VW’s pain a timely lesson for other firms

Amid the ongoing scandal surrounding Volkswagen Group and its collection of brands investors are rightly asking who was at the wheel when it veered into this mess?

The focus has been on the engineers who created the “cheat” code to deceive regulators and on the managers who let it happen. Yet there are also wider questions to be raised about the corporate culture within the organisation. The ousting of chief executive Martin Winterkorn served to sate public demands for a head to role, but it also served to remove someone who had, in some small way, successfully challenged the patriarchal structure of the VW Group earlier in the year. Last April Winterkorn survived a battle of wills against his one-time mentor and chairman of the supervisory board Ferdinand Piëch. After the defeat, Piëch resigned from his position as chairman, though he remained a major power player and shareholder in the background.

Then, last Friday Winterkorn’s successor as VW chief executive was quickly appointed: the Porsche boss Matthias Müller. It’s no coincidence Müller is a favourite of Piëch. The 78-year-old Austrian engineer, grandson of Ferdinand Porsche, may no longer chair the supervisory board, but he could be regarded as its backseat driver. His, other Porsche family members, a local government anchor shareholder and a powerful labour force have long marked the company as an oddity in terms of governance.

Until now investors had no real interest in focusing on governance matters. Pre-tax profits soared, accolades for its models filled the trophy cabinets at Wolfsburg and an aim to be the biggest selling car manufacturer on the planet looked a done deal. The pain being felt now by investors – Qatar’s sovereign wealth fund has reportedly been hit with a €4.5 billion drop in investment – will focus minds on VW’s corporate structure and governance. For some it will be too little too late. For other firms, it might be a timely lesson to get their houses in order.