Board of Management
Volkswagen AG and the Volkswagen Group are managed by Volkswagen AG’s Board of Management in accordance with the Volkswagen AG Articles of Association and the rules of procedure for Volkswagen AG’s Board of Management issued by the Supervisory Board.
Volkswagen’s strategic management is largely conducted at Group level by various committees. These committees, which are composed of representatives both of the relevant central departments and the corresponding functions in the Company’s business areas, cover the following basic functions, among other things: product, liquidity and foreign currency, investment, digital transformation, and management issues.
Each brand in the Volkswagen Group is managed by a board of management, which ensures its independent development and its business operations. The Group targets and requirements laid down by the Board of Management of Volkswagen AG must be complied with to the extent permitted by law. This allows
Group-wide interests to be pursued while at the same time safeguarding and reinforcing each brand’s specific characteristics. Matters that are of importance to the Group as a whole are submitted to the Group Board of Management in order – to the extent permitted by law – to reach agreement between the parties involved. The rights and obligations of the statutory bodies of the relevant brand companies remain unaffected.
The companies of the Volkswagen Group are managed separately by their respective managements. In addition to the interests of their own companies, each individual company management takes into account the interests of the Group and of the individual brands in accordance with the framework laid down by law.
Fiscal year 2016 was dominated by the Volkswagen Group’s realignment. The work of the Supervisory Board and its committees focused on the development of the future program TOGETHER – Strategy 2025, as well as the diesel issue and its consequences. The Supervisory Board of Volkswagen AG addressed the Company’s position and development regularly and therefore with particular intensity in 2016. It supervised and supported the Board of Management in its running of the business and advised it on issues relating to the management of the Company in accordance with its duties under the law, the Articles of Association and the rules of procedure. The Supervisory Board also observed the relevant recommendations and suggestions of the German Corporate Governance Code at all times. It was directly involved in all decisions of fundamental importance to the Group. The Supervisory Board additionally discussed strategic considerations with the Board of Management at regular intervals.
The Board of Management regularly, promptly and comprehensively informed the Supervisory
Board in writing or orally on all matters of relevance to the Company relating to the strategy, the development of the business as well as the Company’s planning and position, including the risk situation and risk management. In this respect, the Board of Management also informed it in particular of improvements to the risk and compliance management system with regard to the diesel issue. In addition, the Board of Management informed the Supervisory Board on an ongoing basis about compliance-related topics and other topical issues. In all cases it received the documents relevant to its decisions in good time for our meetings. The Supervisory Board also received a detailed monthly report from the Board of Management on the current business position
and the forecast for the current year. Any variances in performance that occurred as against the plans and targets previously drawn up were explained by the Board of Management in detail, either orally or in writing. The Supervisory Board analyzed the reasons for the variances together with the Board of Management so as to enable countermeasures to be derived. In addition, the Board of Management presented regular reports on current developments in connection with the diesel issue at the meetings of the Special Committee on Diesel Engines.
The Chairman of the Supervisory Board also consulted with the Chairman of the Board of Management at regular intervals between meetings to discuss important current issues. Apart from the diesel issue, they included the Volkswagen Group’s new strategy and planning, the development of the business, the Group’s risk situation and risk management including integrity and compliance issues.
The Supervisory Board held a total of eleven meetings in fiscal year 2016. The average attendance ratio was 95.0%; all of the members of the Supervisory Board attended over half of the meetings of the Supervisory Board and the committees of which they are members. In addition, resolutions on urgent matters were adopted in writing or using electronic communications media.
Supervisory Board Committees
The Supervisory Board has established five committees in order to discharge the duties entrusted to it: the Executive Committee, the Nomination Committee, the Mediation Committee in accordance with section 27(3) of the Mitbestimmungsgesetz (MitbestG – German Codetermination Act), the Audit Committee and, since October 2015, the Special Committee on Diesel Engines. The Executive Committee and the Special Committee on Diesel Engines each consist of three shareholder representatives and three employee representatives. The members of
the Nomination Committee are the shareholder representatives on the Executive Committee. The remaining two committees are each composed of two shareholder representatives and two employee representatives. The members of these committees as of December 31, 2016 are given on page 87 of the Annual Report of 2016.
The Executive Committee met 20 times during the past fiscal year, mainly discussing current matters related to the diesel issue. The Committee also prepared the resolutions by the Supervisory Board in detail and dealt with the composition of and contractual issues concerning the Board of Management other than remuneration.
The Nomination Committee is responsible for proposing suitable candidates for the Supervisory Board to recommend for election to the Annual General Meeting. The Committee met once in the reporting period.
The Mediation Committee did not have to be convened in 2016.
The Audit Committee held six meetings in fiscal year 2016. It focused primarily on the consolidated financial statements, risk management (including the internal control system), and the work performed by the Company’s compliance organization. In addition, the Audit Committee addressed the Group’s quarterly reports and the half-yearly financial report as well as current financial reporting issues and their examination by the auditors.
The Special Committee on Diesel Engines is responsible for coordinating all activities relating to the diesel issue and preparing resolutions by the Supervisory Board. The Special Committee is also provided with regular information by the Board of Management to enable that. It is also entrusted with examining any consequences of the findings. The Chairman of this Committee reports regularly on its work to the Supervisory Board. The Special Committee on Diesel Engines met on ten occasions in fiscal year 2016. At its meeting on June 18, 2016, the
Special Committee on Diesel Engines decided – having been delegated by the Supervisory Board with the relevant authority – to approve the conclusion of settlements with the US authorities and customers in relation to the 2.0 l engines. At its meetings on November 17, 2016 and December 19, 2016, the Special Committee on Diesel Engines decided – having been delegated by the Supervisory Board with the relevant authority – to approve the conclusion of settlements with the US authorities and customers in relation to the 3.0 l engines.
Furthermore, as a rule the shareholder and employee representatives met for separate preliminary discussions before each of the Supervisory Board meetings.
Conflicts of Interest
At its meeting on November 17, 2016, the Executive Committee of the Supervisory Board addressed major shareholder business relationships. The Executive Committee members were guided exclusively by the interests of the Company when voting. No material conflicts of interest were discernible in this respect. In this context, the Executive Committee granted approvals to transactions with the State of Lower Saxony. Executive Committee member Mr. Stephan Weil is Minister-President of the State of Lower Saxony and abstained from voting.
Mr. Hans Dieter Pötsch was a member of the Board of Management of Volkswagen AG until October 2015. His move to the Supervisory Board had already been planned irrespective of the diesel issue. In order to avoid conceivable conflicts of interest, Mr. Pötsch does not participate in adopting Supervisory Board resolutions that might relate to his conduct in connection with the diesel issue. Consequently, Mr. Pötsch also did not vote on the resolution adopted by the Supervisory Board at its meeting on May 10, 2016 on the proposed resolution to the Annual General Meeting concerning formal approval of the actions of the members of the Board of Management for fiscal year 2015.
No other conflicts of interest were reported or were discernible in the reporting period.