Giant Norway fund slams “unacceptable” VW-Porsche deal in second governance campaign in a week

Announcement follows controversial US and UK governance broadsides.

The asset manager of the Norwegian Government Pension Fund – Global has made its second major international public corporate governance stand within a week by writing to the board of Germany’s Volkswagen saying its planned acquisition of Porsche is “unacceptable”. In a letter addressed to VW supervisory board chairman, Ferdinand Piech, the NOK2,385bn (€280bn) Norges Bank Investment Management (NBIM), which runs the sovereign wealth fund’s assets, said: “We write to you to express our deep concerns over Volkswagen’s agreed and planned dealing with Porsche entities and their controlling owners, concerns we believe are widely shared among investors in the equity market,”
NBIM head of corporate governance Anne Kvam and analyst Ola Peter Krohn Gjessing said the takeover plans: “leave the impression of being designed to suit the needs of the Porsche controlling families at the expense of Volkswagen and its non-controlling owners.” The letter added that the transactions are “compromised by conflicts of interest”. Last week, NBIM announced a major corporate global governance campaign challenging four major US companies to split their chairman and chief executive roles. It is also threw its considerable weight in the UK stock market – as owner of £32bn worth of UK listed shares – behind moves to push all UK corporate directors to be re-elected every year, a tougher position than recommended by the recent draft Walker review on corporate governance by Sir David Walker. That position was criticised by UK investors including Hermes and the Universities Superannuation Scheme, who said it risked making the relationship between shareholders and boards short-termist.In its latest governance broadside, NBIM, Europe’s largest equity investor, questioned whether individual VW supervisory board members had fulfilled their fiduciary duty to the company. “Unless the supervisory board takes steps to alleviate our concerns, we see little reason to support the execution of the proposed transactions. As [an] investor we will consider the options open to us in this respect.”
The fund’s decision could represent a key moment in addressing some of the complexities of cross-shareholdings in Germany AG.
NBIM held NOK2.6bn (€311m) of VW shares at the end of last year, according to its web site – giving it a 0.15% voting stake and 0.35% ownership in the Wolfsburg-based car giant. It held NOK529m of Porsche stock, giving it 0.57% ownership. Foreign institutional investors held 11.9% of VW at the start of this year, down from 25.6% a year before.
NBIM’s intervention follows VW’s agreement in August to buy 42% of Porsche SE’s car arm for €3.3bn as part of a gradual merger of the firms. The deal is effectively a bailout for Porsche which has run up billions of euros of debt in a bid to swallow its larger peer. The saga at one point saw VW briefly become the world’s most valuable company. VW chairman Piech is a member of the Porsche and Piech families that control Porsche’s voting shares. The families that control Porsche have four representatives on VW supervisory board. VW spokespersons were not speaking to the press on the matter. VW shares were up around 2% at €115.39 today.