AHOLD MANAGEMENT RISKING LONG-TERM VALUE:

1 EXECUTIVE SUMMARY Ahold is at a crossroads. Down one road lies a set of risks that accompany confrontation and conflict with one third of the comp...
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EXECUTIVE SUMMARY Ahold is at a crossroads. Down one road lies a set of risks that accompany confrontation and conflict with one third of the company’s employees in the United States over their fundamental rights to form a union and bargain collectively. Down the other is a partnership with the United Food and Commercial Workers International Union (UFCW) that has already delivered tangible benefits that have made Ahold a more profitable and successful company. This report: 1. Details the positive labor-management partnership between Ahold and the UFCW, illustrating the many ways in which UFCW members have contributed to Ahold’s success in the United States; 2. Describes Ahold’s stated corporate responsibility commitments to uphold widely agreed-upon international labor standards and respect workers’ basic associational rights; 3. Explains how Ahold management is risking its success in the U.S. by pursuing an anti-union agenda at Giant/Martin’s that violates its own pledges, breaches international labor standards, and contradicts its practices elsewhere; 4. Illustrates how management’s anti-union agenda is risking profitability by warping the supply chain, hampering service levels, harming brand reputation, and reducing customer loyalty at newly acquired stores in Richmond, Virginia; and 5. Calls upon Ahold management to reduce these risks by re-committing to the company’s corporate responsibility principles and by applying them consistently to all its employees, including those at Giant/Martin’s. Yes, Ahold is at a crossroads, but the optimal path is clear. Partnership not conflict. We suggest to all of Ahold’s stakeholders, including investors, that they express their concerns to Ahold management: 

UFCW-AHOLD MEETING: When will top Ahold management meet with UFCW leadership? We believe such a meeting will benefit Ahold stakeholders if management works diligently and proactively with the UFCW to settle Ahold’s strained labor relations in the U.S.



AHOLD MANAGEMENT RISKING LONG-TERM VALUE: The history of the Ahold-UFCW relationship is clearly positive for Ahold. The UFCW has been a constructive partner, working to advance the company’s interests in a number of areas, including community relations, beneficial legislation, enhanced productivity, workplace flexibility, competitive positioning, and collective bargaining. Why has Ahold management fought the union at Giant/Martin’s?



TWO-FACED LABOR RELATIONS: Ahold treats some workers differently, denying to approximately 35 percent of its U.S. workforce the organizing and bargaining rights granted to workers elsewhere in the U.S. and in Europe. How will the company remedy this disparate treatment of Giant/Martin’s workers?



AHOLD’S CORPORATE RESPONSIBILITY: Ahold has publicly and forcefully committed to uphold fundamental international labor standards across all its operations. Yet, evidence suggests that management infringes the spirit and letter of these standards at Giant/Martin’s. What is Ahold’s plan to implement consistent international labor standards throughout its U.S. operations?

 

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I. SUCCESS STORY: THE AHOLD-UFCW PARTNERSHIP The United Food & Commercial Workers International Union (UFCW) is one of the largest private-sector, North American trade unions with over 1.3 million members in the retail, supermarket, and food processing industries. The UFCW Capital Stewardship Program (CSP) promotes the interests of current and retired UFCW members whose pension funds total over $40 billion. CSP supports trustees who lead these funds, as well as UFCW officials who lead some of the largest public funds in North America, including public pension funds in the states of Maryland, Ohio, and Michigan. UFCW members and pension fund participants have a direct stake in the success of Ahold as our funds are major investors in the company. Additionally, UFCW represents around 70,000 Ahold employees, approximately 65% of the Ahold U.S. workforce. Ahold USA is one of the largest and most successful food retailers in the eastern United States. The company operates three American grocery chains that generated $23.5 billion in sales during FY 2010.1 Stop & Shop and Giant-Landover are Ahold’s two leading U.S. banners with 571 stores spread throughout the Northeast and Mid-Atlantic regions. Both banners are highly unionized, with most of their approximately 86,000 employees benefiting from a labormanagement partnership with the UFCW.2 Giant/Martin’s is the third banner within Ahold USA and operates 180 stores in Maryland, Pennsylvania, West Virginia, and Virginia. It has a workforce of approximately 30,000 employees, which is almost entirely nonunion.3 For more than a decade, Stop & Shop and GiantLandover, the unionized operations, have served as the foundation for Ahold’s success in the US. In FY 2009, the two grocery chains netted a total of $18 billion in sales and $869 million in operating income— accounting for an estimated 46 percent of total company earnings.4 Historically, both banners have posted higher operating margins than nonunion Giant-Carlisle and the entire Ahold group. In light of these financial results, company officials have characterized these integrated business units as the “cornerstones” of Ahold’s corporate structure.5 Representing approximately 70,000 employees throughout Stop & Shop and Giant-Landover, UFCW has played an important role in the expansion of Ahold’s U.S. operations.6 Despite Ahold operating partially non-union, UFCW has forged a strategic partnership with Stop & Shop and Giant-Landover, paving the way for years of tremendous profits, labor reliability, workforce productivity, and customer loyalty. This partnership between both grocery chains and their unionized workforce is so strong that UFCW Local 371 1 2 3 4 5 6

Ahold. Fourth Quarter/Full Year 2010, January 20, 2011, p. 3. Ahold. Annual Report 2009, p. 23. Ahold. Annual Report 2009, p. 24. Ahold. Annual Report 2009, p. 3. Ahold. “CEO of Stop & Shop and Giant Food Announces Retirement,” in Press Releases, February 27, 2006. United Food and Commercial Workers. Contract Directory; and Royal Ahold. Annual Report 2009, p. 18.

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President Thomas Wilkinson described UFCW’s relationship with Ahold as “the gold standard” of labormanagement relations.7 Ahold Group8 (in millions)

2004

2005

2006

2007

2008

2009

€ 44,610

€ 43,979

€ 27,826

€ 24,893

€ 25,648

€ 27,925

Operating Income

€ 923

€ 253

€ 1,063

€ 1,068

€ 1,202

€ 1,297

Operating Margin

2.07%

0.58%

3.82%

4.29%

4.69%

4.64%

2004

2005

2006

2007

2008

2009

$16,105

$16,346

$16,438

$16,689

$17,074

$17,867

Operating Income

$860

$854

$839

$662

$701

$869

Operating Margin

5.34%

5.22%

5.10%

3.97%

4.10%

4.86%

2004

2005

2006

2007

2008

2009

$6,480

$6,201

$3,812

$4,307

$4,738

$4,958

Operating Income

$142

$90

$170

$213

$233

$218

Operating Margin

2.19%

1.45%

4.46%

4.95%

4.92%

4.40%

Net Sales

Stop & Shop/Giant-Landover Net Sales

Giant/Martin's Net Sales

Even prior to the 1996/1998 purchase of Stop & Shop and Giant-Landover, both supermarket companies benefited from their longstanding professional relationships with the UFCW. These relationships date back to the mid-20th century, when both food retailers were small, family-owned companies.9 Over the years, UFCW took an active role in facilitating the expansion of Stop & Shop and Giant-Landover, assisting both companies to grow into two of the most profitable grocery chains in the eastern U.S. UFCW welcomed Ahold’s purchases of Stop & Shop and Giant-Landover, given the company’s track record of operational success and strong labor partnership. As President Mark Espinosa of UFCW Local 919 asserted in 1996, Ahold did not seem like “the type of company that’s going to come in and wreck a good thing.”10 One UFCW Local President even likened Ahold’s takeover to the arrival of a “white knight.”11 Ultimately, the acquisitions proceeded as planned through a seamless transition of ownership, thus marking the start of a “harmonious relationship” between Ahold and UFCW.12

