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Bloomberg


If you place the résumés of Martin Winterkorn and Matthias Mueller side-by-side, it would be hard to spot the difference.
After early positions at Audi, the outgoing and incoming Volkswagen chief executive officers spent the next 20 years hopping between development roles in the carmaker's 600,000-employee empire. Winterkorn became Audi chief before graduating to head the whole group, while Mueller made his penultimate stop at the Porsche unit.
The supervisory board of the troubled parent company named Mueller to replace Winterkorn, who stepped down on September 23 amid a widening scandal over rigging emission-test results.
The scandal has rocked Germany, prompting Winterkorn to resign, and has wiped more than €25 billion (HK$217 billion) from the company's market value.
That Mueller, someone with such a similar background, was picked to clean up the mess shows the insularity and clannishness of Germany's corporate governance structure, said Charles Elson, director of the University of Delaware's Weinberg Centre for Corporate Governance.
"I'm not surprised they went with an insider," he said. "The company may say 'who else can take charge?' and that's a fair point. But, given what's happened at VW and the breadth of it, they would be wiser to make a real break and go outside for a leader."
Berthold Huber, interim chairman of the company's supervisory board, said that Mueller is "a person of great strategic, entrepreneurial and social competence. He knows the group and its brands well and can immediately engage in his new task with full energy". Mueller was picked by the company's 20-member supervisory board, 17 of them German or Austrian. Of the nine members of VW's all-male management board, all but one is German or Austrian.
Lack of a broad international mix on that board, especially an executive with US experience, may have compounded Volkswagen's problems in North America, according to Stefan Bratzel, director of the Centre of Automotive Management at the University of Applied Sciences in Bergisch Gladbach, Germany.
"They never really had anyone on the board in Germany who had any sort of clout when it came to the US," he said.
Boards at most big German companies are predominantly male and lag behind companies in countries such as the UK and Sweden, which do not have quotas for women, as well as Norway, which does.
While Europe's largest economy is headed by Chancellor Angela Merkel, just 6 per cent of management-board positions and 22 per cent of supervisory-board seats are held by women at companies in the benchmark DAX Index, according to the Economy Ministry.
In addition to its lack of gender diversity, Germany's corporate-governance system is held back by its cliquishness, said Henrike von Platen, president of the Business and Professional Women advocacy group in Berlin.
"If you meet someone on the board at one company, you happily take them with you to another one," von Platen said. "Trying to break into that and improve diversity is tough."
Supervisory boards in Germany are supposed to act as a check on their management boards and look broadly when seeking top talent. While they are changing, they still have plenty of directors who have overlapping business interests and they tend to choose insiders for the CEO spot.
At VW and other German companies, supervisory boards are comprised equally of shareholder and employee representatives, though the chairman, usually from the shareholder side, votes in the event of a tie. The shareholder representatives often are executives at other big German companies, a legacy of the era when the country's financial institutions held big stakes in its companies.
For instance, Volkswagen management board member Herbert Diess sits on the supervisory board of chipmaker Infineon, alongside Wolfgang Mayrhuber, who is also chairman of Deutsche Lufthansa.
That company's CEO, Carsten Spohr, is a supervisory board member of ThyssenKrupp, whose board is chaired by former Henkel CEO Ulrich Lehner - who also leads the Deutsche Telekom supervisory board.
"It's still an old boys' network, and when it comes to top appointments there's more focus on who knows whom than on doing a broad search" that includes outsiders as well as insiders, said Bob Benson, head of RL Benson Associates, a New Canaan, Connecticut, consultant to executive search firms.
Change is coming, though. German lawmakers earlier this year voted to require more than 100 of the largest listed companies to allocate 30 per cent of vacant supervisory board positions to women starting next year. The hope is that as supervisory boards become more diversified, so will executive ranks.
At Siemens, for example, before Lisa Davis, an American, was named head of energy operations in 2014, all of the company's seven management-board members were male. All but one of them was born within a 100-mile radius of Nuremberg, the Bavarian city that is one of its major manufacturing hubs. A second woman was named to the management board this year.
CEO Joe Kaeser, who counts Daimler and Allianz SE among his supervisory boards, has worked at Siemens for 35 years. Another company that has been undergoing a board and management makeover is Deutsche Bank. After Paul Achleitner, a former executive at Allianz SE and Goldman, Sachs & Co., was named chairman in 2012, the bank announced the promotion of Anshu Jain and Juergen Fitschen to co-chief executives. They replaced Josef Ackermann, who had led the bank for 10 years.
Such changes are already evident at Volkswagen, where the Porsche and Piech families hold a majority of voting shares in the automaker and five seats on the supervisory board. Two of the board family members are women; other women include Annika Falkengren, CEO of Sweden's Skandinaviska Enskilda Banken AB. VW had said before the diesel scandal broke that Chief Financial Officer Hans Dieter Poetsch would take on the chairmanship of the supervisory board, pending approval by shareholders at a meeting set for November 9. The Austrian joined VW in 2003.
Mueller, 62, whose contract as CEO runs until 2020, had managed the maker of the 911 sports car since October 2010. He boosted Porsche profit 62 per cent over four years. Deliveries are on track to surpass 200,000 vehicles for the first time in 2015, with the addition of new models such as the Macan.
"My most urgent task is to win back trust of the Volkswagen Group - by leaving no stone unturned and with maximum transparency, as well as drawing the right conclusions from the current situation," Mueller said.
Volkswagen faces civil lawsuits and criminal investigations and has stopped selling the affected vehicles in a growing number of countries after it publicly admitted to cheating on diesel emissions last month. The company said it plans to fix the pollution-control systems.
German prosecutors opened a probe into Winterkorn after Volkswagen and others filed complaints calling for a criminal investigation into whether fraudulent measures were taken to sell cars that did not meet emissions standards. However, on Tuesday, they were forced into a U-turn in their investigation.
The latest statement from the prosecutors said that there must be "concrete facts" before a probe into Winterkorn is opened.
 
