Bernd Osterloh

How much is too much?

  • Why it matters

    Why it matters

    Employee representatives play a critical role in German companies, having to sign off on key decisions including restructurings that cost jobs.

  • Facts

    Facts

    • Bernd Osterlohhas been the head of VW’s works council for the past 12 years.
    • Besides his base salary of €200,000 ($218,650) he gets a bonus that easily totals another half a million euro in a good year.
    • By law, companies are required to pay their employee reps an amount that is at least comparable with what they could earn if they had chosen another career path within the company.
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    Audio

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More dirt to be dug at VW? Prosecutors are investigating the pay of VW's leading worker representative. Source: Mauritius.

Bernd Osterloh must be used to scandal and investigations surrounding his employer, Wolfsburg-based automaker Volkswagen, by now.

But the most recent stir isn’t focused on the so-called Dieselgate emission-cheating scandal that has held the firm in its grip for almost two years. The most recent scrap is about Mr. Osterloh – who is quite possibly the most powerful employee representative in Germany – himself. On Friday, prosecutors alleged that VW has overpaid the influential chief of the works council for years.

The investigation doesn’t actually target Mr. Osterloh himself – it is aimed at members of the carmaker’s personnel managers who signed off on his payments. But it could still leave a stain: Like manager bonuses, remuneration for employee representatives is a touchy subject in Germany, where works councils are strong and must be convinced to get onboard major restructuring initiatives.

Given how powerful the head of the VW works council is, if the board was found to have overpaid him deliberately, it could be another major blow to the company’s already-battered reputation.

A bonus for employee representatives is unusual, but not unheard of in Germany.

Mr. Osterloh represents the carmaker’s 620,000 employees in every negotiation about its restructuring, something VW sorely needs after paying out tens of billions in fines and settlements since the Dieselgate scandal emerged in September 2015.

He has a lot of power, he is aware of this and he uses it. When in 2015 then-VW boss Martin Winterkorn was in the hot seat because of a spat with the owner, Ferdinand Piëch, it was Mr. Osterloh who supported the CEO and helped buy him some more time in the job. And when earlier this year Mr. Osterloh went head-to-head with VW’s core brand manager Herbert Diess over the details of restructuring program, it was only a decree by the Porsche-Piëch owner family that was able to save Mr. Diess.

Mr. Osterloh in the past also has been accused of being too close to management by rivals within the VW works council. Some within the workforce have nicknamed Mr. Osterloh “the co-manager” because he was often seen socializing with former Mr. Winterkorn over wine and cigars at company events. There is no doubt that Mr. Osterloh can make or break careers at VW.

His remuneration is close to the level of a senior manager at the company. Besides his base salary of €200,000 ($218,650) he gets a bonus that easily totals another half a million euro in a good year. Such a bonus for employee representatives is unusual but not unheard of in Germany, according to sources at Germany’s largest trade union IG Metall. A VW spokesperson said the reason is simply that works council members of the board are paid like higher-level management.

Bernd Osterloh
A powerful man: Bernd Osterloh, chief of the VW works council. Source: DPA

By law, companies are required to pay their employee reps an amount that is at least comparable with what they could earn if they had chosen another career path within the company instead. That’s supposed to make sure that the most capable employees don’t desert the works council for better-paying management positions. But the law doesn’t specify a concrete sum and doesn’t cap the total.

Both the company spokesperson and Mr. Osterloh said they don’t think there is any merit to the prosecutor’s accusations. The spokesperson added that Volkswagen hired a legal expert who found that Mr. Osterloh’s remuneration was in accordance with the law and that the manufacturer is fully cooperating with authorities in the investigation.

A spokesperson for the VW works council said that Mr. Osterloh, who has been the top employee rep for 12 years, passed on many opportunities to join management over that time period, most recently an offer to join the board as head of personnel. That would have easily earned him about €5 million ($5.47 million) per year. Mr. Osterloh said that he passed on the position because he did not want to abandon employees during the crisis caused by the Dieselgate scandal.

Over the weekend Mr. Osterloh told a local newspaper, the Braunschweiger Zeitung, that he has a “clear conscience” with regard to his remuneration, and that he’s paid just like any one of the 300 divisional managers at Volkswagen. He added that he expects a bonus of almost €300,000 ($328,000) for 2016. Nor is he considering giving up his post over the controversy. He added that if employees have a problem with how much he’s making, he’ll be happy to face his critics and explain the situation.

Prosecutors don’t allege wrongdoing on Mr. Osterloh’s part. Instead, they are investigating current head of personnel, Karlheinz Blessing, and his predecessor, Horst Neumann, for potentially overpaying Mr. Osterloh, a spokeswoman for the prosecution’s office told Handelsblatt. Authorities are looking into the actions of two more top-level executives in the case as well.

The supervisory board and the state of Lower Saxony, one of VW’s largest investors besides the Porsche-Piëch clan, have already come out in support of Mr. Osterloh over the weekend, crediting him with fighting hard for workers’ rights at Volkswagen.

Of course, some of VW’s managers may be happy to hear about the investigation. If Mr. Osterloh is defending himself, he will be too busy to defend VW’s workers. At the same time, VW doesn’t need any more scandals at the moment, so will likely do their best to make this go away. Still, if the stories about his earnings don’t quieten down soon, the next few weeks could prove increasingly uncomfortable for Mr. Osterloh.

 

Martin Murphy covers the steel, car and defense industries for Handelsblatt. Stefan Menzel writes about the auto industry focusing on Volkswagen. Volker Votsmeier is an editor with Handelsblatt’s investigative reporting team. To contact the authors: murphy@handelsblatt.commenzel@handelsblatt.com votsmeier@handelsblatt.com

 

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