Volkswagen’s decision to pay its top managers considerable bonuses while the automaker is struggling with huge costs over the dieselgate issue made its investors step upfront and demand explanations.
Volkswagen finally saw the financial repercussions of its emissions cheating scheme, as it posted a record loss of 1.6 billion euros (1.82 billion dollars) for 2015, while setting aside 16.2 billion euros (18.4 billion dollars) in provisions. Nevertheless, the automaker said it still planned to pay the 12 current and former members of its management board 63.24 million euros (72 million dollars), after it cut the remunerations by around 39 percent compared to 2014. Management also agreed to withheld part of last year’s bonuses until 2019, with payment depending on performance criteria and on recovery of the Volkswagen’s share price. The decision triggered much discontent among the company’s shareholders, as they keep asking VW’s board to wipe off entirely their bonuses amid such troublesome times.
Activist hedge fund TCI Fund Management has written to the board of the German carmaker, fiercely attacking its approach. Chris Hohn, founder of the 10 billion dollar London-based fund, said the ”extravagance must end and the management remuneration system needs to change.”
He said the company had the potential to make huge profit, but the last six-years have not been as they should be and the business had gone backwards. “Shockingly, in that six-year period, the nine members of the Board of management will have been paid around 400 million euros. That is corporate excess on an epic scale. Management has been rewarded for failure,” he wrote.
But the investors are not the only ones baffled by VW’s way of handling the issue. Germany’s finance minister Wolfgang Schaeuble has also criticized the executive board. “I have no sympathy for managers who first drive a large blue chip-listed company into an existence-threatening crisis and then defend their own bonuses in a public debate,” he recently told German weekly Frankfurter Allgemeine Sonntagszeitung. “That shows that something is not working.”