Later On

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Problems at Volkswagen Start in the Boardroom

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James Stewart reports in the NY Times:

There is a long tradition of scandal and skulduggery in the auto industry, but few schemes appear as premeditated as Volkswagen’s brazen move to use sophisticated software to circumvent United States emissions standards.

That such a thing could happen at Volkswagen, Germany’s largest company and the world’s largest automaker by sales — 202.5 billion euros last year — has mystified consumers and regulators around the world. But given Volkswagen’s history, culture and corporate structure, the real mystery may be why something like this didn’t happen sooner.

“The governance of Volkswagen was a breeding ground for scandal,” said Charles M. Elson, professor of finance and director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. “It was an accident waiting to happen.”

The company, founded by the Nazis before World War II, is governed through an unusual hybrid of family control, government ownership and labor influence. Even by German standards, “Volkswagen stands apart,” said Markus Roth, a professor at Philipps-University Marburg and an expert in European corporate governance. “It’s been a soap opera ever since it started.”

Volkswagen’s recent history — a decades-long feud within the controlling Porsche family, a convoluted takeover battle and a boardroom coup — has dominated the German financial pages and tabloids alike. This week, the German newspaper Süddeutsche Zeitung compared Volkswagen’s governance to that of North Korea, adding that its “autocratic leadership style has long been out of date.” It said “a functioning corporate governance is missing.”

Until a forced resignation this spring, the company was dominated by Ferdinand Piëch, 78, the grandson of Ferdinand Porsche and the father of 12 children. He reigned over Volkswagen’s supervisory board and directed a successful turnaround at the luxury brand Audi before taking the reins at its parent, Volkswagen, in 1993. Mr. Piëch set the goal of Volkswagen’s becoming the world’s largest automaker by sales, a goal the company achieved this past year. He stepped down as chairman in April after unsuccessfully trying to oust the company’s chief executive, Martin Winterkorn, who himself was forced out this week.

One measure of Mr. Piëch’s influence: In 2012, shareholders elected his fourth wife, Ursula, a former kindergarten teacher who had been the Piëch family’s governess before her marriage to Ferdinand, to the company’s supervisory board.

Although many shareholders protested her lack of qualifications and independence, they have little or no influence. Porsche and Piëch family members own over half the voting shares and vote them as a bloc under a family agreement.

Labor representatives hold three of the five seats on the powerful executive committee, and half the board seats are held by union officials and labor.

Of the remaining seats, two are appointed by the government of Lower Saxony, the northwestern German state that owns 20 percent of the voting shares. Two are representatives of Qatar Holding, Qatar’s sovereign wealth fund, which owns 17 percent of Volkswagen’s voting shares. Members of the Piëch and Porsche families hold three more seats, and a management representative holds another.

Outside views rarely penetrate. “It’s an echo chamber,” Professor Elson said. . .

Continue reading.

Written by LeisureGuy

24 September 2015 at 4:22 pm

Posted in Business

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