The Volkswagen AG Supervisory Board performs its role through its members working together. It advises and monitors the Board of Management with regard to the management of the Company and, through the requirement for the Supervisory Board to provide consent, is directly involved in decisions of fundamental importance to the Company.
Information on the composition of the Supervisory Board and the Supervisory Board committees and their chairs as well as on the terms of office of the individual Supervisory Board members can be found in the “Members of the Supervisory Board and committees” section. Further information on the work of the Supervisory Board and the Chair of the Supervisory Board’s discussions with investors can be found in the “Report of the Supervisory Board”.
The Supervisory Board of Volkswagen AG consists of 20 members, half of whom are shareholder representatives. In accordance with Article 11(1) of the Articles of Association of Volkswagen AG, the State of Lower Saxony is entitled to appoint two of these shareholder representatives for as long as it directly or indirectly holds at least 15% of the Company’s ordinary shares. The remaining shareholder representatives on the Supervisory Board are elected by the Annual General Meeting.
The other half of the Supervisory Board consists of employee representatives elected by the employees in accordance with the Mitbestimmungsgesetz (MitbestG – German Codetermination Act). A total of seven of these employee representatives are Company employees elected by the workforce; the other three employee representatives are trade union representatives elected by the workforce.
The Chair of the Supervisory Board is generally a shareholder representative, and the Deputy Chair is generally an employee representative. Both are elected by the other members of the Supervisory Board.
The business of the Supervisory Board is managed by a dedicated office of the Supervisory Board Chair. The Chair of the Supervisory Board ensures the independence of the office of the Supervisory Board Chair and its staff and exercises the right to appoint and supervise staff in consultation with the responsible Board of Management members.
The Supervisory Board appoints the Board of Management members and, on the basis of the Executive Committee’s recommendations, decides on a clear and comprehensible system of remuneration for the Board of Management members. It presents this system to the Annual General Meeting for approval every time there is a material change, but at least once every four years.
Each member of the Supervisory Board of Volkswagen AG is obliged to act in the Company’s best interests. Supervisory Board members are not permitted to delegate their responsibilities to others.
Every Supervisory Board member is obliged to disclose any conflicts of interest to the Chair of the Supervisory Board without delay. In its report to the Annual General Meeting, the Supervisory Board informs the Annual General Meeting of any conflicts of interest that have arisen and how these were dealt with. Material and not merely temporary conflicts of interest on the part of a Supervisory Board member should result in a termination of the member’s mandate.
Supervisory Board members should not hold board or advisory positions at major competitors of Volkswagen AG or major competitors of a company dependent on Volkswagen AG and should not be in a personal relationship involving a major competitor.
Members of the Supervisory Board receive appropriate support from the Company upon induction as well as with respect to education and training. Education and training measures are outlined in the “Report of the Supervisory Board”.
Working procedures of the Supervisory Board
As a rule, the Supervisory Board adopts its resolutions in meetings of all its members. It must hold at least two meetings in both the first and second halves of the calendar year. The precise number of meetings and the main topics discussed are outlined in the “Report of the Supervisory Board”. Due to the pandemic, many meetings were held virtually.
The Chair of the Supervisory Board coordinates the work within the Supervisory Board. He represents the interests of the Supervisory Board externally and represents the Company to the Board of Management on behalf of the whole Supervisory Board. Within reason, the Chair of the Supervisory Board discusses Supervisory Board-specific topics with investors and, in consultation with the Board of Management, may also discuss non-Supervisory Board-specific topics. More details can be found in the “Report of the Supervisory Board”.
To underline the importance of environmental sustainability, social responsibility and good corporate governance, the Supervisory Board has appointed an ESG (environmental, social and governance) officer. This role is currently performed by Mr. Hans Dieter Pötsch.
The Supervisory Board should meet regularly also without the Board of Management. Each Supervisory Board meeting generally ends in a debate. Board of Management members are not present during this part of the meeting. The Chair of the Supervisory Board convenes and chairs the Supervisory Board meetings. If the Chair is unable to do so, the Deputy Chair performs these tasks. If the auditor is called to a meeting of the Supervisory Board or one of its committees as an expert, members of the Board of Management do not attend such a meeting if the Supervisory Board or the committee does not deem their attendance necessary.