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Thomas Wilkinson (President of UFCW Local 371). Interview, January 4, 2011. Ahold. “Results Q4 and Full Year 2005,” p. 2-6; Ahold. “Full Year and Fourth Quarter 2006 Summary Financial Report,” p. 3 and 10-12; Ahold. “Full Year and Fourth Quarter 2007 Summary Financial Report,” p. 9-11; Ahold. “Full Year and Fourth Quarter 2008 Summary Financial Report,” p. 2 and 9-10; and Ahold. “Fourth Quarter and Full Year 2009 Summary Financial Report,” p. 2, 3, 12, 14, 15. Note that after November 2009, Ahold no longer discloses revenue and operating income for its individual U.S. banners. 9 Dan Clifford (President of UFCW Local 1459). Interview, December 21, 2010; Rhonda Nelson (Recorder of UFCW Local 1500). Interview, January 4, 2011; Jim Lowthers (Former President of UFCW Local 400). Interview, January 5, 2011; Richard Charette (President of UFCW Local 1445). Interview, December 16, 2010; Mark Espinosa (President of UFCW Local 919). Interview, December 21, 2010; and Dave Fleming (President of UFCW Local 328). Interview, January 3, 2011. 10 Mark Espinosa. Interview, December 21, 2010. 11 Dan Clifford. Interview, December 21, 2010. 12 UFCW Local 1445 and Stop & Shop. Contract, p. 1. 8

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UFCW Support for Ahold USA UFCW members understand that their livelihoods are intertwined with the continued growth of Stop & Shop and Giant-Landover and have sought to advance the operational goals and financial objectives of both food retailers. Over the course of Ahold’s 15-year relationship with the UFCW, its American business units have not lost a single workday to strikes. Even when contract negotiations involved disagreements and prolonged bargaining, Ahold and UFCW settled their differences amicably through the bargaining process. This record not only attests to the strength of labor-management partnership throughout the two grocery chains but also highlights UFCW’s sensitivity to the operational needs of Ahold USA. In the context of a hyper-competitive grocery market, year after year, company officials could turn to their shareholders and announce how their labor contracts “would allow” their banners “to remain the leading supermarket[s] in the marketplace.”13 While winning some contract improvements, UFCW accepted contract provisions that reduced the financial burdens of employer-sponsored healthcare and retirement plans. Union members have also made concessions on matters like weekend pay and compensation for part-time employees. Overall, these sacrifices have bolstered the bottom lines of Stop & Shop, Giant-Landover, and the entire Ahold corporate family. For example, UFCW has made numerous alterations to bring labor standards in line with the realities of the marketplace. UFCW encourages and facilitates the introduction of new technology.14 And, where Stop & Shop and Giant-Landover face strong non-union competition, UFCW’s contracts have reflected this reality. For example, in Maryland and Virginia, UFCW has established an entirely new classification in contracts with Giant-Landover to meet the challenges posed by “severe competitive situations.”15 These accommodations include lower wages, cheaper healthcare plans, operational reforms, and reduced retirement benefits. Taken together, these flexibilities have provided both Stop & Shop and Giant-Landover with the opportunity to increase productivity in existing stores, compete against low-road employers, expand into new markets, and boost the bottom line.

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Quote taken from: Stop & Shop Supermarket Company. “A Statement from the Stop & Shop Supermarket Company,” in PR Newswire US, March 11, 2007. Other references include: Jim Bodor. “Stop & Shop Workers Approve New Contract,” in Telegram & Gazette, February 14, 2001, p. E2; and Staff. “Stop & Shop, Unions Approve Contract,” in The Associated Press, February 15, 2004; and Jaci Smith and Brian Spadora. “Stores, Union Reach Contract; Four-Year Pact Averts Strike at 250 Markets,” in Herald News, April 16, 2005, p. A1. 14 UFCW Local 1445 (Meat) and The Stop & Shop Supermarket Company LLC. Agreement, February 21, 2010, p. 40-41; UFCW Local 1459 and The Stop & Shop Supermarket Company LLC. Agreement, February 15, 2004, p. 39; and UFCW Local 1500 and The Stop & Shop Supermarket Company LLC. Agreement, June 23, 2002, p. 32. 15 UFCW Local 400 and Giant LLC. Agreement, March 29, 2008, p. 65; and Jim Lowthers,

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Competing with Low-Road Employers Led by Walmart, low-road food retailers seek to undermine industry standards. We believe their business model stifles competition16 and perpetuates environmental damage.17 They typically fail to provide their employees with adequate training, affordable healthcare, or pension benefits, while limiting opportunities for career advancement.18 Low-road employers are also staunchly anti-union and show little respect for their employees’ rights.19 The UFCW has succeeded in blunting the impact of this fierce competition upon Stop & Shop and GiantLandover. Over the past 15 years, UFCW has allocated millions of dollars towards efforts that oppose the expansion of low-road employers into their communities. This work includes customer education efforts, voter engagement, economic analyses, and advocacy for community benefit agreements that limit the efforts by low-road retailers to reduce standards. Independent analysts are convinced that this work has benefited food retailers, including Ahold, and limited Walmart’s growth. For example, Bank of America analysts wrote: “We believe the (UFCW) campaign is hurting WMT, while benefiting the supermarkets…”20 UFCW has hired specialized experts to document the heavy long-term price the public pays when lowroad employers gain unfair market advantages by externalizing costs related to training, advancement, environmental compliance, and related standards. UFCW’s commitment to supporting industry standards rests upon long-term strategies that involve industry expertise, community coalitions, and civic alliances that come from the many decades of community involvement by our 1.3 million members. UFCW’s successful efforts to promote industry standards has greatly benefited the bottom line for Ahold USA and added tremendous value for all the company’s stakeholders.

