This has not been a salutary week for European corporate governance. At Volkswagen in Germany and at Industrivärden in Sweden, a system intended to encourage stability and long-term growth has instead created self-indulgence.
In 2010, seven managers from PSA Peugeot Citroën and five from Chang’an Automobile met in Shenzhen, southern China, to lay the groundwork for a new car factory. Three years later, Capsa, a 50-50 joint venture between the French and Chinese companies, is in the final stages of preparing a 1m square metre plant for the September launch of Chinese-made premium cars under the DS brand. “Because we were beginning from a blank sheet, people wanted to make it as perfect as possible,” says Gilles Boussac, Capsa’s president, between meetings with his team of mostly Chinese managers. “So often in China, if you’re trying to rework or improve something, it takes years to achieve.”
“Day by day Volkswagen… appears less like a public company, and more like a complex oligarchy.” That’s how The Economist began a critique of the German carmaker’s flawed corporate governance – in December 2005.
Not much has changed since, as the latest developments in Wolfsburg suggest. In spite of periodic protests about governance, Ferdinand Piëch, VW’s chairman, has reinforced his hold over the group and is expected to seek another five-year term in the chair. The latest news is that his wife, Ursula, will stand for nomination to the board. This may be, as the FT wrote on Sunday, part of “a fairly well-established tradition of spouses taking up powerful positions at German companies”, citing the board positions held by Friede Springer at Axel Springer, and Liz Mohn, at Bertelsmann. But to anybody outside this tradition of family-controlled companies, it looks distinctly odd. As Dow Jones pointed out in its account, “there are no reports…. that would suggest she has any high-profile corporate management experience“. Read more