The Supervisory Board is only quorate if at least ten members participate in passing the resolution. The Chair of the Supervisory Board or of the relevant committee decides the form of the meeting and the voting procedure for the Supervisory Board and its committees. Should the Chair so decide in individual cases, meetings may also be held using telecommunications technology, or members may participate in meetings using this technology. The Chair may also decide that members can participate in the Supervisory Board’s or its committees’ decision making in writing, by telephone or in another, similar form. Supervisory Board resolutions require a majority of votes cast, unless legislative provisions or the Articles of Association stipulate otherwise. Decisions to establish or relocate production sites require a two-thirds majority of the Supervisory Board members. If a vote results in a tie on this item, the vote is repeated. If this vote is also tied, the Chair of the Supervisory Board casts two votes. Minutes must be taken of each meeting of the Supervisory Board and its committees. Minutes of a meeting must record the time and location of the meeting, the participants, the items on the agenda, the material content of the discussions and the resolutions adopted.
In individual cases, the Supervisory Board may decide to call upon experts and other appropriate individuals to advise on individual matters.
Supervisory Board committees
In order to discharge the duties entrusted to it, the Supervisory Board has established four committees: the Executive Committee, the Nomination Committee, the Mediation Committee established in accordance with section 27(3) of the Mitbestimmungsgesetz (MitbestG – German Codetermination Act) and the Audit Committee. The Executive Committee is currently comprised of four shareholder representatives and four employee representatives. The shareholder representatives on the Executive Committee make up the Nomination Committee. The remaining two committees are each composed of two shareholder representatives and two employee representatives.
Which tasks the Supervisory Board has generally transferred to the respective committees is described below. This does not rule out that the Supervisory Board will not transfer other tasks to committees in individual cases, where legally admissible.
At its meetings, the Executive Committee meticulously prepares the resolutions of the Supervisory Board, discusses the composition of the Board of Management and takes decisions on matters such as contractual issues concerning the Board of Management other than remuneration and consent to ancillary activities by members of the Board of Management. The Executive Committee supports and advises the Chair of the Supervisory Board. It works with the Chair of the Board of Management to ensure long-term succession planning for the Board of Management.
The Nomination Committee proposes suitable candidates for the Supervisory Board to recommend to the Annual General Meeting for election. Before presenting such proposals, it ensures that the candidates can commit the expected time to their role and identifies the personal and business relationships of the candidates to Volkswagen AG and its Group companies, to Volkswagen AG’s corporate bodies and to shareholders who directly or indirectly hold more than 10% of the voting shares in Volkswagen AG. In its proposals to the Supervisory Board, the Nomination Committee also takes into account the requirement for the Supervisory Board to adhere, in its proposals to the Annual General Meeting, to the specific targets it has set for the composition of the Supervisory Board and to the profile of skills and expertise it has decided on for the Board as a whole; the Nomination Committee also takes into account the diversity concept for the composition of the Supervisory Board.
The Mediation Committee has the task of submitting proposals to the Supervisory Board for an appointment or revocation of appointment if there is no majority for the relevant measure on the Supervisory Board in the first vote. The majority involves at least two-thirds of all Supervisory Board members.
Among other things, the Audit Committee discusses the auditing of financial accounting, including the annual and consolidated financial statements, as well as monitoring of the accounting process, and the audit of the financial statements. It also discusses compliance and the effectiveness of the risk management system, internal control system and internal audit system. In addition, the Audit Committee particularly concerns itself with the Volkswagen Group’s quarterly financial reports and half-yearly financial report.
A further committee formed by the Supervisory Board is the Special Diesel Engine Committee, which was in existence from October 2015 to December 2021. Comprised of three shareholder representatives and three employee representatives, the Special Diesel Engine Committee was responsible for supporting the investigations in connection with the manipulation of emissions figures for Volkswagen Group diesel engines and preparing Supervisory Board resolutions for necessary consequences at Supervisory Board level. To this end, the Special Diesel Engine Committee was provided with regular information by the Board of Management. The Chair of the Special Diesel Engine Committee reported regularly on the Committee’s work to the Supervisory Board. The tasks of the Special Diesel Engine Committee were essentially completed by the end of December 2021: the Supervisory Board has completed its investigations into the diesel issue as far as the civil liability of the members of the boards are concerned. In light of this situation, the Supervisory Board dissolved the Special Diesel Engine Committee with effect from the end of December 31, 2021. Any measures connected with the diesel issue to be addressed in the future will be discussed directly by the full Supervisory Board and prepared by the Executive Committee.
Objectives for the composition of the Supervisory Board, profile of skills and expertise and diversity concept
In view of the Company’s specific situation, its purpose, its size and the extent of its international activities, the Supervisory Board of Volkswagen AG strives to achieve a composition that takes the Company’s ownership structure and the following aspects into account:
- At least three members of the Supervisory Board should be persons who embody the criterion of internationality to a particularly high degree.
- In addition, at least four of the shareholder representatives should be persons who, in line with the criteria of Recommendations C.7 to C.9 of the Code, are independent within the meaning of Recommendation C.6 of the Code.
