UK hedge fund TCI says Volkswagen Group's top management together will have been paid about 400 million euros ($455 million) in salary and bonuses since 2011, a sum it condemned as "corporate excess on an epic scale."
That averages out to about 7.4 million euros per person per year despite what TCI estimates will be stagnant operating profits over the same six-year period.
“Management has been rewarded for failure,” TCI founder Chris Hohn told the carmaker earlier this month in an open letter to both senior executives and the board of directors.
What the activist investor did not mention is VW's bill for terminating management contracts more than tripled last year as the automaker has agreed to give four executives golden parachutes worth more than 41 million euros -- or about 10 million euros per person.
Now that truly is being rewarded for failure.
Ex-CEO Martin Winterkorn is getting a 9.3 million euro payoff after quitting his post last September when the diesel-emissions cheating scandal broke. This comes in addition to the 7.3 million euro salary he received for 2015 from VW Group and a 900,000 euro salary from Porsche SE, the company that oversees the Porsche-Piech clan's 52 percent VW stake. Winterkorn will also receive 1.5 million euros to step down as the holding company’s CEO.
When he quit as VW CEO last September, Winterkorn accepted responsibility for the scandal but said he wasn't aware of any wrongdoing on his part, and the company said last week an external investigation so far has found “no serious and manifest breaches of duty” on his part. However, the emissions-rigging took place throughout his entire tenure at the helm from 2007.
VW Group Chairman and Porsche SE boss Hans Dieter Poetsch defended Winterkorn's Porsche SE payout. "Essentially the legal claim [of Winterkorn] would have been higher," Poetsch told the holding company's annual news conference at the end of April.
Three other executives walked away with handsome payoffs.
- VW Group’s sales chief, Christian Klingler, who left in September with a little more than two years left on his contract, received 14.3 million euros.
- Former VW trucks chief Leif Ostling received nearly 2.2 million euros to leave six months early.
- Ex-finance chief Poetsch agreed to trade in his high salary as a company employee for the less-well paid chairmanship of VW's supervisory board. He made the change at the request of the group’s family owners in exchange for compensation of 15.3 million euros. While he wasn’t forced out, he remains under scrutiny for his decision not to disclose to investors the fraud at an earlier time.
VW's management board has become a prime example of corporate greed after its members clung to their 2015 bonuses despite the diesel scandal that plunged the company to its worst loss after it was forced to set aside 16.2 billion euros in provisions to cover the expected costs of fixing rigged diesel engines, plus a whole host of fines, legal fees and compensation claims.
"I have no understanding for those people that lead a large [German blue chip] corporation into an existential crisis, only to then openly defend their own bonuses," German Finance Minister Wolfgang Schaeuble told the Frankfurter Allgemeine Sonntagszeitung recently.
