Foreign investors take stand against Volkswagen chief Piech at AGM (Update)

At least four non-domestic institutions oppose election to board

(Updates with comment from CPPIB)
At least four non-domestic institutional investors have voted against Volkswagen chief Ferdinand Piech and his wife as supervisory board candidates at the carmaker’s annual meeting in Hamburg tomorrow.

The institutions are the $157bn (€120bn) Florida State Board of Administration, the C$152.8bn (€152bn) Canada Pension Plan Investment Board (CPPIB), the $4bn Christian Brothers Investment Services (CBIS) and London-based Hermes Equity Ownership Services (EOS).

Hermes, ultimately owned by the BT Pension Scheme, has around £89bn (€110bn) under advice.

Piech has been chairman of Volkswagen’s supervisory board since 2002. His wife Ursula, a former nanny to his family, serves as his deputy at two foundations that hold his corporate wealth.

Hans Hirt, executive director at Hermes EOS, outlined his objections to the appointments in a letter to Piech and VW Chief Executive Martin Winterkorn.

“The composition of the supervisory board has continually deteriorated with regard to the independence of its members,” he wrote.

“It lacks a sufficient amount of independent members as required under the German Corporate Governance Code.”

“We are therefore critical towards the candidates proposed for election and will not be supporting them.”

CPPIB also commented: “As per our Proxy Voting Principle and Guidelines CPPIB believes that sufficientindependence is one of the most effective ways of ensuring that boards act in the best interests of all shareholders,” The Canadian fund added: “Our vote results from the fact that the supervisory board would be only 5% after the proposed elections, which is far below market standards for Germany.”

But the election of the couple to the board is near certain, as Piech’s family and his relatives in the Porsche family hold a majority stake in Europe’s biggest car maker.

“The composition of the supervisory board has continually deteriorated”

The state of Lower Saxony, Volkswagen’s second-largest shareholder with a 20% stake, also backs the couple as candidates. The third biggest shareholder is Qatar with 17%.

“In Mrs Piech, Volkswagen’s supervisory board is gaining a competent woman and someone who has followed the carmaker’s development for many years,” said David McAllister, premier of Lower Saxony, in a statement to Responsible Investor. McAllister sits on the supervisory board as a result of the shareholding.

In his letter, Hirt also took aim at the plans to provide CEO Winterkorn with €20m in compensation for 2011. “Remuneration is considered appropriate if it ensures that Mr Winterkorn stays at Volkswagen and is sufficiently motivated. Has the supervisory board ascertained that almost €20m is actually needed for that purpose?”