The VW Group is proposing to its shareholders to increase the upper limit for board salaries. This emerges from the invitation to the Annual General Meeting on May 10 in Berlin, which was published on Monday. “The Supervisory Board has decided to adjust the remuneration system for the members of the Board of Management of Volkswagen AG with effect from January 1, 2023,” it says.
So far, according to the rules, CEOs may earn a maximum of EUR 12 million gross per year, if all salary components including pension entitlements are taken into account – other members of the Management Board a maximum of EUR 7 million. In the future it should be up to 15 million euros or 8.5 million euros.
The most recent upper limits for the cash amounts transferred were 10 million (Chairman) and 5.5 million euros. According to the regulations, they should avoid “unreasonably high payments” in individual years. Shareholders are now being asked to raise these thresholds to EUR 12.5 million and EUR 7 million respectively.
Again and again in the criticism
The references in the top floor of Germany’s largest company were repeatedly the subject of criticism. Among other things, VW justifies the amount by saying that it remains attractive for executives in an international comparison and that it also has to reflect the “market conditions”. The benchmark is a group of different corporations in which the remuneration at the top is sometimes even more lavish. In 2017 there was a salary reform at VW, meanwhile ecological and social factors are also included.
Sub-goals, the achievement of which is necessary for maximum remuneration, should now be formulated more ambitiously. In addition, components that are geared to long-term instead of short-term indicators are given greater weight. The possibility of extraordinary special bonuses for members of the top VW management team is also to be abolished – such payments have not been made in recent years.
Values often not comparable
The fixed base salary is usually the smallest part for Volkswagen board members. Far higher sums come from variable elements that are linked to business success and other criteria. This includes the development in the current reference year (“annual bonus”) and a “long-term bonus” based on three previous years. Then there are the pension claims. Values between two individual years are often only comparable to a limited extent because the payment of certain categories can be staggered over several stages and deductions.
The former CEO Martin Winterkorn came up with up to 17 million euros in years with high bonuses. According to the remuneration report, Herbert Diess, who had to resign at the beginning of September 2022 and make way for Oliver Blume, will receive 7.9 million euros for his last eight months at the top of the group including pension, plus a further 3.9 million euros after leaving the Executive Board – in total a good 11.8 million euros for the past year.
In the case of Blumes – at the same time still the head of the VW subsidiary Porsche – it is almost 7.4 million euros. Among the board members who performed the same function throughout the year, HR manager Gunnar Kilian achieved the highest salary with a total of just over 6.8 million euros.
