Volkswagen’s announcement that it may shut down factories in Germany and cut roughly 100,000 jobs — nearly double its earlier target — has renewed scrutiny of the 89-year-old automaker’s distinctive ownership arrangement and governing rules that shareholders have questioned for years.
The company, which has grown through decades of acquisitions and strategic moves, now controls a wide range of brands ranging from budget-friendly SEATs to high-end Lamborghinis. It also holds ownership stakes in sports car manufacturer Porsche AG and commercial truck producer Traton.
Where Did the ‘Volkswagen Law’ Come From?
The roots of worker influence at Volkswagen stretch back to before World War Two, when the Nazi regime constructed the company’s primary manufacturing facility in Wolfsburg using funds that were partly derived from assets seized from trade unions. Forced labor was also used in building the company’s financial foundation.
Following the war, British authorities, who held responsibility for the plant at that time, placed the company under public trusteeship. The German state of Lower Saxony, where Volkswagen is headquartered and where five of its six western German assembly plants operate, continues to hold a 20% voting stake to this day.
When Volkswagen was converted into a joint-stock corporation in 1960, lawmakers passed what became known as the Volkswagen Law, granting significant power to both Lower Saxony and workers as a shield against outside takeover attempts.
What Does the Law Actually Require?
The legislation contains two key provisions. First, decisions that typically need a three-quarters shareholder majority at an annual general meeting instead require approval from more than four-fifths of Volkswagen shareholders — a threshold that gives Lower Saxony an effective veto.
Second, any decision to build or relocate a production facility must receive approval from at least two-thirds of the 20-member supervisory board. Although the law does not explicitly address plant closures, this provision effectively allows the board’s 10 labor representatives to block sweeping decisions affecting factories.
Who Actually Owns Volkswagen?
The ownership picture is layered, largely because Volkswagen issues two types of shares: preferred stock, which is listed on Germany’s main DAX index, and common stock, which carries voting rights.
Porsche SE — the investment entity controlled by the Porsche and Piech families — holds the largest combined stake in the company at 31.9%, covering both share classes. The state of Lower Saxony owns 11.8% of total equity, while Qatar holds 10%.
Voting power tells a different story, however. Porsche SE commands a 53.3% voting majority, while Lower Saxony controls 20% of votes and Qatar holds 17%.
How Does This Shape the Way Volkswagen Is Run?
Investors have repeatedly criticized Volkswagen’s governance, arguing that its ownership arrangement gives Porsche SE disproportionate control over the company despite not owning a majority of all shares.
Volkswagen’s CEO Oliver Blume stepped down from his concurrent role as CEO of Porsche at the start of this year, following sustained criticism from some shareholders who objected to him simultaneously leading two large, closely related automotive groups.
Beyond market headwinds, governance concerns have weighed on Volkswagen’s stock price, which has fallen to around 16-year lows. Adding to investor uncertainty is the question of who will eventually take over leadership of the Porsche and Piech families, currently headed by Wolfgang Porsche, 83, and Hans Michel Piech, 84.