 


The industry insider picked to drive VW out of crisis

Headless chickens and the VW scandal

Martin Winterkorn (left) and his replacement Matthias Mueller.Photo: EPA

Paris stinks: City's love affair with diesel makes it one of the world's most polluted

Paris hosts UN talks in two months on cutting emissions. Photo: AFP

Pedestrians walk down the famous Champs Elysees, during an initiative by the City Hall titled 'The Day Without Cars' that saw much of the centre pedestrianised. Photo: EPA

'We will overcome this crisis': Porsche boss Mueller flips to damage control mode after being named new CEO of scandal-hit Volkswagen

The new chief executive of Volkswagen, Matthias Mueller, said on Friday his priority is to win back trust that has been lost in the company after a scandal over its rigging of diesel emissions tests. Photo: Reuters

A press conference announcing the new appointment. Martin Winterkorn resigned as chairman of the board after a crisis meeting on September 23. Photo: EPA

An activist holds up a sign reading "Stop Lying" (Schluss mit Luegen) during a protest of environmental watchdog Greenpeace in front of the headquarters of German carmaker Volkswagen in Wolfsburg, central Germany, on Friday. Photo: AFP

The pollution test rigging scandal could end up costing the carmaker over US$18 billion. Photo: AFP

Volkswagen China ventures say no role in emissions scandal

Volkswagen has two joint ventures in China, where it delivered 3.67 million cars last year. Photo: Reuters

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World

Great expectations fall on the shoulders of the German automaker's new CEO Matthias Muellerchosen in the wake of a widening rigging scandal


The industry insider picked to drive VW out of crisis

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Great expectations fall on the shoulders of the German automaker's new CEO Matthias Muellerchosen in the wake of a widening rigging scandal

Great expectations fall on the shoulders of the German automaker's new CEO Matthias Muellerchosen in the wake of a widening rigging scandal