Handelsblatt Exclusive

VW Wants to Cap Executive Compensation at €10 Million

Capping manager salaries. Picture source: DPA

The supervisory board at Volkswagen is drafting plans to cap executive compensation at €10 million, or $10.7 million, according to Handelsblatt sources close to the non-executive board.

The cap will be discussed at the supervisory board’s meeting on February 24. If approved, the new cap would be included in executives’ current contracts.

Under the proposed compensation system, executives would receive a higher fixed salary and lower variable compensation. Bonuses wouldn’t play as great a role as in the past, company sources told Handelsblatt. Variable compensation has been about four times higher than fixed compensation.

Executives would also invest a portion of their money in company stock, which they would not be able to redeem for several years. Bonuses would be tied to dividends and VW’s stock price, sources said, so that the consequences of a bad year would also be reflected in executive pay.

“The view will be oriented to the future and the system will be oriented more toward the capital market,” an insider told Handelsblatt.

VW confirmed that it’s reworking its compensation system, but a spokesman for the automaker declined to provide details.

Executive compensation has been a perennial source of controversy at VW. Christine Hohmann-Dennhardt received a €13 million package upon leaving the automaker after serving only a year as its legal chief. Former chief executive Martin Winterkorn received €17 million, making him the best paid corporate head in Germany.

The federal state of Lower Saxony, which has a 20-percent stake in VW, is expected to push hard for a reduction in executive compensation amid public pressure.


Martin Murphy is a Handelsblatt correspondent covering the car industry. To contact the author: murphy@handelsblatt.com

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