BlackRock attacks Volkswagen’s post-Dieselgate governance

BlackRock, the world’s biggest fund manager, has criticised Volkswagen’s management and supervisory boards, saying the carmaker still suffers from a lack of independent governance five years after Dieselgate.

The US group, which is the fourth-largest VW shareholder, revealed it had voted against members of both boards at the German group’s annual meeting on Wednesday.

It said the company had not addressed problems that played a “major role” in the Dieselgate scandal, adding that it was concerned about the composition of the company’s ownership, in which just three shareholders hold more than 90 per cent of the voting rights.

The fund manager also criticised the fact that individuals who were VW executives at the time of the discovery of so-called “cheat devices” were still in charge.

Through VW’s unique two-tier capital structure, Porsche SE, the investment vehicle of the Porsche-Piëch families, holds 53.1 per cent of VW’s voting rights, while the state of Lower Saxony holds 20 per cent, and Qatar 17 per cent.

All three are entitled to nominate representatives to VW’s 20-person supervisory board, which is led by the company’s former chief executive Hans Dieter Pötsch, who also runs Porsche SE.

“We have on numerous occasions encouraged the company to improve the number of independent directors on the supervisory board to enhance the level of independent oversight of management,” BlackRock said, disclosing that it had voted against certain executives since 2016, the first annual meeting following the diesel emissions scandal in 2015.

“In our assessment, the insufficient independent oversight provided by VW’s supervisory board played a major role in the events, which led to the company employing what has become known as a ‘defeat device’ in some of its diesel engine cars,” the US investor added.

Both Mr Pötsch, and chief executive Herbert Diess, were executives at VW when the Dieselgate scandal was revealed. The affair has cost the carmaker €32bn — almost the same amount as its entire electric vehicle investment package.

However, Larry Thompson, a US court appointed monitor who spent three years at VW overseeing the overhaul of its corporate culture, said this month he was confident the company was a “better organisation” than when he arrived at its Wolfsburg headquarters in 2017.

“There will be other problems, but I am absolutely convinced that Volkswagen will handle those problems differently than they handled the Dieselgate problem,” the former Enron prosecutor told the Financial Times.

BlackRock was joined by German asset manager DWS in not voting to approve the actions of members of the management board, and by institutional investors Deka and Union in refusing to ratify the entire supervisory board.

Norway’s oil fund, the sixth largest VW investor and the world’s biggest sovereign wealth fund, also voted against both boards.

In addition, BlackRock criticised the voting process at VW, in which shareholders are usually required to complete individual proxy forms to exercise their rights, due to a German law that has governed the company since it was privatised in 1960.

The fund manager said this “serves to further limit the ability of minority shareholders . . . as it makes it unusually difficult for shareholders to voice their concerns”.

Despite BlackRock’s misgivings, 94.33 per cent of VW’s preferential shareholders voted to approve the actions of the management and supervisory boards in the 2019 fiscal year.

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