A ROW over the €50 million pay-off for Porsche’s ousted chief executive intensified yesterday when it emerged that the sports carmaker’s family owners had originally offered Wendelin Wiedeking €140 million.
Wolfgang Porsche, Porsche chairman, had proposed the bigger compensation package at a supervisory board showdown on Wednesday, several people close to the situation said.
But the plan to pay one of the biggest compensation packages in the world was thwarted by the employee representatives on the board, these people said. In the end, the board agreed to pay Mr Wiedeking €50 million – which could still be the highest pay-off in German corporate history.
The agreement exasperated investors and reignited a fierce political debate about executive pay in Germany.
“From the investors’ viewpoint, it is highly unfortunate that Mr Wiedeking gets a golden parachute although he was clearly part of maldevelopments at Porsche,” Hans Hirt, head of European corporate governance at Hermes, the UK pension fund, said.
“This is a high compensation even for UK and US standards.”
The German public has eyed executives’ salaries with much scepticism, even though pay packages are usually lower than in the UK or the US.
DSW, the German shareholder association, said “this was not acceptable for shareholders as Mr Wiedeking has brought Porsche to the brink of bankruptcy.”
In an attempt to avert a public outcry, Mr Wiedeking had announced when he stepped down from his post that he would give more than half of his compensation to charity.
Mr Wiedeking’s dismissal came as the Piëch and Porsche family clans ended months of feuding by agreeing on a rough plan to merge the debt-saddled sports carmaker with Volkswagen, Europe’s largest carmaker.
Many details of the integration plan were still unclear but the companies were aiming to agree on a roadmap by August 13th.
The Porsche family is likely to hold a stake of up 50 per cent in the new group, which will be created by 2011.
People close to the IG Metall union said they were aiming to poach a 10 per cent stake in the group from VW’s existing shareholders.
Porsche has in the past outraged investors with its opaque strategy to take over Volkswagen. After a VW share price spike last October that left many investors who bet on a falling share price reeling, several hedge funds have been considering legal action against Porsche.
But they are understood to now be focusing their efforts on lobbying Bafin, the German market regulator, for a change in market abuse rules. – (Copyright The Financial Times Limited 2009)