UFCW Aiding the Expansion of Ahold USA Since Ahold purchased Stop & Shop and Giant-Landover in the 1990s, UFCW has been active in enabling both grocery chains to expand into new markets and improve their financial performance. Companies who seek access to new markets in the U.S. often encounter a bewildering array of regulations, paperwork, and approval processes which can be litigious and overwhelming. To address these dynamics, UFCW has provided Ahold USA with the expertise and experience to facilitate approval processes at planning commissions, city councils, and other governing bodies, which have allowed Ahold USA to build stores throughout the Northeast and Mid-Atlantic states in a streamlined and efficient manner.21 Additionally, UFCW leaders and members have worked with their political allies to secure millions of dollars in public loans for Ahold USA. Most recently, UFCW Local 1500 helped Stop & Shop obtain $5.5 million in U.S. Federal Government stimulus money to build a new store in Rockaway, NY.22

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Tom Angotti, Brian Paul, Tom Gray, and Dom Williams. “Wal-Mart’s Economic Footprint: A literature review prepared by Hunter College Center for Community Planning & Development and New York City Public Advocate Bill de Blasio,” January 10, 2010. 17 Wal-Mart Watch. “It’s Not Easy Being Green: The Truth about Wal-Mart’s Environmental Makeover,” September 2007; Sierra Club, “Stop Sprawl: How Big Box Stores like Wal-Mart Effect the Environment and Communities,” http://www.sierraclub.org/sprawl/reports/big_box.asp. 18 American Rights at Work. “Wal-Mart: Rolling Back Workers’ Wages, Rights, and the American Dream,” November 2005, http://www.americanrightsatwork.org/dmdocuments/ARAWReports/WalmartReport_lowres.pdf. 19 Human Rights Watch. “Discounting Rights: Wal-Mart’s Violation of US Workers’ Right to Freedom of Association,” April 30, 2007. 20 Bank of America Retail Analyst Report, March 8, 2007, page 3. 21 Thomas Wilkinson. Interview, January 4, 2011; Richard Charette. Interview, December 16, 2010; Rhonda Nelson. Interview, January 4, 2011; Mark Espinosa. Interview, December 21, 2010; Jim Lowthers. Interview, January 5, 2011; and Dave Fleming (President of UFCW Local 328). Interview, January 3, 2011. 22 Marine Cole. “Stimulus Cash Spawns Queens Supermarket,” in Crain’s New York Business, October 22, 2010; and Rhonda Nelson. Interview, January 4, 2011.

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UFCW Building Consumer Support for Ahold USA UFCW conducts extensive public relations campaigns to effectively promote Ahold’s leading U.S. food operations through newspapers, community meetings, resolutions, and government hearings. UFCW has spent tens of thousands of dollars every year persuading consumers to purchase their groceries from unionized supermarkets.23 UFCW cultivates community support for Stop & Shop and Giant-Landover through other channels as well. For decades, UFCW has participated in Stop & Shop’s fundraising events for the Jimmy Fund, a charity for cancer research, and “spoken very highly” of the company’s involvement in their communities.24 UFCW New York leaders assembled with New York City Mayor Michael Bloomberg and many other public officials to celebrate the first day of construction on a new Stop & Shop store in the city. At the gathering, a UFCW leader characterized the opening of the new Stop & Shop as “a win for the people” and spoke at length about how the company “is not just bringing a new and much needed supermarket to the area,” but is also “bringing good jobs for hardworking people.”25

Ahold’s Financial Crisis: UFCW Responds to Help Keep Ahold Afloat Between 1993 and 2002, Ahold management, led by CEO Cees van der Hoeven, embarked upon one of the most reckless corporate expansions in the history of the retail food industry. In what The New York Times labeled “a bruising pace of acquisitions,” Ahold spent more than €18 billion to construct a worldwide network of grocery chains and food distributors.26 In 2000 alone, the company initiated 15 takeovers, including the $3.6 billion purchase of U.S. Foodservice.27 In 2003, however, Ahold’s international strategy of debt-financed growth imploded in an $880 million accounting scandal.28 Culminating in the resignations of van der Hoeven and CFO Michiel Meurs, the scandal had far-reaching ramifications for the entire corporation. Within a single week, Ahold’s stock price plummeted approximately 75 percent as investors fled the overextended, debt-ridden company.29 Unionized workers at Stop & Shop and Giant-Landover paid a heavy price for Ahold management’s incompetence. Having generated approximately €10.82 billion in debt, Ahold executives turned to the company’s most profitable banners to generate cash and remain solvent.30 Managers at both grocery chains, in turn, targeted labor costs as a remedy for their parent company’s self-inflicted financial woes.

Ahold Divests from Stop & Shop and Giant-Landover Ahold’s corporate restructuring in response to its crisis had a dramatic impact on Stop & Shop and GiantLandover. Months before Ahold even announced its “Road to Recovery” plan, both business units went into what one company executive called “triage mode.”31 In the northeastern United States, management 23

Harvey Whille. Interview, December 22, 2010; Dan Clifford. Interview, December 21, 2010; Mark Espinosa. Interview, December 21, 2010; Jim Lowthers. Interview, January 5, 2011; Rhonda Nelson. Interview, January 4, 2011; and Richard Charette. Interview, December 16, 2010. 24 Richard Charette. Interview, December 16, 2010; and Mark Espinosa. Interview, December 21, 2010. 25 Staff, “Mayor Bloomberg Breaks Ground on Major New Supermarket at Arverne by Sea Development on Rockaway Peninsula,” in US State News, October 27, 2009. 26 Suzanne Kapner and Greg Winter. “Some Worry that Ahold is Expanding Too Quickly,” in The New York Times, September 8, 2001, p. C1; and Morgan Stanley. “Ahold NV,” February 20, 2009, p. 2. 27 Martha McNeil Hamilton. “Ahold to Buy Food Service Firm,” in The Washington Post, September 5, 2001, p. E3; and Morgan Stanley. “Ahold NV,” February 20, 2009, p. 2. 28 Morgan Stanley. “Ahold NV,” February 20, 2009, p. 2. 29 Ibid., p. 2. 30 Ahold. Ahold Annual Report 2004, p. 79. 31 Dina ElBoghdady and Carrie Johnson. “Giant Food Gets ‘A Bit More Frugal,’” in The Washington Post, March 20, 2003, p. E1.

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suspended construction and remodeling of Stop & Shop stores. Further south, Ahold executives made even steeper cuts to the Giant-Landover banner.

(in millions) Ahold Capital Expenditures32

2001

2002

2003

2004

2005

2006

2007

2008

€2,500

€2,200

€1,200

€1,700

€1,400

€1,500

€ 979

€1,128

Reflecting upon the disastrous repercussions of the crisis, former UFCW Local 400 President Jim Lowthers asserted, “They quit putting money into Giant. They sucked every nickel and dime they could out of there to pay for their problems at U.S. Foodservice… They were essentially collapsing at every level.”33

Workers’ Sacrifices Ahold’s austerity measures caused great hardship for UFCW members at Stop & Shop and Giant-Landover.  Hundreds of UFCW members lost their jobs as a result of a downsizing strategy that reduced the number of Giant-Landover stores from 197 to 184 between 2003 and 2007.34  A similar downsizing move at Stop & Shop cost hundreds of workers their jobs, including 500 members of UFCW Local 1360 after the company shuttered six New Jersey stores.35  Management cancelled all staff trainings at GiantLandover for a period of three years and allowed service levels to decline precipitously.36  A strategy to replace full-time positions with parttime jobs between 2002 and 2007 resulted in a 6.63 percent decline in full-time positions from 63,663 to 59,439.37  In the years immediately following the accounting scandal, Stop & Shop and Giant-Landover also made significant cuts in employee hours.38 In December 2003, for example, officials at GiantLandover mandated a business-wide reduction in payroll hours of 4 percent. Struggling to find a

