Business, 18.07.2020 23:01 Dashavu7165

Corporate Governance Failures at Volkswagen Discussion Question 1: In what way did the Board of Directors at Volkswagen contribute to the Emission Test scandal in 2015?

The primary cause is the absence of a strong group of independent directors. Based
upon German Corporate law, governance is provided by a Management Board and a Supervisory Board, with employees making up 50% of the Supervisory Board. This should have allowed for at least 50% of the Supervisory Board to be fully independent. While staying within the ‘letter of the law,’ they sidestepped the ‘spirit of the law’ by cycling recent former senior executives through the Supervisory Board Chairmanship position and other board positions. This had the effect of removing truly independent oversight.

A secondary cause is that 50 % of voting shares are controlled by the Porsche family. Family members, acting as Chairman of the Board, will regularly remove an independent CEO and replaced them with unqualified family members. This has the effect of removing qualified and independent senior management oversight.

Read Illustration Capsule 2.4 in your text: Corporate Governance Failures at Volkswagen.
Post your thoughts on the following:
Did the advisory boards (management and supervisory boards) neglect their obligations? If yes, explain how (be specific). If no, explain why (be specific).
What other factors do you think led to the use of the defeat devices?
How do you believe this situation has affected Volkswagen internally and externally?

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Corporate Governance Failures at Volkswagen Discussion Question 1: In what way did the Board of Dir...