Activist Investor Finally Targets Volkswagen
Activist investor TCI Fund Management is taking to task Volkswagen, in an effort by an activist to shake up the embattled company, finally. TCI's issues include excessive pay despite the fact that the company has been performing poorly. This bloated cost structure has hurt earnings and was doing so even before the diesel emissions scandal.
Chris Hohn, who runs TCI and is Europe's most aggressive activist, has a €1.2bn stake in VW. In his recent letter, Hohn pushes for pay reform. The recent loss, losing €1.6bn for 2015, was the worst ever, but executives still got bonuses.
Hohn says in his letter, “the shares and management have been constant disappointments ... With a new management team in place, we want to express formally what we expect from the company and how management should be paid going forward.”
Hohn has also said, “the dirty secret of Volkswagen group is that for years management has been richly rewarded with massive compensation despite presiding over a productivity and profit collapse ... We believe that this excessive top management compensation . . . has encouraged aggressive management behaviour contributing to the diesel emission scandal.”
Hohn wants a new executive compensation structure.
It's about time that Volkswagen faced an activist. However, it's not without headwinds, with 89% of the voting stock owned by the Porsche and Piech owner families, the German state of Lower Saxony and the emirate of Qatar - all of which limit an activists ability to push for change.