Daily Times

Investors hungry for reform at Volkswagen after the diesel emissions test-cheating scandal may be disappointed at the carmaker’s annual shareholder meeting on Wednesday.

Galvanized by hedge fund TCI, which launched an attack on Volkswagen’s (VW) corporate governance last month, some shareholders felt that changes to the company’s arcane structure were inevitable.

There were also signs of discontent among major shareholders with some members of the Porsche-Piech family indicating they might dispute the paying of a dividend at the meeting. But that appeared to have been resolved on Thursday after Volkswagen presented a 10-year strategy plan.

After decades in which Europe’s biggest carmaker appeared to be run in the interests of the Porsche-Piech clan that controls the company, Volkswagen’s more than half a million employees and its home state of Lower Saxony, the balance of power seemed set to tip towards institutional shareholders.

“VW can only develop further if the conflict of interest between unions, Lower Saxony, the ruling families and independent shareholders is resolved,” said Ingo Speich, a fund manager at Union Investment which holds about 0.6 percent of VW preference shares.

A vote by the Porsche-Piech family would have begun to weaken the special status of Lower Saxony by giving all shareholders equal voting rights if the dividend were scrapped for two years in a row.

That would have eliminated the veto rights of Lower Saxony, with its interests in preserving local jobs, over major strategic moves such as shutting plants.

But the family closed ranks on Thursday after Volkswagen presented a strategy plan supposed to turn the company into a leader in electric vehicles and new forms of mobility such as ride-hailing and car-sharing.”The agreement on the dividend shows that no significant changes are to be expected,” said Union Investment’s Speich.

Porsche SE, the family’s holding company for its 52 percent stake in Volkswagen, said the clan no longer had any issue with Volkswagen’s paying a dividend, thanks to the plan that it said secured the company’s future, and called off a supervisory board meeting at which the issue was due to be discussed on Monday.

In an interview with Germany’s Bild tabloid, Wolfgang Porsche and Hans Michel Piech – two senior representatives of the family on Volkswagen’s supervisory board – explicitly backed executive bonuses, Chairman Hans Dieter Poetsch, and the new strategy, which it said was the only way to preserve jobs.

“We as a family are responsible for Volkswagen,” Porsche told the newspaper. “In this matter, our families, regardless of what generation, are absolutely unanimous.”

These are the key players and issues facing Volkswagen: Dieselgate has put VW’s delicately balanced ownership structure in the spotlight, with the state of Lower Saxony, VW’s second largest shareholder, controlling 20 percent of voting rights and retaining a blocking minority to veto major strategic decisions. The 20-seat supervisory board, or board of directors, grants equal representation to workforce and shareholder representatives. But VW differs from other German companies in one respect – Lower Saxony, where VW is headquartered, gets two of the 10 shareholder seats, tipping the balance of power.

Analysts say the representatives from Lower Saxony and the workforce share the common goal of protecting jobs at the state’s biggest company, which employs over 100,000 people in the northwestern German state.

The clout that labor wields at VW became visible again two weeks ago when executives and labor bosses, faced with pressure to make cuts in high-cost German operations, agreed to start talks without eliminating jobs.

“VW needs a more contemporary structure. Special government rights are outdated and counterproductive,” said London-based Evercore ISI analyst Arndt Ellinghorst who has a “buy” rating on the stock.

The structure of the supervisory board, dubbed by Ellinghorst as the “Super Saxony Board”, is mirrored by the composition of its executive committee, which sets the agenda for the broader board.