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Ahold. Annual Report 2003, p. 29 and 72; Ahold. Annual Report 2006, p. 39; Ahold. Annual Report 2008, p. 16. Jim Lowthers. Interview, January 5, 2011 34 Ahold. Annual Report 2003, p. 56; and Ahold. Annual Report 2008, p. 18. 35 Sam Ferraino (President of UFCW Local 1360). Interview, January 4, 2011. 36 Jim Lowthers. Interview, January 5, 2011; and Michael Barbaro. “Giant Food Adjusts to Difficulties of Merger; With Stop & Shop, Bigger Family Means Some Growing Pains,” in The Washington Post, February 21, 2005, p. E1. 37 Ahold. Ahold Annual Report 2004, p. 125; and Ahold. Annual Report 2008, p. 18. 38 Jim Lowthers. Interview, January 5, 2011; and Richard Charette. Interview, December 16, 2010. 33

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feasible way to institute this policy, one store manager said, “That’s a significant reduction for a store our size. People are wondering: ‘How are we going to pay our bills?’”39 During the collective bargaining sessions that followed the 2003 accounting scandal, UFCW members made further material sacrifices to keep their employer afloat: 

At Giant-Landover, healthcare deductibles doubled to $200 a year for existing employees and increased to $300 a year for future employees. New part-time hires were required to wait longer before they became eligible for health benefits.40 And the quality of workers’ prescription drug plans deteriorated.41



At Stop & Shop, UFCW’s five New England Locals made similar cuts to their health care plans over the course of two contract negotiations.42

Taken together, these developments have had a pronounced impact upon the material wellbeing of UFCW members at Stop & Shop and Giant-Landover. The adverse effects of the 2003 accounting scandal continue to reverberate throughout the company’s U.S. workforce and have placed major strains on Ahold employees and their families. As President Dave Fleming of UFCW Local 328 stressed, there “was a financial crisis, there was a lot of money owed… and they made up that money on the backs of the workers.”43

Renewed Success Due in large part to the sacrifices and hard work of its employees, Ahold has prospered in recent years. Revenue in 2010 was 18% greater than in 2007, while operating income grew 19% over the same period despite the fact the company had 250 fewer stores.44 The balance sheet is healthy, with more than €2.5 billion in cash available for growth investments. Management is looking for acquisitions, sprucing up stores, and returning cash to shareholders. In sum, Ahold is once again successful.

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Dina ElBoghdady. “Giant Cuts Payroll in Busiest Season,” in The Washington Post, December 10, 2003, p. E1. Michael Barbaro and Amy Joyce. “Grocers, Union Agree on Pact,” in The Washington Post, March 30, 2004, p. A1; and Stacey Hirsh and Jamie Smith Hopkins. “Giant, Safeway Avert a Strike,” in The Baltimore Sun, March 31, 2004, p. D1. 41 Barbaro and Joyce. “Grocers, Union Agree on Pact,” p. A1. 42 Peter Marteka. “Stop & Shop Workers Say Yes to Pact,” in Hartford Courant, February 16, 2004, p. B1; Natalia E. Arbulu. “Stop & Shop Nulls Strike Threat,” in The Republican, March 12, 2007, p. A1; Rhonda Nelson. Interview, January 4, 2011; and Richard Charette. Interview, December 16, 2010. 43 Dave Fleming. Interview, January 3, 2011. 44 Sales and operating income figures from Capital IQ. For store numbers see Ahold. Annual Report 2007, p. 2, and Annual Report 2010, p. 2. 40

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II. SUCCESS IN JEOPARDY: AHOLD’S RISKY BEHAVIOR IN THE U.S. CREATES MAJOR CONCERNS FOR ALL STAKEHOLDERS The UFCW takes some credit and considerable pride for Ahold’s recent achievements. However, we are concerned that recent management decisions are putting this success at risk. In particular, a creeping anti-union temperament appears to be warping management’s choices in the United States, and possibly elsewhere, with potentially harmful consequences. We see this in the decision to integrate Ahold’s recent acquisition of 25 Ukrop’s stores with anti-union Giant/Martin’s, instead of unionized, and geographically nearer, Giant-Landover. It is readily apparent, too, in the campaign management is running against its workers who want to unionize at Giant/Martin’s in Richmond, Virginia. And we fear this temperament is behind Ahold’s unwillingness to negotiate with UFCW a solution to the underfunded status at several U.S. multi-employer pension plans in which it participates, a concern we detail in a separate memo. We are particularly troubled by the anti-union turn because the company has publicly committed, through its corporate responsibility program, to uphold workers’ rights as defined by a number of widely accepted international labor standards.

Ahold’s Two-Faced Labor Practices As noted above, UFCW represents approximately 65 percent of Ahold’s total U.S. workforce. These union members work at Stop & Shop stores in Connecticut, Massachusetts, New Hampshire, New Jersey, New York, and Rhode Island, and at Giant-Landover stores in Delaware, Maryland, Virginia, and Washington, DC. Relations between UFCW and Ahold have been generally positive and productive. A key pillar of the positive relationship has been Ahold’s approach to new stores, some of which the UFCW has helped open. When Stop & Shop and Giant-Landover have opened new stores, management has invited UFCW to meet with workers and present its information. Workers have the option of joining the union, and a majority of them have. In this way, Ahold and UFCW have grown together over the years. By contrast, Ahold’s anti-union operation, Giant/Martin’s, operates stores in Maryland, Pennsylvania, Virginia, and West Virginia. Ahold management refuses to recognize UFCW as the representative of Giant/Martin’s workers and has subjected them to aggressive anti-union efforts. When Ahold purchased 25 Ukrop’s stores in February 2010, it merged the stores into anti-union Giant/Martin’s instead of GiantLandover. Note, however, that the stores and distribution centers of Giant-Landover are significantly geographically closer to the Ukrop’s stores than those of Giant/Martin’s. Despite what would appear to be a logistically more efficient merger with Giant-Landover, Ahold chose Giant-Martin’s. It appears a primary reason for Ahold’s choice was union avoidance, and since the acquisition workers at the former Ukrop’s stores have been subject to an anti-union campaign.

Freedom of Association at Ahold: Corporate Responsibility and Commitment Ahold’s anti-union activity at Giant/Martin’s is doubly confounding because it violates the company’s own stated principles with regard to labor rights as laid out in its corporate responsibility program. In its 2009 and 2010 Corporate Responsibility reports, Ahold states that it bases its labor standards on the UN Global Compact’s Ten Principles, the Business Social Compliance Initiative (BSCI) Code of Conduct, the ILO Core Conventions, the OECD Guidelines for Multinational Enterprises, and the UN Universal Declaration of

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Human Rights.45 Taken together, these international provisions firmly establish workers’ rights to form unions and bargain collectively. Ahold’s commitment to uphold these standards should mean that it will do so throughout its operations worldwide.

