After allegations of embezzlement against bosses: less money for vw works councils

The employee representatives have to accept steep cuts: This is how the Group wants to refute the accusation that they were to be made compliant.

Bernd Osterloh (center) in 2009 between former VW CEO Martin Winterkorn (left) and then-Foreign Minister Frank-Walter Steinmeier Photo: ap

Bernd Osterloh says he is "at peace with himself." That’s what the head of the VW Group and General Works Council says on the website of IG Metall at Volkswagen. This immediately raises the question of what he might have to reproach himself for? It’s a highly sensitive issue for VW: Are works councils at the world’s largest car company still being handled in an inadmissible, i.e. excessive, manner so that they don’t cause management so much stress despite co-determination?

After all, it was only a good decade ago that the unpleasant affair about secret bonuses and pleasure trips at company expense for employee representatives shook the group. As if that were not enough, the public prosecutor’s office has been investigating again since May 2017 on the initial suspicion of embezzlement in payments to works councils – against senior VW managers who may thus be improperly influencing employee representatives. In mid-November, prosecutors and tax investigators therefore even searched the offices of VW’s top management. The prosecutors’ investigations are not directed against Osterloh and his colleagues.

However, VW bosses have now apparently had enough of the insinuations – and are cutting the salaries of 14 works council members in the company who are paid more than the collective wage agreement. "We regret that members of our works council and representatives of the company have been exposed to this situation," VW CEO Matthias Muller said in Wolfsburg on Friday. For the time being, he said, Volkswagen is only paying a small group of works council members compensation up to the top pay scale level. That means steep cuts in some cases. The works council members affected have so far been paid well above the collective wage agreement. The sometimes lavish annual bonus payments are now also on hold. The regulation applies retroactively to December 1.

The special position of the works council at Volkswagen also has to do with the strong position of the state of Lower Saxony in the Group. The state government in Hanover holds about 20 percent of VW – which is why SPD state premiers in particular had long supported the employees at VW. As a reminder, the works council affair also brought down the VW labor director Peter Hartz, who had been protected by the former prime minister and later chancellor Gerhard Schroder.

Heavy losses for the works council head

For Osterloh, the losses are severe: according to his own statements, his annual base salary used to be around 200,000 euros – after the cap, his base salary is now only around 96,000 euros. At his peak, he once earned 750,000 euros, partly because of hefty bonus payments.

As an indirect consequence of the works council scandal, the 61-year-old has headed the board since 2005 and, as a member of the Supervisory Board’s Executive Committee and Deputy Chairman of the Supervisory Board, is one of the most influential people in the Group. He has been paid comparable to a divisional manager at VW, i.e. a member of the middle management level below the brand and group board members.

With regard to the investigations, VW said the company had decided to clarify this "stressful situation for all involved" as quickly as possible. "We expressly thank the works councils for supporting this step," Muller said. There are a total of 262 works councils in the Group. More than 90 percent of them have so far been paid according to collective agreements – and are therefore not affected by cuts.

The Works Constitution Act leaves important questions unanswered with regard to the pay determination of works councils, Muller said. He announced that he would vigorously pursue a "proactive" legal clarification. A spokesman said this could be, for example, arbitration proceedings with an external and independent "arbitrator."

Osterloh criticizes the cuts

The law states, mutatis mutandis, that works council members may not earn less than comparable employees with a development that is customary for the company. The problem, however, is that a company must establish "hypothetical career paths" for exempt works council members, especially if they have held this position for a long time. This is done in other groups, for example, by the works councils selecting a "normal" employee on whose salary development theirs is based.

VW’s group works council said the board’s move was necessary to push ahead with a quick labor law clarification. "The decision minimizes criminal risks for the managers responsible." In the view of the works council, the salary set by the company for Osterloh, for example, is in line with legal requirements, it said, adding that this is confirmed by external expert opinions.

Osterloh himself expressed criticism of the board of management’s move in an interview on the IG Metall website at Volkswagen. "I think that now, after the recent action by the public prosecutor’s office, some people in the company want to play it 110 percent safe here. That’s why they are giving higher priority to criminal law fears than to labor law assessments that come from recognized experts," he is quoted as saying there.

The board’s criminal law advisers had recommended ruling out any risk, he said. "And in this case, for some works council members who have so far received management compensation, that means their pay will be reduced for now." The 14 works councilors affected by the board’s move would now fall back to the top pay scale. "That’s about 8,000 euros per month," Osterloh said.

He stressed that all renowned labor law experts agree that the legislature should provide clear legal guidelines. He added that he was "attributed management qualities from many sides. I often cut back privately and regularly work at least 70 hours a week." He thinks his grouping in management comparable to a division manager should be "in order." In 2015, the head of the works council had rejected an offer to become head of human resources at VW with a salary in the millions. (with dpa)

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