Shareholders approved a new compensation system for Volkswagen AG's management board members and discharged all management board and supervisory board members from responsibility on actions over the past year, despite opposition from several large pension funds.
Shareholders voted 80.96% in favor of the new management board compensation system at the car manufacturer's annual meeting Wednesday. Additionally, each of the 31 named management board and supervisory board members were discharged by a vote of 99%.
The $318.9 billion California Public Employees' Retirement System, Sacramento, C$287.3 billion ($210.3 billion) Canada Pension Plan Investment Board, Toronto; $202.8 billion California State Teachers' Retirement System, West Sacramento; $189.4 billion Florida State Board of Administration, Tallahassee; and the $133.2 billion Texas Teacher Retirement System, Austin, all voted against the new management board compensation system, which includes an overall cap on executives' individual compensation and bonus calculation changes.
CPPIB, CalSTRS and Texas Teachers voted against discharging each of the 31 named management board and supervisory board members, according to their proxy-voting disclosures. CalPERS and Florida SBA voted against discharging 24 and 30 board members, respectively.
Proxy advisory firm Institutional Shareholder Services recommended in an April report that shareholders vote against the new management board compensation system. Reasons provided by ISS for its recommendation were “the long-term completely non-independent compensation committee, unexplained and drastic increases in the base salary as the company continues to deal with the fallout of the diesel scandal, and a change to the long-term incentive plan that effectively would not hold VW's management responsible for the fallout of the diesel scandal.”
According to ISS' report, the CEO's fixed pay would increase 34.2% to €2.13 million ($2.31 million) under the new system, while other executives' fixed pay would increase between 7.14% and 27.8% to €1.35 million each.
In the April report, ISS also recommended that shareholders vote against discharging each of the named 31 management board and supervisory board members from responsibility on actions taken over the past year because of “serious outstanding questions regarding the company's governance and internal controls, and concerns about the company's handling of the (emissions) crisis, including communications with shareholders and its level of transparency.” “The annual formal discharge of the management board and supervisory board represents shareholder approval of actions taken during the year. Discharge is a tacit vote of confidence in the company's management and policies. It does not necessarily eliminate the possibility of future shareholder action, although it may make such action more difficult to pursue.”
Volkswagen paid $4.3 billion in January to settle criminal and civil charges brought by the U.S. Justice Department over its use of emissions-cheating technology in its diesel vehicles.
A Volkswagen spokesman could not immediately be reached for comment.