Volkswagen Group CEO Martin Winterkorn is set to receive a two-year contract extension that will allow him to continue in the post to 2018 – long enough to see through his ambitious, decade-long strategy to replace Toyota as the top-selling global automaker.
VW's 20-member supervisory board is almost certain to sign off on the contract extension, which was proposed Wednesday by its influential steering committee, during at its meeting on Sept 25.
In Germany the duty of appointing and dismissing CEOs and other senior managers falls to the supervisory board, which also is tasked with the key role of oversight – unlike the one-tier board structure familiar in the U.S. or UK.
Unfortunately at Volkswagen, however, the supervisory board often ended up in the past effectively rubber-stamping decisions taken by then-Chairman Ferdinand Piech, who resigned in April.
VW now has an opportunity to strengthen its oversight, after botching the chance in May when two unknown and largely inexperienced nieces of Piech were appointed to the supervisory board at the behest of the very management board the two are supposed to monitor.
With the steering committee now down to five following Piech’s departure, VW should consider naming a member of its third shareholder group, the Gulf state of Qatar, to this key body. Typically, motions proposed by the Praesidium carry during the full boardroom sessions.
This could help cement ties with Qatar, heading off speculation that it might disrupt the delicate balance of interests that rule VW by selling its 17 percent voting stake. While Arab investors have proven to be long-term partners for Germany’s industry, Abu Dhabi’s sovereign wealth fund Aabar Investments liquidated in October 2012 its entire stake in Daimler. This was not only disruptive but highly embarrassing, since management bequeathed it over 9 percent of its stock less than three years earlier at the rock-bottom price of just over 20 euros per share in a firesale stock issue that diluted the rest of its investors.
Qatar could furthermore provide a valuable counterweight to the shifting alliances of the Porsche-Piech clans, the German federal state of Lower Saxony and the German unions – all of whom are already represented on the steering committee. For its part the Arab country could and should play a bigger role when protecting its investment.
Since May, the carmaker also has a strong candidate on its board with over two decades of experience running a national champion much like Volkswagen that has strong ties to the government and its people. Akbar Al Baker transformed Qatar Airways from an insignificant regional Gulf operator with just four aircraft when he took over in 1997 to the tenth largest international operator by passenger-kilometers flown, according to industry statistics.
During his extensive time as CEO, the state-owned company’s fleet expanded every year on average by over 20 percent, an expansion of productive capacity that easily outdoes even Volkswagen’s prodigious growth under Winterkorn.
Granted state subsidies played a role in financing his strategy, but the only other individual on VW’s board with anything remotely like his credentials when it comes to running the day-to-day operations of a major company is banker Annika Falkengren, head of Swedish lender SEB. But Falkengren's background is financial not transportation.
In addition to coming from the transport industry, Al Baker is considered to be very detail-oriented, much like Piech and Winterkorn. He has been outspoken about union obstruction in managing a business and served as an advocate of change within the airline governing body IATA. The Doha native has campaigned against its lack of transparency, questioned the auditing of its accounts and attacked its narrow mindset for currying favor mainly amongst its European delegates.
This kind of critical outside perspective would be well put to use on VW’s influential steering committee. The question is not only whether Volkswagen wants to improve its corporate governance, but whether Mr. Al Baker have both the inclination and the time to play a bigger role?