The AGM of Volkswagen, the car manufacturer hit by an emissions scandal, takes place today and has been described as a “lithium test” for shareholder power in issues of corporate governance.
David Pitt-Watson, a London Business School academic and director of the International Corporate Governance Network, predicts a “stormy” shareholder meeting and says investors around the world will be watching.
“For many years there have been concerns about the governance of VW. Today this outstanding engineering company, now fallen foul of a terrible scandal, has the opportunity to rise to the challenge, and announce a reform package, which shows its system of governance can demonstrate the proper use of the power entrusted to it.”
Dr Hans-Christoph Hirt, co-head of Hermes EOS, the engagement unit of Hermes Investment Management, said: “The company’s continuous disregard of fundamental corporate governance principles may have contributed to the emissions scandal. It has undoubtedly tarnished the reputation of the German two-tier board system and employee representation among foreign institutional investors, resulting in collateral damage to the German economy.”
Hermes is to vote against the “discharge” of the management and the supervisory board at today’s AGM. In German law, a vote against so-called discharge is a way for shareholders to express dissatisfaction with boards.
In addition, and among other measures, Hermes has initiated a request for a special audit to investigate the acts and potential breaches of duty by the two boards.
The supervisory board oversees and, is ultimately responsible for, Volkswagen’s corporate governance and culture in which the emissions scandal was able to unfold and remain undetected for many years, said Hirt.
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