Bonuses were paid out, despite the company recording a record loss.
Volkswagen is facing calls to reduce the remuneration received by 12 of its top executives after paying out €63 million ($71 million) in 2015, despite the company posting record losses for the year.
Automotive News Europe reports that activist investor TCI Fund Management sent a letter to VW earlier this month, calling on the automaker to reduce the “huge sums of money” paid to top-level employees. The letter also adds that any bonuses should be paid in shares, thereby aligning managers with shareholders.
Under VW’s current system, execs are rewarded if the company earns more than €5 billion ($5.62 billion) in a year, before interest and tax payments. “This is obviously wrong,” said TCI boss Chris Hohn. Hohn first weighed in on the issue in May of this year, criticizing VW’s boardroom “extravagance”.
VW’s 2015 losses stemmed from the Dieselgate scandal that broke in September of that year and the slump in sales that followed. A $15 billion compensation package, including payouts to owners of cars fitted with emissions cheating software, has been agreed in the United States, before any fines and legal action.
The bill for a recall of affected cars in Europe and other parts of the world will likely run to 11 figures, as well. Some estimates have put the total cost the saga at $70 billion, possibly more.
In his letter, Hohn said VW should implement a new salary and bonus scheme that is transparent, easily measured and does not reward poor performance.
Speaking separately to Reuters, TCI partner Ben Walker said all bonus payments should be made in shares over three to five years. He said: “Managers must own a lot of stock so they are aligned with shareholders.”
VW released a statement saying it is working on a new executive pay structure that will come into force for its 2017 financial year. Ideas from investors would be considered in the process, the statement added.
Source: Automotive News Europe