Corporate Governance at Volkswagen

1. Introduction

Volkswagen’s products are often seen as a synonym for German quality and assurance of performance, and the automobile giant has recorded sales revenues of 204.5 billion Euros in 2014 (Annual Report, 2014). By assessing the stock prices over the past 10 years, Volkswagen has managed to steadily increase its share price – even following the financial crisis. According to former CEO, Martin Winterkorn, the company “stands for strength, reliability and long-term success - even under less favourable conditions” (Letter, 2014) However, some characteristics of Volkswagen’s corporate governance practices are at best highly questionable, and this report seeks to analyse and identify the overarching problems and integrate these into a recommendation for the automobile company. At the root of the on-going emission scandal, lack of corporate governance is seen as the catalyst for this wrongdoing. The scope of this assignment will focus shortly on (1) the power struggle of the Porsche family, (2) the ownership structure as a result of (1), (3) the board structure and (4) what lead to the scandal. The analysis will be conducted by the application of relevant corporate governance theories and frameworks, which function as the basis of the reports elucidating power. This will be consolidated in a recommendation to ensure that the automotive giant can restructure and regain the trust in the wake of both previous and current scandals.

2.1 The struggle for power

For the past 50 years, there has been an on-going struggle between the different members of the Porsche family – the creators of both Volkswagen and the Porsche brand. Recently, the battle has been between Ferdinand Piëch (former chairman of the supervisory board) and Wolfgang Porsche (chairman of the supervisory board at Porsche holding SE) (Spiegel, 2015), which lead to the departure of Piëch in April 2015. There are many details and a lot of complexity to this matter, but the outcome of this family feud has affected both the ownership structure and thereby the composition of the supervisory board.

According to Volkswagen, they follow and comply with the German corporate governance code (Annual Report, 2014). However, by taking a closer into the composition of board members and who holds majority-voting rights, the transparency that this governance code was supposed to bring (Thomsen & Conyon, 2012), is far from realised. With heavily intertwined connections between Volkswagen and its majority shareholder, Porsche Holding SE, it is a setup for complicated corporate governance problems. While the struggle is no sole governance problem, it has had severe implications on ownership- and board structure.

2.2 Ownership structure

The current ownership structure of Volkswagen is one of the overarching problems of the German giant. With different