UN Global Compact Launched in 2000, the UN Global Compact is a “strategic policy initiative” with the ultimate goal of advancing socially responsible business practices throughout the world.46 The Global Compact has a core set of “ten universally accepted principles” that all signatory companies are expected to follow.47 Principle 3 focuses exclusively upon employees’ right to freedom of association, and it underscores the importance for companies to respect “the right of… all workers to freely and voluntarily establish and join organizations of their own choice.”48 Further, companies should: 

“…not interfere in an employee's decision to associate, or discriminate against the employee or their representative.”



“Ensure that all workers are able to form and join a trade union of their choice without fear of intimidation or reprisal, in accordance with national law.”



“…not interfere with the activities of worker representatives while they carry out their functions in ways that are not disruptive to regular company operations.”



“Support the establishment and functioning of local/national…trade unions.”



“Inform the local community, media and public authorities of your company's endorsement of the UN Global Compact and its intention to respect its provisions, including those on fundamental workers' rights.”49

By signing on with the UN Global Compact, Ahold agreed to uphold and respect the right of all its employees to form unions. Indeed, in a letter to UN Secretary-General Ban Ki-moon, then CEO John Rishton asserted that Ahold would “advance these principles as far as is possible within the scope of our business.”50

Business Social Compliance Initiative (BSCI) Code of Conduct Launched in 2002 and headquartered in Brussels, BSCI is a nonprofit organization that promotes a common Code of Conduct amongst its members. BSCI brings together more than 600 businesses and primarily advocates for improving working conditions within companies’ supply chains.51 BSCI’s Code of Conduct affirms: All personnel shall have the right to form, join, and organise trade unions of their choice and to bargain collectively on their behalf with the company. The company shall respect this right, and shall effectively inform personnel that they are free to join an organisation of their choosing and that their doing so will not result in any negative consequences to them, or retaliation, from the 45

Ahold. Corporate Responsibility Report 2009, p. 17 and 18. UN Global Compact. Annual Review 2010, p. 2 and 9; and UN Global Compact. UN Global Compact. “Overview of the UN Global Compact,” http://www.unglobalcompact.org/aboutthegc/ 47 UN Global Compact. The Ten Principles, http://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/index.html 48 UN Global Compact. “Principle 3,” in The Ten Principles. http://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/principle3.html 49 Ibid. 50 John Rishton. “Letter from John Rishton to UN Secretary General H.E. Ban Ki-Moon,” October 6, 2010. 51 BSCI. Annual Report 2009, p. 4; and BSCI. BSCI. “About BSCI,” http://www.bsci-intl.org/about-bsci. 46

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company… The company shall ensure that representatives of workers and any personnel engaged in organizing workers are not subjected to discrimination, harassment, intimidation, or retaliation for reason of their being members of a union or participating in trade union activities, and that such representatives have access to their members in the workplace.52 In its 2009 corporate responsibility report, Ahold states that BSCI is an important component in the company’s “commitment to good working conditions.”53

ILO Core Conventions The International Labour Organization (ILO) is a widely accepted source for responsible labor standards around the world. Its Core Conventions establish the regulatory frameworks for numerous corporate 54 responsibility programs, and many countries have ratified the provisions of these Conventions into law. Through Conventions 87 and 98, the ILO has put in place a sweeping defense of employees’ right to freedom of association in the workplace. As both Conventions detail: 

“Workers…shall have the right to establish and… join organizations of their own choosing without previous authorization.”



“Each Member of the International Labour Organization for which this Convention is in force undertakes to take all necessary and appropriate measures to ensure that workers…may exercise freely the right to organize.”



“Workers shall enjoy adequate protection against acts of anti-union discrimination in respect of their employment.”55

In its Global Code of Professional Conduct and Ethics, Ahold emphasizes that the company “respect[s] the fundamental rights of associates codified in local laws and by the International Labor Organization.”56 Both the UN Global Compact and BSCI incorporate the ILO Core Conventions as an important source for establishing socially responsible labor standards.57 While the U.S. has not ratified these Conventions per se, it did sign the 1998 Declaration on the Fundamental Principles and Rights at Work, which established that these two Conventions have been so well-established that they are considered customary international law. Further, the U.S. is bound by these Conventions by virtue of its ILO membership.58 What’s more, Ahold’s home country, the Netherlands, ratified ILO Conventions 87 and 98 in 1950 and 1993, respectively.59

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BSCI. Code of Conduct, November 2009, p. 1. Ahold. Corporate Responsibility Report 2009, p. 17. 54 ILO. “How International Labour Standards Are Used,” http://www.ilo.org/global/standards/introduction-to-international-labourstandards/international-labour-standards-use/lang--en/index.htm. 55 ILO. Convention Concerning Freedom of Association and Protection of the Right to Organise, C087, 1948. http://www.ilo.org/ilolex/english/convdisp1.htm; and ILO. Convention Concerning the Application of the Principles of the Right to Organise and to Bargain Collectively, C098, 1949. http://www.ilo.org/ilolex/english/convdisp1.htm 56 Ahold. Ahold Global Code of Professional Conduct and Ethics, p. 20. 57 UN Global Compact. The Labour Principles of the United Nations Global Compact: A Guide for Business, p. 9-10; and BSCI. Code of Conduct, p. 1. 58 ILO. ILO Declaration on Fundamental Principles and Rights at Work and its Follow-Up, http://www.ilo.org/declaration/thedeclaration/textdeclaration/lang--en/index.htm. 59 ILO. “Convention No. C087—Ratifications,” ILOLEX Database of International Labour Standards; ILO. “Convention No. C087—Ratifications,” ILOLEX Database of International Labour Standards. http://www.ilo.org/ilolex/english/convdisp1.htm 53

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OECD Guidelines for Multinational Enterprises The Organisation for Economic Co-operation and Development (OECD) is an international body of participating governments that aims to “improve the economic and social well-being of people around the world.”60 The OECD Guidelines for Multinational Enterprises are a set of recommendations that participatory governments have instituted to promote companies’ compliance with socially responsible business practices.61 In Section IV of the Guidelines, the OECD makes clear that businesses should not obstruct workers from forming their own labor organizations. Towards this end, the OECD affirms that “enterprises should… respect the right of their employees to be represented by trade unions and other bone fide representatives of employees.”62 The Guidelines go on to say that Section IV “is designed to echo all four fundamental principles and rights at work which are contained in the ILO’s 1998 Declaration [on Fundamental Principles and Rights at Work], namely the freedom of association and right to collective bargaining, the effective abolition of child labour, the elimination of all forms of forced or compulsory labour, and non-discrimination in employment and occupation.”63 Both the Netherlands and the US are members of the OECD.64 The OECD Guidelines are also an important part of BSCI’s standards for social compliance.65

UN Universal Declaration of Human Rights Adopted by the UN General Assembly in 1948, the Universal Declaration of Human Rights is one of the most widely recognized documents to promote the basic rights of individuals throughout the international community. While the Declaration covers a broad assortment of social issues, Article 23 focuses upon individuals’ rights in the workplace. With respect to freedom of association and collective bargaining, Article 23 asserts that “everyone has the right to form and to join trade unions for the protection of his interests.”66 In its 2009 and 2010 corporate responsibility reports, Ahold states that the Universal Declaration of Human Rights is an important component in the underlying principles of BSCI, to which it adheres.67 Article 23’s protection of workers’ rights therefore applies within the framework of Ahold’s corporate responsibility program.