- At least three of the seats on the Supervisory Board should be held by people who make a special contribution to the diversity of the Board.
- Proposals for election should not normally include persons who have reached the age of 75 on the date of the election.
The above criteria have been met. Numerous members of the Supervisory Board embody the criterion of internationality to a particularly high degree; various nationalities are represented on the Supervisory Board and numerous members have international professional experience. Several members of the Supervisory Board contribute to the Board’s diversity to a particularly high degree, especially Dr. Hessa Sultan Al Jaber, Ms. Marianne Heiß, Ms. Bertina Murkovic and Dr. Hussain Ali Al Abdulla. The Supervisory Board comprises members of various generations. Independent Supervisory Board members within the meaning of Recommendation C.6 of the Code currently comprise at least the following: Dr. Hessa Sultan Al Jaber, Dr. Hussain Ali Al Abdulla, Mr. Bernd Althusmann and Mr. Stephan Weil.
Supervisory Board members Dr. Hans Michel Piëch, Dr. Ferdinand Oliver Porsche and Dr. Wolfgang Porsche have been members of the Supervisory Board for more than 12 years and therefore fulfill one of the indicators set out in C.7 of the Code regarding a lack of independence from the Company and its Board of Management. The same will apply to Supervisory Board member Hussain Ali Al Abdulla from April 23, 2022. However, considering all the circumstances of the case in hand, the shareholder representatives are of the opinion that the aforementioned Supervisory Board members are nevertheless independent from the Company and its Board of Management. This opinion is based in particular on the following reasons:
- Hans Michel Piëch, Ferdinand Oliver Porsche and Wolfgang Porsche, together with other family shareholders, are indirectly controlling shareholders of Porsche Automobil Holding SE, which as the largest single shareholder of Volkswagen AG holds 31.4% of the share capital and 53.3% of the voting rights. The management by the Board of Management of Volkswagen AG therefore economically affects the personal assets of Hans Michel Piëch, Ferdinand Oliver Porsche and Wolfgang Porsche.
- Hussain Ali Al Abdulla is a representative of Qatar Holding LLC, which as one of the largest single shareholders of Volkswagen AG holds 16.4% of the share capital and 17.0 % of the voting rights. The management by the Board of Management of Volkswagen AG therefore also economically affects the assets of Qatar Holding LLC.
- The composition of the Board of Management has changed fundamentally several times over the past 12 years during the tenure of Hans Michel Piëch, Ferdinand Oliver Porsche, Wolfgang Porsche and Hussain Ali Al Abdulla. The incumbent Board of Management members have been in office for a maximum of approximately seven years. There are therefore no indications that Hans Michel Piëch, Ferdinand Oliver Porsche, Wolfgang Porsche and Hussain Ali Al Abdulla would stop behaving in an impartial manner towards incumbent members of the Board of Management as a result of a long period of collaboration. There is also no other evidence of “tunnel vision” on the part of Hans Michel Piëch, Ferdinand Oliver Porsche, Wolfgang Porsche and Hussain Ali Al Abdulla.
- Hans Michel Piëch, Ferdinand Oliver Porsche, Wolfgang Porsche and Hussain Ali Al Abdulla are not financially dependent on their remuneration as members of the Supervisory Board.
Aside from their Supervisory Board appointments, Hans Michel Piëch, Ferdinand Oliver Porsche, Wolfgang Porsche and Hussain Ali Al Abdulla have no personal relationship with the Company or the Board of Management that could give rise to a material and not merely temporary conflict of interest. The Supervisory Board work of Hans Michel Piëch, Ferdinand Oliver Porsche, Wolfgang Porsche and Hussain Ali Al Abdulla in recent years has also not given rise to any conflicts of interest.
In addition, the Supervisory Board has decided on the following profile of skills and expertise for the full Board: the Supervisory Board as a whole must collectively have the knowledge, skills and professional expertise required to properly perform its supervisory function and assess and monitor the business conducted by the Company. For this, the members of the Supervisory Board must collectively be familiar with the sector in which the Company operates. The key skills and requirements of the Supervisory Board as a whole include, in particular:
- Knowledge of or experience in the manufacture and sale of all types of vehicles and engines or other technical products,
- Knowledge of the automotive industry, the business model and the market, as well as product expertise,
- Knowledge in the field of research and development, particularly of technologies with relevance for the Company,
- Experience in corporate leadership positions or in the supervisory bodies of large companies,
- Knowledge in the areas of governance, law or compliance,
- Detailed knowledge in the areas of finance, accounting, or auditing,
- Knowledge of the capital markets,
- Knowledge in the areas of controlling/risk management and the internal control system,
- Human resources expertise (particularly the search for and selection of members of the Board of Management, and the succession process) and knowledge of incentive and remuneration systems for the Board of Management,
- Detailed knowledge or experience in the areas of codetermination, employee matters and the working environment in the Company.
