Volkswagen's Governance Under Scrutiny Amidst Major Changes

Volkswagen's decision to close German plants and end labor agreements prompts examination of its governance and ownership. The company, with roots in WWII, is largely controlled by Porsche SE. Its complex ownership and governance structures face criticism and impact share performance, driven by historical labor laws and familial influences.

Volkswagen's move to shut down manufacturing plants in Germany and terminate existing labor agreements casts a spotlight on the company's governance. The automaker's unique ownership structure has been a focal point of investor criticism for years, influenced by historic labor laws and its diverse portfolio ranging from SEAT to Lamborghini.

The origin of Volkswagen's complex governance dates back to pre-World War Two, with the advent of the so-called Volkswagen law post-1960. This law empowers the state of Lower Saxony and workers with significant control, influencing major decisions, including plant closures—critical factors contributing to its unique corporate setup.

Control of Volkswagen is mainly vested in Porsche SE, despite the presence of varying stock classes, with governance issues largely attributed to overlapping leadership roles. Investors express concerns over familial succession, impacting the company's market valuation and leaving its shares underperforming in the sector.

(With inputs from agencies.)