In September 2015, the company was found to have programmed cars to undermine laboratory emissions testing for NOx emissions, known as the ‘dieselgate’ scandal. This resulted in the company facing lawsuits and having its brand tarnished, resulting in a significant drop in share price and costs estimated to be $35bn. We identified that underlying company culture may have allowed the scandal to initially take place.
Since the scandal broke, we have engaged with the supervisory and executive board and individuals at the company leading on culture change, and spoken at the company’s annual general meetings. Furthermore, in our client vote recommendations, we have consistency advocated voting against the discharge of board members that were at the company at the time of the scandal.
In engagements with the company, we suggested the company undertakes an external, independent review of the factors influencing company culture. We have also supported shareholder resolutions seeking the appointment of a special auditor to investigate the role and potential liability of board members in the apparent corporate governance failures and the resulting emissions scandal.
Despite some improvements to address culture issues, such as introducing employee surveys and a new whistle-blower system, we pressed for further transparency around the underlying key performance indicators (KPIs) that the company uses in assessing its progress on culture and governance improvements. The company built on this to hold its first sustainability day for investors where the executive board member responsible for integrity and legal affairs explained VW’s approach in overhauling its culture. She highlighted various efforts, such as improved compliance processes. However, she could not elaborate on any specific KPIs that were used to assess the company’s progress on improving its culture.
In September 2020, we were pleased to see that Volkswagen met its commitment, under its Plea Agreement with the US Department of Justice, to design and implement a compliance programme that would prevent and detect violations of antifraud and environmental laws. In a meeting with the chair in December 2021, he assured us the culture had improved.
Ultimately, we determine that our engagement on culture change was partially successful. Although the company did not undertake the external, independent culture review that we suggested, we were one of the key stakeholders pushing the company to take the role of company culture in the emissions scandal sufficiently seriously. The company has undertaken a comprehensive integrity project that has demonstrable improvements.
1 Dieselgate Scandal Could Cost Volkswagen Up To $35 Billion (forbes.com)