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: products, investment, risk management, digital transformation, management issues, and monitorship.
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.
In fiscal year 2017, the work of the Supervisory Board of Volkswagen AG and its committees focused once again on realigning the Volkswagen Group as part of the Group`s TOGETHER – Strategy 2025, and the investigation of the diesel issue. The Supervisory Board of Volkswagen AG addressed the Company’s position and development regularly and with particular intensity in the reporting period. 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. It also observed the relevant recommendations and suggestions of the German Corporate Governance Code (the Code)at all times. The Supervisory Board was directly involved in all decisions of fundamental importance to the Group. It 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 in person on all matters of relevance to the Company relating to its strategy, the business development and the Company’s planning and position. This also included 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, the Supervisory Board received the documents relevant to its decisions in good time for its meetings. At regular intervals, it also received a detailed 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 in person or in writing. Together with the Board of Management the Supervisory Board analyzed the reasons for the variances 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 business development, the Group’s risk situation and risk management, including integrity and compliance issues.
The Supervisory Board held a total of twelve meetings in fiscal year 2017. The average attendance ratio was 84.6%; 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, 2017 are given on page 87 of the Annual Report of 2017.
The Executive Committee met 17 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 did not hold any meetings in 2017.
The Mediation Committee did not have to be convened in the reporting period.
The Audit Committee held five meetings in fiscal year 2017. It focused primarily on the consolidated financial statements, the risk management system including the effectiveness of the internal control system, and the work performed by the Company’s compliance organization. In addition, the Audit Committee concerned itself with the Group’s quarterly reports and the half-yearly financial report, as well as with current issues and the supervision of financial reporting and the financial reporting process, and the examination thereof by the auditors. Moreover, the Audit Committee initiated the call for bids for audits and other auditrelated services in the Volkswagen Group follow the selection procedure within the meaning of Article 16(3) of Regulation (EU) No 537/2014.
The Special Committee on Diesel Engines is responsible for coordinating all activities relating to the diesel issue and preparing resolutions by the Supervisory Board. To this end, the Special Committee on diesel Engines is also provided with regular information by the Board of Management. It is also entrusted with examining any consequences of the findings. The Chairman of this Committee on Diesel Engines reports regularly on its work to the Supervisory Board. In fiscal year 2017, the Special Committee on Diesel Engines met on eleven occasions, in which, among other topics, details pertaining to the settlements with the US authorities as well as the Supervisory Board`s proposed resolutions regarding formal approval of actions of incumbent members in fiscal year 2016 were discussed.
Furthermore, as a rule, the shareholder and employee representatives met for separate preliminary discussions before each of the Supervisory Board meetings.
Conflicts of Interest
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 always left the meeting room prior to discussions and resolutions adopted by the Supervisory Board that might relate to his conduct in connection with the diesel issue.
No other conflicts of interest were reported or were discernible in the reporting period.