Sunday 18 March 2018

Snap election in Germany should spell end to political interference in Volkswagen boardroom

Bernd Althusmann
Bernd Althusmann

Olaf Storbeck

From a global perspective, the political crisis in Lower Saxony, which was triggered by the defection of a Green parliamentarian, looks a storm in a teacup. But for investors in Volkswagen, a snap election due in October could be a turning point for political meddling in the carmaker.

Lower Saxony owns 20pc of VW's voting stock, making it the company's second-largest shareholder. Opinion polls suggest that Prime Minister Stephan Weil, a Social Democrat, may lose his job to his Christian Democrat challenger Bernd Althusmann. The latter accuses Mr Weil of not managing the VW stake professionally and has called for an overhaul.

He has a point. Both the state's representatives on VW's supervisory board are regional career politicians with little insight into the global car-making industry. They focus on protecting local jobs, and work closely with trade unions, which appoint half of the supervisory board members. The result is a lack of effective checks and balances that makes the carmaker prone to value-destructive strategies and misconduct like the diesel emissions scandal.

Ideally, Lower Saxony would sell its stake, which is currently worth €7.7bn. Rival carmakers BMW and Daimler do not have state governments as shareholders, and both have outperformed VW. German labour laws are strong enough to give workers influence without a state shareholder. Yet any politician who severed the historic link between Lower Saxony and VW would face accusations of flogging the family silver.

Althusmann has suggested that one of the board seats should be occupied by a car expert rather than a politician.

That would be a start. Doing away with the undue privileges over other shareholders should be on the agenda, too. It should waive its right to make board appointments without approval of other shareholders and its right to veto key decisions like opening and closing plants.

If Lower Saxony started to deal with VW at arm's length, it would eventually turn into a more normal company. That's a precondition for corporate success, which would ultimately be good for workers and shareholders - and for local politicians.(Reuters Breaking Views)

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