Freedom of Association in the US: The Shortcomings of American Labor Law The application and enforcement of international labor standards are especially important in the United States, since American labor law fails to protect adequately workers’ associational rights. As Human Rights Watch asserted in its 2000 report Unfair Advantage, “freedom of association is under sustained

60

OECD. “About the Organisation for Economic Co-operation and Development (OECD)—Our Mission,” http://www.oecd.org/pages/0,3417,en_36734052_36734103_1_1_1_1_1,00.html. OECD. OECD Guidelines for Multinational Enterprises, p. 9-11. 62 OECD. OECD Guidelines for Multinational Enterprises, p. 17. 63 OECD. OECD Guidelines for Multinational Enterprises, p. 44. 64 OECD. OECD Guidelines for Multinational Enterprises, p. 2. 65 BSCI. BSCI Code of Conduct, p. 1. 66 United Nations. The Universal Declaration of Human Rights, http://www.un.org/en/documents/udhr/index.shtml 67 Ahold. Corporate Responsibility Report 2009, p. 17-18; and Ahold. Corporate Responsibility Report 2010, p. 23. 61

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attack in the United States, and the government is often failing in its responsibility under international human rights standards to deter such attacks and protect workers’ rights.”68 Sections 7 and 8(a) of the National Labor Relations Act (NLRA) establish freedom of association as a fundamental right and provide some protections for workers.69 However, several organizations have pointed out the shortcomings of this legislation in defending the rights of workers and their labor organizations. The ILO Committee on Freedom of Association, for instance, has ruled on numerous occasions that US labor law fails to meet international standards.70 Indeed, following a complaint filed by UFCW in 1992, the ILO noted that workers’ associational rights are restricted under US law since union representatives are not guaranteed access to workplaces.71 Other components of US labor law that violate international standards include the permanent replacement of strikers, the exclusion of low-level supervisors from union representation, and a lack of legal safeguards for immigrant workers. Freedom of association is further restricted in the US by a corporate culture that is staunchly anti-union. When workers seek to organize into unions, employers regularly wage campaigns to discourage their employees from forming unions. These campaigns often violate US labor law outright, but employers face few sanctions for such violations. According to a 2009 study of 563 organizing campaigns by Kate Bronfenbrenner, Director of Labor Education Research at Cornell University’s School of Industrial and Labor Relations, “employers threatened to close the plant in 57% of elections, discharged workers in 34%, and threatened to cut wages and benefits in 47% of elections.” Bronfenbrenner concluded that “the overwhelming majority of U.S. employers are willing to use a broad arsenal of legal and illegal tactics to interfere with the rights of workers to organize, and that they do so with near impunity.”72 As Human Rights Watch confirmed in its 2010 report, A Strange Case, workers in the US “face an uphill battle to exercise their right to freedom of association” while companies “use myriad tactics to prevent workers from freely choosing whether to organize.”73

68

Human Rights Watch. Unfair Advantage: Workers’ Freedom of Association in the United States under International Human Rights Standards, (August 2000), p. 12. National Labor Relations Act. Sections 7 and 8(a). 70 ILO Committee on Freedom of Association. Complaint Against the United States, 278th Report, Case No. 1543 (1991); ILO Committee on Freedom of Association. Complaint Against the United States, 284th Report, Case No. 1523 (1992); ILO Committee on Freedom of Association. Complaint Against the United States, 332nd Report, Case No. 2227 (2003); ILO Committee on Freedom of Association. Complaint Against the United States, 349th Report, Case No. 2524 (2008). 71 ILO Committee on Freedom of Association. Complaint Against the United States, 284th Report, Case No. 1523 (1992). 72 Kate Bronfenbrenner. “No Hold Barred: The Intensification of Employer Opposition to Organizing,” Economic Policy Institute Briefing Paper, #235, May 20, 2009, p. 2, http://www.epi.org/publications/entry/bp235. 73 Human Rights Watch. A Strange Case: Violations’ of Workers’ Freedom of Association in the United States by European Multinational Corporations (September 2010), p. 13. 69

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Freedom of Association at Giant/Martin’s: Ahold’s Attack on Workers’ Rights Throughout most of its business operations, Ahold has upheld its associates’ rights to freedom of association and collective bargaining. In the Netherlands, Ahold and the Dutch union FNV-Bondgenoten have a longstanding labor-management relationship. In the United States, as described above, a similar relationship exists between UFCW and Ahold’s two leading banners, Stop & Shop and Giant-Landover. Despite this history of labor-management cooperation, and despite the provisions of Ahold’s corporate responsibility program that commit the company to respect workers’ rights, Ahold management has demonstrated its determination to remain “union-free” at Giant/Martin’s by repeatedly interfering with employees’ efforts to form a union. These actions undermine the basic rights of the company’s workforce and violate the company’s corporate responsibility policies.

Giant/Martin’s History on Labor Issues Founded in 1923 as a small family-owned grocery company, Giant/Martin’s had several dozen stores when it became part of Ahold in 1981.74 Today Ahold operates 180 stores, with approximately 30,000 employees, under the banners of Giant Food Stores and Martin’s Food Markets.75 By several measures, Ahold’s Giant/Martin’s banners fail to uphold basic workplace standards. According to a 2006 report by The Philadelphia Inquirer, an estimated 11.8 percent of Ahold’s workforce at Giant/Martin’s earned so little that they qualified for Pennsylvania’s state-subsidized Medicaid health insurance program—a figure that is “roughly similar” to the Medicaid-dependency ratios at other low-road employers such as Walmart.76 In terms of basic health and safety standards, Giant/Martin’s has committed more than fifteen Occupational Safety and Health Administration violations since 2006 with initial penalties amounting to $52,875.77 More recently, Ahold has become mired in a class action lawsuit with more than 500 of its department managers at Giant/Martin’s.78 The suit alleges that Giant/Martin’s violated the Fair Labor Standards Act and Pennsylvania Minimum Wage Act by failing to compensate department managers at time-and-one-half pay for overtime work and by failing to compensate them for work performed from home.79 The suit is pending. Department managers at other Ahold banners in the U.S. are members of the UFCW and the alleged practices are barred under the union’s contracts with Ahold.80

