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Volkswagen Asks Shareholders for a Vote of Confidence

By John Rosevear - May 11, 2016 at 4:20PM

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VW's board said that, because the investigation into the diesel mess hasn't implicated any current members of the company's senior management team, it will ask VW shareholders to ratify the team's actions in 2015. Here's what that means.

VW CEO Matthias Mueller addressed reporters in Detroit earlier this year. VW's board said on Wednesday that an investigation into the company's diesel-emissions scandal hasn't implicated Mueller and his senior management team. Image source: Volkswagen.

Volkswagen (VWAGY 0.11%) said on Wednesday that, while an ongoing investigation into its diesel-emissions scandal isn't complete, it has so far failed to turn up any evidence of wrongdoing by its current senior managers.  The company said that it will ask shareholders to ratify the actions taken by current members of its senior management team in fiscal 2015 at its upcoming annual meeting.

What Volkswagen said about the investigation and its request

"The Supervisory Board of Volkswagen AG has recommended to Volkswagen's 2016 Annual General Meeting that the actions of the serving members of the Board of Management in fiscal year 2015 be ratified," VW said in a statement. (VW's "Supervisory Board" is equivalent to a U.S. company's board of directors; its "Board of Management" is made up of VW's senior management team.)

The statement went on to say:

This recommendation is based on information currently available from the not yet concluded investigation into the diesel matter by U.S. law firm Jones Day. On this basis, law firm Gleiss Lutz carried out a comprehensive legal review which has been confirmed by Professor Wulf Goette (retired chief justice at the German Federal Court of Justice).

The Supervisory Board requested an examination into whether, on the basis of information currently available, serious and manifest breaches of duty on the part of any serving or former members of the Board of Management are to be established. Although the investigation by Jones Day is still ongoing, according to information currently available, no serious and manifest breaches of duty on the part of any serving or former members of the Board of Management have been established that would stand in the way of granting ratification at this time.

VW's statement noted that the Jones Day investigation is continuing, and that its proposed resolution could change if new information comes to light before the Annual Meeting on June 12.

What does this mean? 

Essentially, VW is asking shareholders to give CEO Matthias Mueller and his new top management team a vote of confidence. VW's top ranks were shaken up severely in the wake of the U.S. Environmental Protection Agency's decision to pursue charges against the company last fall. CEO Martin Winterkorn resigned, and was replaced by Mueller, who had been CEO of subsidiary Porsche. Mueller subsequently restructured the company's senior ranks, and replaced many top managers. 

It's those top managers who are the subject of the proposal that will be put to shareholders. While the investigation into the diesel mess is still ongoing, VW's Supervisory Board is assuring shareholders that it so far has no reason to think that any "serving members" of the management team are implicated in the scandal. 

Should we believe that VW's managers are in the clear?

Probably. It would be very bad for the Supervisory Board to ask for this ratification if they weren't pretty certain that none of the current members of the Board of Management will be implicated in the scandal. But it's hard to know for sure, because we have no idea what the investigation has turned up to date.

VW's Supervisory Board hired Jones Day last fall to conduct an exhaustive internal investigation into the events that led to the installation of emissions-control "defeat devices" in millions of VW Group vehicles since 2009. That investigation isn't yet complete, and its findings so far haven't been released. 

"Volkswagen expressly regrets that any publication of interim findings of the investigation by Jones Day would still involve unjustifiable risks for the Group, and therefore cannot be effected at this time," the company said in its statement on Wednesday. "For this reason, no elaboration of the recommendation to ratify can be made at this time."

The upshot: One more piece of information in an extremely slow-moving reveal

Here's the takeaway: The Supervisory Board is telling us that the ongoing investigation probably won't implicate anyone on VW's current management team. For beleaguered VW shareholders, that's a small bit of good news -- but many important questions remain, and this won't do anything to help VW move past the scandal.

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