VW shareholders vent anger at chairman

Volkswagen’s minority shareholders vented their anger at the German carmaker’s leadership over the diesel emissions scandal on Wednesday, and demanded reform of its supervisory board.

Nine months after Volkswagen admitted to equipping up to 11m diesel cars with defeat devices that understated harmful emissions in official tests, VW’s directors and senior management stood before more than 3,000 investors at the company’s annual meeting.

Several shareholders called for a shake-up of the supervisory board, so that it included more independent directors to hold management to account. Currently, just one of the 20 member board is considered independent by certain investors and proxy advisers, although VW disputes this.

Hans Dieter Pötsch, VW chairman, bore the brunt of investor criticism during the day-long meeting, but he appeared untroubled as one shareholder after another inveighed against his handling of the worst crisis in the company’s history.

Among the broadsides levelled against Mr Pötsch were complaints that he should have notified shareholders of the scandal weeks before VW did, on September 22 — four days after US regulators revealed the wrongdoing.

“Mr Pötsch, why are you sitting there?” asked one shareholder, who then alluded to how a majority of VW’s voting shares are held by the Porsche and Piëch families.

“You are not impartial … You might have the trust of the Porsche families, but you don’t have ours. You are partially responsible for the scandal.”

Another shareholder said: “You are one of the perpetrators [of the scandal], not a victim. You have made yourself a judge over something that concerns you.”

Mr Pötsch was VW’s finance director when the scandal broke on September 18. His promotion to chairman just weeks later — giving him the task of overseeing an investigation into the scandal and dealing with its repercussions — has caused numerous investors to complain.

“The suggested move of Mr Pötsch not only goes against best corporate governance practice in Germany but gives rise to serious conflicts of interest,” said Hans-Christoph Hirt, co-head of Hermes Equity Ownership Services.

Such complaints were bolstered on Tuesday when it emerged that BaFin, Germany’s financial watchdog, had asked public prosecutors to investigate VW’s entire former management board on suspicion of possible market manipulation.

Public prosecutors in the northern German city of Braunschweig have not responded publicly to that request, but they have launched an investigation into Martin Winterkorn, the carmaker’s former chief executive, and Herbert Diess, head of the VW passenger car brand. Mr Pötsch is not under investigation.

Investor anger mattered little at the meeting because Mr Pötsch’s move to become chairman had already been backed by the Porsche and Piech families, plus two other big shareholders — the state of Lower Saxony and Qatar’s sovereign wealth fund.

The small influence of the minority shareholders was made plain when Mr Pötsch asked them to vote on whether he was fit to chair the meeting. Just 0.02 per cent of shares held by investors present at the meeting supported Mr Pötsch stepping aside.

Mr Pötsch defended his conduct. He said Jones Day, the US law firm that VW hired last year to investigate the scandal, had no input from the supervisory board and was reporting directly to the US Department of Justice, which in January sued the carmaker.

Nevertheless, Mr Pötsch acknowledged that management did a poor job when independent tests in 2014 revealed that emissions by VW diesel cars on the road were far higher than those recorded in laboratory conditions. He said the issue was not given due attention because it was considered a technical problem.

You [Hans Dieter Pötsch] are one of the perpetrators [of the scandal], not a victim. You have made yourself a judge over something that concerns you

Matthias Müller, VW’s chief executive, was at pains to emphasise how the company was moving on from the scandal. “What is done cannot be undone,” he said.

VW slipped to its worst loss ever last year because of costs related to fixing cars affected by the scandal. Its shares have fallen about 20 per cent.

Mr Müller recapped the 10-year strategy plan he revealed last week — a “radical overhaul” to make VW a leader in battery technology and electric cars, while also cutting costs and thereby improving profitability.

Among the dozens of shareholders who spoke at the meeting, almost all focused on the scandal and what it implied about VW’s corporate governance.

Institutional Shareholder Services, a proxy adviser, gives VW’s corporate governance its worst possible rating and the lowest score for any company listed on Germany’s DAX index of major groups.

VW’s leadership offered few hints at the meeting that it was willing to amend its governance structure.

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