Volkwagen pays head of compliance $14m for 13 months work

Volkswagen board member for €˜Integrity and Legal Affairs' Christine Hohmann-Dennhardt has quit.
Volkswagen board member for €˜Integrity and Legal Affairs' Christine Hohmann-Dennhardt has quit. Markus Schreiber
by Patrick McGee

Volkswagen's head of compliance will receive more than €10m for just 13 months of work when she leaves the German carmaker this week.

Volkswagen announced the abrupt departure of Christine Hohmann-Dennhardt last Thursday, saying it was a mutual decision based on differences in vision. She had been hired in late 2015 after VW admitted to equipping 11m cars with software to cheat emission tests over several years.

Investors, analysts and corporate governance experts have decried the departure, given widespread hopes that her presence on the management board might help to institute sweeping reforms to improve culture and efficiency at the group's Wolfsburg headquarters. 

But instead her departure has caused further criticism after it emerged that Ms Hohmann-Dennhardt, a former federal judge and Daimler executive, will receive about €1m for each month of her tenure. 

Martin Winterkorn, the former chief executive officer of Volkswagen AG, arrives to testify to a parliamentary committee ...
Martin Winterkorn, the former chief executive officer of Volkswagen AG, arrives to testify to a parliamentary committee in the Bundestag in Berlin. Rolf Schulten

Volkswagen would not comment on the pay-off, first reported in German media, but the figure will be disclosed in March in the annual report. Ms. Hohmann-Dennhardt could be not reached.

Critics see the large payout as representative of the sort of problems Ms Hohmann-Dennhardt was trying to clean up. However, a person inside VW, who confirmed she would walk away with between €10-15m, said the sum was easily explained.

The figure includes a "transfer fee" to secure Ms Hohmann-Dennhardt from Daimler before her contract was up, he said. That alone could account for up to half the fee, given that her total remuneration at the Mercedes owner was €3.72m in 2015. Moreover, Ms Hohmann-Dennhardt is receiving full pay for three years of work despite leaving 23 months too soon.

"The fact that a contract is fulfilled is a very normal process," Ms Hohmann-Dennhardt told the Süddeutsche Zeitung. "I have nothing to hide." 

A VW investor, who declined to be named, said her departure was unfortunate but that there was too much hype about how one individual could reform culture.

"They have to want to be better," this person said. "And they will be judged on actions. No amount of talk or appointments are going to cut it."

The FT reported last week that Ms Hohmann-Dennhardt left in part because of differences with Manfred Döss, VW's head of legal affairs who led efforts to resolve criminal and civil claims in the US.

VW's worker unions had also balked last year when she asked the company to hire Louis Freeh, a former director of the US Federal Bureau of Investigation, to be an independent monitor, a person at VW said.

Mr Freeh had played that role at Daimler, working closely with Ms Hohmann-Dennhardt after its bribery scandal. 

"She must be very disappointed to leave now, because she's a real change-maker," said Jeff Thinnes, a compliance expert and founder of JTI, a consultancy. "The resisting forces must have been very strong."

Criticism that VW overpays its executives is not new. In May 2006, Bernd Pischetsrieder, then chief executive, received a five-year extension of his contract. He was ousted just months later but continued to receive payments until the contract was up, amounting to €50m, according to German weekly Bild am Sonntag last year.

Investors attacked VW last May when the company revealed that, despite the diesel emissions scandal, it would pay 12 current and former management board members €63.2m for 2015. 

Martin Winterkorn, the chief executive who stepped down within days of the VW test-cheating becoming public, was paid €7.3m for 2015 — the company's worst year on record owing to the scandal.

Financial Times