Dusseldorf Volkswagen wants to pay its board members better in the future. This emerges from the group’s invitation to the Annual General Meeting in May, which was sent on Monday. Accordingly, the maximum remuneration for top managers is to be increased significantly. At the same time, it is likely to become more difficult to actually achieve the newly drawn upper limits.
According to the new model, CEO Oliver Blume can theoretically earn up to 15 million euros, including retirement benefits. So far, the upper limit is twelve million euros. The new maximum for cash payments will also increase to EUR 12.5 million. The salary is currently capped at ten million euros – as was the case recently with Herbert Diess.
The ex-VW boss had fully exhausted the limit of ten million euros for the first time last year and received more than eleven million euros with retirement benefits – although he was only CEO until the end of August. Diess’ contract runs until October 2025. VW has promised the manager that it will continue to pay him until then.
Volkswagen boss Oliver Blume: 7.39 million euros including retirement benefits
There is also more to do for the other board members after the new regulation. Their maximum remuneration including retirement benefits will increase from seven to 8.5 million euros. In the case of cash payments, the upper limit is shifting from 5.5 to 7 million euros.
The proposal still has to be approved at the Annual General Meeting. However, consent is considered certain. The topic has been on the Supervisory Board’s mind since mid-2022 and was thus initiated in the Diess era.
With the appointment of Oliver Blume, however, the remuneration of the VW group boss has become even more complicated. Blume has been managing the entire group and the sports car manufacturer Porsche in a personal union since September. When it comes to remuneration, there is a contractual split for the top manager, because Blume is employed 50 percent on both sides.
The earning potential is increasing, as are the demands.
(Photo: Lazar Backovic)
In 2022, Blume’s total salary in both functions including pension expenses was 7.39 million euros according to the group annual report, without retirement benefits it was 6.4 million euros.
According to the new rule, Blume would now receive a maximum of 12.5 million euros if he remained head of the Porsche and VW group in the long term. The chief salary at Porsche is capped at ten million euros, with a 50 percent share it makes a maximum of five million euros. In addition, there would be half of the CEO maximum – 7.5 million euros.
The payment of the VW management is a constant irritation in Wolfsburg and the Republic. After the diesel scandal became known, Germany’s largest carmaker had to put up with a lot of criticism regarding the remuneration of its top managers. The then CEO Martin Winterkorn had received up to 17 million euros a year in salary and bonuses, more than any Dax board member before him. Today he is supposed to receive a pension of around 3100 euros per day.
>>Read also: These are the top earners among the Dax bosses
Finally, in 2017, Volkswagen fundamentally revised its remuneration system and introduced fixed salary limits for board members. The last adjustment to date was in 2021, when so-called ESG factors were integrated into the remuneration of the Management Board. The abbreviation stands for the three sustainability factors Environment (Environmental), Social (Social) and Corporate Management (Governance).
Oliver Blume can earn 15 million euros in the future – but he has to achieve better results
At 15 million euros, the new maximum remuneration for the VW boss is not far from Winterkorn’s former top salary. However, to put it bluntly, a CEO would have to jump much higher in the future in order to reach the upper limit. In the new set of rules, for example, the bonus requirements for earnings per share or operating profit are almost a third higher than before, according to company circles.
At the same time, special bonuses are completely eliminated in the new system. These authorize the Supervisory Board to grant payments to individual Executive Board members for “outstanding and exceptional performance” in the company’s interests. Such remuneration components are considered controversial from a compliance point of view and, according to group circles, were also heavily criticized by the capital market in the VW case.
You also have to look at the payment of comparable companies with the new upper limits. For example, when it comes to board remuneration, VW orients itself towards a “peer group” of 18 companies from the automotive, industrial and software sectors. This includes companies such as BYD, Tesla, Ford and Mercedes, but also SAP, Siemens and Uber.
VW wants to end up in the middle of this group when it comes to target remuneration, most recently the carmaker was below average.
More: Ex-VW boss Herbert Diess earned record salary after his departure.