Standards & Guidance
European court rules against Volkswagen law
A major blow has been struck against golden shares as the
European Court of Justice advocate
general, Dámaso Ruiz-Jarabo, advised that Germany’s
Volkswagen (VW) law is illegal.
The VW law was introduced with the 1960 privatisation of the German car
company and prevents any shareholder from acquiring more than 20% of voting
rights.
The law also confers on the federal government and the
Land
of Lower Saxony a specific right of mandatory representation on the
company's supervisory board, irrespective of the number of shares they hold.
Ruiz-Jarabo found this arrangement restricts the free movement of capital, and
by strengthening the government position prevents any intervention in the
management of the business.
The ruling is certain to be welcomed by rival car company
Porsche, which has received approval from
its board to raise its stake in VW to 29.9% - just under the 30% threshold for a
mandatory bid.
Paul Betts in the
Financial Times (14
February) said Porsche was using its purchases of stakes in companies such as VW
and truck manufacturers MAN and Scania to construct an “automotive galaxy”
through the “classic ploy of Chinese boxes”.
This, said Betts, involves using a relatively modest outlay to control a much
bigger group through smaller entities. For instance, said Betts, VW chairman
Ferdinand Piëch is grandson of Porsche’s founder and wants to remain on the VW
board when his current mandate expires. He also, suggested Betts, seems to be
attempting to assume the chairmanship at engineering group
MAN. This kind of
“incestuous system”, argued Betts, is something far more commonplace in Southern
Europe.
Links
European Court of Justice
Volkswagen
Land of Lower Saxony
Porsche
Financial Times
MAN
March 2007 |
