Volkswagen set to cap executive bonuses after emissions scandal

German car maker Volkswagen (VW) is considering a cap on executive pay and bonuses in the wake of its “dieselgate” scandal, it emerged on Tuesday.

A salary cap “may be on the agenda” for a supervisory board meeting on February 24, a VW source said, partially confirming local media reports.

VW’s existing pay and bonus system, based on past performance, meant some executives received multimillion-euro payouts even after the group admitted to having installed software to cheat regulatory emissions tests on about 11-million cars worldwide in September 2015.

Under the plans the firm is considering, board members’ pay will not exceed €10m in any one year, business daily Handelsblatt reported, citing sources close to the supervisory board.

Citing its own anonymous source, news agency DPA said only the CE pay limit would be €10m, with lower caps for other executive board members.

A Volkswagen spokesman said the board “has been considering the question of a new pay system for a long time”. Former CE Martin Winterkorn, who quit over the cheating scandal and remains under investigation over his role, was paid more than €10m in several of the years he was at the helm.

Fixed salary will make up a larger share of executive pay at VW in future, Handelsblatt said.

In the past, variable bonus payments have reached up to four times as high as fixed salaries for some executives.

Some of the payout will be in the form of long-term investments in the firm, giving executives a “future-oriented view”, VW sources told Handelsblatt.

Managers’ pay became a political football last week following media reports that VW compliance chief Christine Hohmann-Dennhardt, a former judge and Social Democratic Party (SPD) politician, would leave the board with a golden handshake of more than €12m after just one year.

With general elections slated for September, the SPD is battling to present a left-wing alternative to Chancellor Angela Merkel’s conservative bloc.

VW is particularly exposed to social-democratic ire at managers’ pay, as SPD ministers from its home state of Lower Saxony, a major shareholder, and labour representatives sit on the supervisory board.

VW announced earlier this month it would pay at least $1.2bn to compensate about 80,000 US buyers of 3.0-litre diesel engines as well as buying back or refitting their vehicles.

Along with earlier payouts promised to drivers, car dealers and US states, that brings the total cost of the emissions crisis so far to more than $23bn.

IN THE PAST, VARIABLE BONUS PAYMENTS HAVE REACHED UP TO FOUR TIMES AS HIGH AS FIXED SALARIES FOR SOME OF THE EXECUTIVES