interim financial statements, as well as the Annual Report and financial statements 2005; the review and approval of the internal and external audit plan; review and discussions on the findings in the internal audit letter and the management letter of the external auditor; updates on the IT organization and IT security, the Company's finance structure, the treasury department, pensions, guarantees, enterprise risk management, and insurance and reappointment of the external auditor.
At the end of the regular meetings, the Audit Committee had several individual meetings with the CEO, CFO, Chief Internal Audit Officer and external auditor.
Conference calls were scheduled to approve the release of the quarterly trading statements.
The Audit Committee and the Supervisory Board assessed the independence and performance of the external auditor within the various entities and in the different capacities in which the external auditor acts. For that purpose the Audit Committee pre-approved the fees for audit and permitted non-audit services to be performed by external auditors as negotiated by the Corporate Executive Board. The Audit Committee and the external auditor reviewed the internal audit plan. The Audit Committee also extensively reviewed its functioning as a whole as well as the functioning of its individual members.
The composition of the Audit Committee changed during 2006. Derk Doijer resigned from the Audit Committee to join the Selection and Appointment Committee and Judith Sprieser was appointed to the Audit Committee in May 2006.
The Supervisory Board has determined that Jan Hommen and Stephanie Shern are the "Audit Committee Financial Experts" within the meaning of the Dutch Corporate Governance Code and as defined in Item 16A of Form 20-F. The Supervisory Board has determined that each member of the Audit Committee is "independent" as set forth in Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and as required by Section 303A.06 of the NYSE Listed Company Manual.
The Selection and Appointment Committee met five times in 2006 and its main focus was the selection of an additional member of the Corporate Executive Board and a new member of the Supervisory Board. It was also involved in the change of the CEO at Stop & Shop/Giant-Landover, Giant-Carlisle/Tops and Central Europe, and discussed succession and management development.
In May 2006, Derk Doijer was appointed to the Selection and Appointment Committee.
The Remuneration Committee met six times in 2006. The CEO was invited to all of these meetings. For a report on remuneration and the activities of the Remuneration Committee, see the "Remuneration" section of this Annual Report.
This Annual Report and the 2006 financial statements, audited by Deloitte Accountants B.V., have been presented to the Supervisory Board. The financial statements and the report of the external auditor with respect to the audit of the financial statements were discussed with the Audit Committee in the presence of the Corporate Executive Board and the external auditor. The Supervisory Board endorses this Annual Report. The Supervisory Board recommends that the General Meeting of Shareholders adopts the 2006 financial statements included in this Annual Report.
Amsterdam, the Netherlands, March 21, 2007