The Supervisory Board has also specified the following diversity concept for its composition:
- The Supervisory Board must be comprised such that its members collectively have the knowledge, skills, and professional experience needed to properly perform their duties.
- It has therefore set targets for its composition that also take into account the recommendations of the German Corporate Governance Code. The targets set by the Supervisory Board for its composition also describe the concept through which the Supervisory Board as a whole strives to achieve a diverse composition (diversity concept in accordance with section 289f(2) no. 6 of the HGB). Attention should also be generally paid to diversity when seeking qualified individuals to strengthen the specialist and managerial expertise of the Supervisory Board as a whole in line with these targets. In preparing proposals for appointments to the Supervisory Board, it should be considered in each case how the work of the Supervisory Board will benefit from a diversity of expertise and perspectives among its members, from professional profiles, professional and general experience that complement one another (including in the international domain) and from an appropriate gender balance. A wide range of experience and specialist knowledge should be represented on the Supervisory Board. In addition, the Supervisory Board should collectively have an extensive range of opinions and knowledge in order to develop a good understanding of the status quo and the longer-term opportunities and risks in connection with the Company’s business activities.
- In proposing candidates to the Annual General Meeting for the election of shareholder representatives to the Supervisory Board, the Supervisory Board should take its diversity concept into account in such a way that the corresponding election of these candidates by the Annual General Meeting would contribute to the implementation of this concept. However, the Annual General Meeting is not obliged to accept the candidates nominated.
- The aim of the diversity concept is for the Supervisory Board members to embody a range of expertise and perspectives. This diversity promotes a good understanding of Volkswagen AG’s organizational and business affairs. It also enables the Supervisory Board members to challenge the Board of Management’s decisions constructively and to be open to new ideas by avoiding groupthink. In this way, it contributes to the effective supervision of the management.
- The Supervisory Board and Nomination Committee, in particular, are called upon to implement the profile of skills and expertise and the diversity concept within the context of their candidate proposals to the Annual General Meeting. The Supervisory Board also recommends to employee representatives and unions (which have the right to submit proposals in employee representative elections) and the State of Lower Saxony (which has a right to appoint Supervisory Board members) that the diversity concept, composition targets and profile of skills and expertise should be taken into account. The same applies to individuals entitled to make proposals should a court-appointed replacement be necessary.
The current composition of the Supervisory Board fulfills both the diversity concept and the profile of skills and expertise. The Supervisory Board collectively has outstanding knowledge of the manufacture and sale of vehicles and engines, of the automotive sector and of the technologies relevant for Volkswagen AG; the members of the Supervisory Board are therefore collectively familiar with the sector in which Volkswagen AG operates. Moreover, numerous Supervisory Board members have extensive experience in managerial and supervisory functions. All the relevant expertise in the further individual areas specified in the profile of skills and expertise is represented on the Supervisory Board. Furthermore, several Supervisory Board members, including Ms. Heiß, Ferdinand Oliver Porsche and Mr. Pötsch, have expertise in both accounting and auditing: Ms. Heiß worked as a CFO for a long time and previously for audit and tax consulting firms for several years; Ferdinand Oliver Porsche is a long-standing member and chair of audit committees and worked for an audit firm for several years; Mr. Pötsch is a long-standing member and chair of audit committees and worked for many years as CFO and previously as Head of Controlling at BMW AG. Details on the expertise of the Supervisory Board members can be found in their individual curriculum vitae. The curriculum vitae of the members of the Supervisory Board are available online at www.volkswagenag.com/en/group/executive-bodies.html.
In their proposal to the Annual General Meeting in fiscal year 2021 for the re-election of two Supervisory Board members, the Nomination Committee and Supervisory Board took into account the diversity concept, specific composition targets and profile of skills and expertise. The composition targets, diversity concept and profile of skills and expertise were also taken into account in the court appointment of three new Supervisory Board members by the employee representatives in 2021.
Self-evaluation of the Supervisory Board
The Supervisory Board regularly evaluates every two years how effectively the Board and its committees are performing their tasks. This initially involves distributing a questionnaire to all Supervisory Board members, in which they are able to give their view of the effectiveness of the work of the Supervisory Board and its committees and suggest possible improvements. Following analysis of the questionnaires, the findings and potential improvements are usually discussed at the next regular meeting of the full Board. The most recent self-evaluation took place from late 2021 to early 2022.