- Unions, government called for reduction in management payouts
- Automaker faces billions of dollars in diesel-scandal costs
Volkswagen AG Chairman Hans Dieter Poetsch and other top executives agreed to significant bonus cuts to help resolve a dispute over management pay in the midst of the emissions-cheating scandal.
Poetsch, the former chief financial officer, as well as current management-board members will seek a “reasonable and fair solution” for bonuses, Wolfsburg, Germany-based Volkswagen said in a statement. The individual packages will be adopted at an April 22 meeting of Volkswagen’s supervisory board, said Stephan Weil, the prime minister of Lower Saxony and a board member.
Volkswagen’s management and supervisory boards “jointly agreed that –- given the current situation of the company –- a signal should also be sent with respect to the topic of the management board’s remuneration,” Volkswagen said in the statement. The plan would result in a “significant reduction of the variable remuneration.”
The embattled automaker has been under increasing pressure over executive bonuses after labor unions and the German state of Lower Saxony, the company’s second-largest shareholder, opposed generous bonuses amid the financial hit from the scandal. Poetsch was targeted for scrutiny because he was entitled to a payment of about 10 million euros ($11.4 million) last year as compensation for leaving the higher-paid CFO post.
Volkswagen shares rose the most since March 11, trading up 4.9 percent at 112.75 euros at 12:59 p.m. in Frankfurt. The stock is down 31 percent since the scandal, cutting about 16 billion euros from the company’s market value.
Volkswagen, which is still grappling with fixing 11 million tainted cars, has one of the highest-paid executive ranks in the auto industry. In 2014, its nine-member management board earned a total of nearly 70 million euros, including 54 million euros in variable compensation. That was nearly double the 37 million euros Daimler AG paid its nine top executives, including bonuses for record earnings last year. BMW AG’s nine management-board members made 35.5 million euros last year.
Volkswagen faces billions of euros in costs for installing systems to rig diesel-engine emissions tests and has said the 6.7 billion euros set aside in the third quarter last year won’t be enough.
Chief Executive Officer Matthias Mueller updated management board members at their weekly meeting Tuesday on the remuneration-cutback plans following a gathering of the company’s top supervisory board panel on Monday. At a session last week, some executives had opposed eliminating their bonuses for last year as a means to stem the financial fallout from the scandal, according to people familiar with the situation, who asked not to be named because the talks were private.