74

Giant Food Stores. “History,” http://www.giantfoodstores.com/shareddev/sharedcontent/Company/. Ibid; and Ahold. 2010 Annual Report, p. 25. Giant Food Stores. “Giant Announces Opening Date and Manager for Feasterville, PA,” in Press Releases, March 2, 2011. 76 Amy Worden. “Many Wal-Mart Workers Use Medicaid,” in The Philadelphia Inquirer, March 2, 2006, p. A1. 77 Following a negotiation process, these fines were reduced to $32,175. See Appendix A for more information. 78 Staff. “500 Managers Owed Overtime, Lawsuit Claims,” in Pittsburgh Tribune Review, February 3, 2011; and US District Court for the Western District of Pennsylvania. “Amended Individual and Class Action Complaint,” in Blystone v. Giant Food Stores, Case 2:11-cv-00135-DSC, p. 1-9. 79 Ibid. p. 1 and 6. 80 UFCW Local 400 and Giant Food LLC. Agreement, March 30, 2008. 75

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Giant/Martin’s Anti-Union Campaign in Richmond, Virginia Ahold has cultivated an anti-union management culture at Giant/Martin’s, and this culture has been on vivid display in Richmond, Virginia, where Ahold purchased the Ukrop’s chain of stores in February 2010. Soon after the purchase, a number of workers from the Richmond stores approached UFCW, seeking to form a union. Rather than respect their fundamental rights and adhere to the principles of Ahold’s corporate responsibility program, management has chosen to orchestrate an anti-union campaign that violates international labor standards.

Discouraging Workers from Forming a Union Since taking control of Ukrop’s, Ahold has repeatedly and outspokenly opposed workers’ efforts to exercise their associational rights. 

Management has held a number of orientation meetings with its associates. At these meetings, managers explicitly stated the company’s desire to remain “union free.” These meetings were followed by similar mandatory anti-union meetings with associates.81



Prior to one of UFCW’s first informational meetings with Ahold employees in Richmond, management distributed a notice to its associates stating: “We do not believe any Associate should attend this meeting.” The leaflet characterized union staff as “paid union sales “Employers should not interfere with people” and instructed employees to “beware of workers’ decision to associate, try to union promises.” The leaflet concluded with the influence their decision in any way, or declaration: “Don’t sign a Union Authorization discriminate against either those Card!!!”83 workers who choose to associate or those who act as their In a letter addressed to Giant/Martin’s associates, representatives.”82 executives Richard Herring and Jim Scanlon -UN Global Compact instructed employees that union representation could adversely impact job security through uncompetitive contracts, strikes, and lost “On behalf of the entire Board of business.85 Directors I am pleased to confirm that In yet another letter, management described Ahold supports the ten principles of the employees’ union organizing activities as “a very UN Global Compact.”84 significant issue that threatens to undermine the -Ahold CEO John Rishton to UN Secretaryprogress we’ve made.” Management concluded by General Ban Ki-moon telling its workers that “signing a union card is not in your best interest.”86





81 82 83 84 85 86

Tape Recording, February 2010. UN Global Compact. “Principle 3,” in The Ten Principles. http://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/principle3.html Giant/Martin’s. “Letter—Important,” Undated. Emphasis in original. John Rishton. “Letter from John Rishton to UN Secretary General H.E. Ban Ki-Moon,” October 6, 2010. Richard Herring and Jim Scanlon. “Letter Addressed to Martin’s Associates,” Undated. Giant/Martin’s. “Letter Addressed to Martin’s Associates,” October 12, 2011. Emphasis in original.

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In what UFCW believes to be a violation of U.S. labor law, management instructed one of its employees to remove his union badge. Several days later, management realized its apparently illegal behavior and told the associate that he could wear the badge.87

Restricting Access From the moment Ahold entered the Richmond area, management has instituted a series of policies to restrict organizers, union members, and its own employees from meeting with workers to discuss forming a union. Such policies have placed major constraints upon “Employers should not interfere employees’ associational rights in the workplace. with the activities of worker  Management put in place a new solicitation policy that representatives while they carry effectively banned all nonprofit groups from its out their functions in ways that are storefronts. In the United States, a selective ban on not disruptive to regular company particular groups, such as labor unions or political operations.”88 parties, from the front of a store is illegal; so many -UN Global Compact employers ban all nonprofit groups in order to stop union members from petitioning at a storefront. With its blanket policy, Ahold management prevented union “We are committed to integrate the members and organizers from talking to workers, but Global Compact and its ten it also kept Girl Scouts from selling cookies and the principles into the core of the Salvation Army from collecting donations in front of strategy, operations and day-to-day Giant/Martin’s stores, as they had done for years.90 business of our company.”89 

When unionized Ahold employees from Giant-Landover attempted to speak to their coworkers at Giant/Martin’s, management promptly escorted them from the property. In one instance, management even contacted the police to remove unionized Ahold workers from a store in Richmond.91

-Ahold CEO John Rishton to UN Secretary-General Ban Ki-moon

Public Opposition Ahold managers have been frank in their opposition to employees’ attempts to form a union at Giant/Martin’s in Richmond. 

A spokesperson for the company described the unionization efforts as “a misleading campaign” and expressed the company’s disappointment “that union activities are disrupting the shopping experience for customers.”92

87

Don Gathers. Interview, March 23, 2011. UN Global Compact. “Principle 3,” in The Ten Principles. http://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/principle3.html 89 John Rishton. “Letter from John Rishton to UN Secretary General H.E. Ban Ki-Moon,” October 6, 2010. 90 Louis Llovio. “Ukrop’s Sale to End Sidewalk Activities; New Owner Bars Such Solicitation; Girl Scouts, Salvation Army Affected,” in Richmond Times, February 17, 2010, p. B3. 91 Waqas Ahmad (employee at Giant Landover). Interview, March 17, 2011. 92 Louis Llovio. “Union Trying to Organize Martin’s Workers,” in Richmond-Times Dispatch, February 9, 2011. http://www2.timesdispatch.com/business/2011/feb/09/TDBIZ01-union-trying-to-organize-martins-workers-ar-829738/ 88

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This same spokesperson added that Ahold’s operation in Richmond “is a union-free chain… one that allows us to communicate directly without the interference of an outside third party.”93

“In the community of operation…[an employer should] inform the local community, media and public authorities of company endorsement of the UN Global Compact and the company’s intention to respect the provisions, including those on fundamental workers’ rights.”95

“We communicate our intent to advance these principles as far as is possible within the scope of our business.”94

-Ahold CEO John Rishton to UN Secretary-General Ban Ki-moon, October 2010

-UN Global Compact This evidence makes it clear that Ahold management at Giant/Martin’s has discouraged workers from joining a union, prevented union representatives from meeting with workers, and overtly disparaged the union. These actions illustrate that Ahold has not only failed to enforce its stated commitment to international labor standards, it has violated those very same standards.

