STUTTGART (Bloomberg) -- Porsche Automobil Holding SE, the maker of the 911 sports car, is likely to win an appeals case over a shareholder meeting during its failed bid to take over Volkswagen AG, a German judge said in a preliminary assessment of the case.
Minority investors may not win their bid to invalidate shareholder votes over directors' approval of an “unconscionably” high salary for CEO Wendelin Wiedeking and other officials, Judge Eberhard Stilz said at a hearing at the Stuttgart Higher Regional Court.
“It's important to stress that it is not our task to rule on whether the compensation was illicit or whether the bid to take over Volkswagen was handled in line with the law,” Stilz said on Nov. 3.
“We only have to judge whether the shareholders' decisions were taken wrongfully, and that only indirectly touches these issues.”
The failed bid led to Wiedeking's ouster in 2009, regulatory probes, and lawsuits in United States and Germany.
Volkswagen agreed to join with Stuttgart-based Porsche in August 2009 after the sports car maker's debt tripled to more than 10 billion euros ($14 billion) following the failed bid. Porsche in fiscal 2008 paid 143.5 million euros to its management board.
Shareholders have wide discretion when deciding whether to discharge directors and executives from liability over their actions, Stilz said. The court may still change its view after hearing the parties' arguments, according to the judge. The court scheduled a ruling for Nov. 17.
“If this court grants a carte blanche to Porsche over these issues, it would be a catastrophic signal, also in terms of the competition of financial markets,” said Martin Weidemann, a lawyer for the plaintiffs. “It will also be an issue what courts in this country can offer investors.”
The suit seeks to invalidate the votes to discharge executives and directors from liability for their actions in fiscal 2008. The case also targets the votes approving the appointment and remuneration of supervisory board members.
The minority investors are appealing a lower court ruling that rejected their claims. The shareholder meeting took place in January 2009, before Porsche's takeover bid was abandoned.
Porsche considers the claims unfounded, company spokesman Albrecht Bamler said.
$1 billion hit
The investors argue Porsche should have answered more questions at the meeting about its strategy leading to an October 2008 announcement that it controlled 42.6 percent of Volkswagen shares and had secured so-called cash-settled options for another 31.5 percent.
The statement caused VW shares to surge as short sellers were forced to buy shares borrowed in a bet that Volkswagen stock would fall.
Previously, Porsche had said it was seeking a 50 percent stake in the company.
The events led to probes by Germany's financial-market regulator BaFin and prosecutors. Short sellers have filed U.S. lawsuits claiming the sports car maker secretly cornered the market in VW shares and cost them more than $1 billion.
Porsche was right not to answer all questions about derivatives it used in the process, because such disclosures could have damaged the interests of the company, Stilz said.