Explainer-Can Volkswagen sidestep board opposition to push through its overhaul?

Volkswagen's supervisory board is set to meet in a week to debate the company's largest ever turnaround plan. The plan has sparked opposition from management, unions, and the state of Lower Saxony, which holds a majority of the supervisory board seats. The turnaround strategy includes significant job cuts, potential factory closures, and the division of company divisions.

If rejected, management could call an extraordinary shareholder meeting as early as October, which would be unprecedented in Germany's consensus-driven corporate culture. The board's power dynamics create a unique governance system that delays decision-making at Europe's largest industrial firm during a time of crisis. Lower Saxony and the works council together hold 12 of the 20 supervisory board seats, but they can block any restructuring plan.

The remaining 80% of shares are held by Porsche SE, the Porsche and Piech families, Qatar, and other investors. Under the Volkswagen Law, major corporate actions require shareholder approval of more than 80%, which could impede the supervisory board's resistance. However, management could invoke Article 111 of the German Stock Corporation Act to bypass this hurdle, requiring only a three-quarters majority at an extraordinary shareholder meeting.

This could lead to a protracted legal battle between stakeholders. Talks are ongoing, and the board's executive committee will meet on September 3 to assess the situation, with a potential compromise focusing on job cuts and factory plans.