Union Avoidance Equals Inefficient Operations Contrary to management’s expectations when the acquisition took place, the former Ukrop’s stores in Richmond, Virginia, have struggled since Ahold purchased them. Management had expected to increase revenue and profit quickly, in large part by opening on Sunday and selling alcoholic beverages, two practices the former owners eschewed.96 However, the reality has not met these expectations. The stores lost more than $50 million in 2010, and management announced they would not reach profitability until late 2011.97 We believe that the unexpectedly poor performance at the Richmond stores is related to the company’s unionavoidance approach, which seems to us to be ideologicallydriven and not in the business interests of the company and its shareholders. Rather than working with employees and their representatives to increase service and productivity, as the company has done at Stop & Shop and GiantLandover, Ahold management at Giant/Martin’s has seen labor only as a cost to be reduced. In many former Ukrop’s 93

Ibid. John Rishton. “Letter from John Rishton to UN Secretary General H.E. Ban Ki-Moon,” October 6, 2010. 95 UN Global Compact. “Principle 3,” in The Ten Principles. http://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/principle3.html 96 Gregory Gilligan, Louis Llovio, and Emily Dooley, “Ukrop’s Future: Open Sundays, Alcohol Sales after Name Changes in About Two Years,” Richmond Times-Dispatch, December 17, 2009, http://www2.timesdispatch.com/news/2009/dec/17/ukrops_future_open_sundays_alcohol_sales_after_xml-ar-14117/ 97 Ahold. Annual Report 2010, p. 53. Louis Llovio, “A Year After the Farewell to Ukrop's/After Bumps, Martin's Expects Profit in 2011,” Richmond Times-Dispatch, February 7, 2011. 94

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stores, management has cut staffing on many shifts and reduced hours for many employees.98 The impact of these cuts has been predictable. Employees report that previously loyal customers have registered their dismay regarding reduced service, selection, and staffing levels. A local newspaper confirmed this view, noting that “More than two dozen shoppers interviewed in the past two months outside several grocery-chain stores in the Richmond area say they wished the Ukrop family hadn't left the retail grocery business, and they believe Martin's hasn't risen to the same level of service and selection as its predecessor.”99 Giant/Martin’s stores in Richmond face the added difficulty of a long-distance supply chain, the result of how Ahold carried out the acquisition of Ukrop’s. As mentioned above, rather than integrating the former Ukrop’s stores into unionized Giant-Landover, which has distribution centers in Maryland, Ahold chose to integrate the stores into anti-union Giant/Martin’s, with distribution centers in Carlisle, Pennsylvania, a difference of over 150 kilometers. The greater distance adds complexity and cost, and it increases the carbon emissions of a company that has pledged to reduce its footprint. In our view, the experience of Giant/Martin’s in Richmond illustrates how Ahold’s anti-union approach can hurt the bottom line. On the one hand, the company’s service problems are the result of its instrumental view of employees, leading to lower revenue. On the other, its union-avoidance strategy has stretched its supply chain, leading to higher cost. The result is self-inflicted financial losses.

III. CONCLUSION: AHOLD AT A CROSSROADS Ahold is at a crossroads. It has committed itself to corporate responsibility in every aspect of its operations and in every place it does business. This means it has pledged to support fundamental international labor standards, including those established by the UN Global Compact, the BSCI Code of Conduct, the ILO Core Conventions, the OECD Guidelines for Multinational Enterprises, and the UN Universal Declaration of Human Rights. In line with its corporate responsibility commitments, Ahold has benefited greatly from its partnership with UFCW. This partnership has delivered predictable labor costs, healthy productivity improvements, strong community reputation, powerful government relations, and improved competitive positioning against low-road retailers. It has also delivered higher margins and years of sustainable growth. However, this documented success is at risk. Through its investment decisions, Ahold management has indicated a preference to grow its anti-union banner Giant/Martin’s rather than its unionized banners Stop & Shop and Giant-Landover. The decision to merge Ukrop’s with Giant/Martin’s rather than GiantLandover is the most recent example of this bias, but the trend is ongoing. The number of Stop & Shop and Giant-Landover stores has fallen since 2006, but the number of Giant/Martin’s stores has increased 24 percent.100

98 99

Martin’s workers. Interviews, February 3, 2011. Louis Llovio, “A Year After the Farewell to Ukrop's/After Bumps, Martin's Expects Profit in 2011,” Richmond Times-Dispatch, February 7, 2011. Ahold. Annual Report 2007, p. 16; Ahold. Annual Report 2010, p. 25; Giant-Carlisle/Martin’s. “About Martin’s,” http://richmond.martinsfoods.com/shareddev/sharedcontent/VA/faqs.cfm; Stop & Shop. “Stop & Shop Issues a Voluntary Recall of Nature’s Promise Bagged Salads,” in Press Releases, January 26, 2011; and Giant Food LLC. “Giant Food Issues a Recall of Nature’s Promise Bagged Salads,” in Press Releases, January 26, 2011.

100

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2006

2007

2008

2009

2010

Stop & Shop/Giant-Landover Stores

575

560

563

561

571

Giant-Carlisle/Martin's Stores

143

145

148

152

177

Ahold’s growing anti-union approach comes with a set of risks that could impact its valuation. Choosing confrontation over cooperation means abandoning the company’s stated commitment to international labor standards and corporate responsibility. It means rejecting a proven partnership that has contributed to customer loyalty, brand reputation, operational performance, and the bottom line. And, as the difficulties in Richmond, Virginia, have demonstrated, it means poor service, weaker community relations, a sullied reputation, rising costs, lower revenue, and losses. Ahold is at a crossroads, and the choice for the company should be clear: reject the anti-union approach at Giant/Martin’s, re-commit to its principles of corporate responsibility as defined by international labor standards, and allow all the company’s workers, including those at Giant/Martin’s, to exercise their rights to freedom of association and collective bargaining. It is not only the right thing to do; it is the profitable thing to do.

Appeal to Ahold Stakeholders We call on all of Ahold’s stakeholders, including investors, to express their concerns to Ahold management: 

UFCW-AHOLD MEETING: When will top Ahold management meet with UFCW leadership? We believe such a meeting will benefit Ahold stakeholders if management works diligently and proactively with the UFCW to settle Ahold’s strained labor relations in the U.S.



AHOLD THREATENING LONG-TERM VALUE: The history of the Ahold-UFCW relationship is clearly positive for the company. The UFCW has been a constructive partner, working to advance the company’s interests in a number of areas, including community relations, beneficial legislation, enhanced productivity, workplace flexibility, competitive positioning, and collective bargaining. Why has Ahold management fought the union at Giant/Martin’s?



TWO-FACED LABOR RELATIONS: Ahold treats some workers differently, denying to approximately 35 percent of its U.S. workforce the organizing and bargaining rights granted to workers elsewhere in the U.S. and in Europe. How will the company remedy this disparate treatment of Giant/Martin’s workers?



AHOLD’S CORPORATE RESPONSIBILITY: Ahold has publicly and forcefully committed to uphold fundamental international labor standards across all its operations. Yet, evidence suggests that management infringes the spirit and letter of these standards at Giant/Martin’s. What is Ahold’s plan to implement consistent international labor standards throughout its U.S. operations?

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