Adecco under pressure to compensate shareholders
The world’s largest employment agency, Adecco, is facing legal action from shareholders after the discovery of accounting irregularities caused its share price to plummet.
Investors in the United States have filed several lawsuits seeking damages against the Swiss firm.
Adecco saw its value drop by nearly SFr7 billion ($5.6 billion) in a matter of minutes on January 12, following the announcement that it would delay publishing its year-end results.
The firm, which is based in Glattbrugg near Zurich, revealed that accounting flaws had been discovered during an internal audit at Adecco Staffing North America.
The statement has prompted separate probes by authorities in the US and by Switzerland’s Federal Banking Commission.
The Swiss stock exchange (SWX) has also launched preliminary investigations into alleged derivatives insider trading and a possible breach of the bourse’s publication rules.
In addition, six US law firms acting for investors have filed class action suits against Adecco, alleging that the company misstated its figures.
Seeking compensation
Adecco has yet to explain what went wrong at the firm. Initially there were fears of fraud at some of firm’s overseas units, but more recent communiqués from the company suggest that it may simply have mishandled its communications.
Whatever the reason, Adecco shareholders may still be looking at a sizeable loss on their investment. But court action may not be the best way of seeking compensation, says the Swiss Investors Protection Association.
“The shareholders could also call for an extraordinary general meeting. This can get quicker results than legal proceedings,” said the organisation’s president, Hans-Jacob Heitz.
Swiss caution
While shareholders in the US are already trying to get compensation for losses, Swiss investors are sitting tight.
Dominique Biedermann, director of the Ethos Foundation in Geneva, says the difference in attitude comes down to different legal procedures.
“In the United States, shareholders can file a complaint before they even know the extent of the damage,” Biedermann told swissinfo.
“In a general sense, European investors think differently. They try to find out what actually happened before launching legal proceedings.”
It will take several weeks before the American courts decide whether the complaints have a legal basis or not.
Not serious
On January 30, Adecco announced that its problems were not as bad as it had previously thought and would in fact have no financial significance.
The company also said that its chief executive, Jérôme Caille, would not be stepping down, despite coming under fire from shareholders.
Both the chief financial officer and the chief executive of Adecco Staffing North America stepped down soon after the irregularities were first revealed.
Following last week’s announcement, Adecco’s share price rose by around 14 per cent to SFr65.50.
The company has yet to announce when its 2003 figures will be released.
swissinfo
On January 12, Adecco announced it had found accounting irregularities and would delay the publication of its 2003 results.
The company’s value dropped SFr7 billion soon after the announcement.
The problem was located in internal controls in Adecco Staffing North America.
The irregularities came to light during a routine audit of the company’s numbers.
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