FRANKFURT/BERLIN : Volkswagen’s plans to close plants in Germany and dissolve long-standing labour agreements with unions have put the spotlight on its unique governance and ownership structure that have drawn criticism from investors for years.
Like other German conglomerates, the 87-year-old automaker is the result of decades of expansion and strategy shifts, resulting in an empire that stretches from mass-market SEATs to luxury Lamborghinis, as well as stakes in sports car maker Porsche AG and trucks firm Traton.
WHAT’S THE VOLKSWAGEN LAW?
The strong influence of workers dates back to the early days of Volkswagen before World War Two, when the Nazis built Volkswagen’s main factory in Wolfsburg with money that came in part from assets expropriated from trade unions.
This, and the use of forced labour, formed the financial basis of the company. After the war, the British, who were responsible for the plant at the time, decided to place trusteeship of the company in public hands.
To this day, the state of Lower Saxony, where Volkswagen is based and where it operates five of its six western German assembly plants, has a 20 per cent voting stake.
In 1960, when the company was changed to a joint stock corporation, the so-called Volkswagen law was passed, handing significant influence to Lower Saxony and workers in a bid to protect the business from outside influence.
WHAT DOES IT SAY?
There are two critical clauses.
Decisions that normally require at least a three-quarters majority at the annual general meeting must be passed by more than four-fifths of Volkswagen shareholders, giving Lower Saxony a blocking minority.
Any decision to build or move a production plant also needs approval of a two-thirds majority in the 20-strong supervisory board, the law says, without specifically mentioning closures.
This means the 10 members on the board representing German labour can veto any far-reaching plans that affect factories.
WHAT’S
