By Christoph Steitz and Victoria Waldersee
FRANKFURT/BERLIN - Volkswagen's recent announcement of plant closures in Germany has brought attention to its unique governance and ownership structure, which has long been a point of contention for investors.
As a seasoned investment manager and financial market journalist, I will unravel the complexities of Volkswagen's history and shed light on how it impacts the company's future.
Unpacking the Volkswagen Law
The roots of Volkswagen's influential worker presence can be traced back to its inception before World War Two, when the Nazis funded the construction of its main factory in Wolfsburg. After the war, the British placed the company under public trusteeship, with the state of Lower Saxony holding a 20% voting stake to this day.
In 1960, the Volkswagen Law was enacted, granting significant influence to Lower Saxony and workers to safeguard the company from external interference. Key provisions include requiring a four-fifths majority for major decisions and a two-thirds majority for plant-related matters in the supervisory board.
The Ownership Maze
Volkswagen's ownership structure is intricate due to dual classes of shares - preferred and common stock. Porsche SE, owned by the Porsche and Piech families, holds a 31.9% equity stake, giving it effective control over the company. Lower Saxony and Qatar also hold significant voting stakes.
Governance Challenges
Volkswagen has faced criticism for governance issues stemming from its ownership structure, including Porsche SE's control despite not owning a majority of shares. CEO Oliver Blume's dual role at Volkswagen and Porsche AG has also raised concerns about effective leadership.
The resulting valuation discount has caused Volkswagen's shares to underperform, with uncertainty over succession within the Porsche and Piech families further exacerbating investor unease.
Analysis and Implications
Volkswagen's governance and ownership complexities have been a double-edged sword, providing stability but also hindering agility and shareholder value. The company's historical ties to worker influence and familial control pose challenges for modern corporate governance standards.
For investors, understanding Volkswagen's unique structure is crucial for evaluating its long-term prospects and potential risks. The company's ability to navigate these challenges will determine its future performance and attractiveness to shareholders.
As the world's top investment manager and financial market journalist, it is essential to stay informed and vigilant about these intricacies to make informed decisions and maximize returns in the ever-evolving landscape of global markets.
