War & Piech: chairman loses VW battle

VW - business as usual? 
VW – business as usual? 

It’s all change at VW. Well, sort of. The news that the head of the VW family Ferdinand Piech has resigned as chairman of the world’s second-largest family business surprised nobody. It came just two weeks after he expressed – in German magazine Der Spiegel – that he had lost confidence in his CEO, Martin Winterkorn.

While such behaviour might raise eyebrows in most companies, it was business as usual for Piech who had also informed his previous CEO that his days were numbered through the medium of a press interview. Then, the CEO left and Piech continued.

This time, though, things were different. The rest of the board expressed confidence in Winterkorn and Peich was isolated. The only thing the 78-year-old could do was to fall on his sword, resigning all his director positions in the company founded by his grandfather. His wife also left hers.

The outcome was so predictable that one might wonder whether Piech’s actions were a subtle sort of suicide, a way of abdicating without losing his reputation as a pugnacious businessman. Questions for his therapist, perhaps.

So, what happens next? VW faces various serious operational problems, such as declining sales in China. It remains to be seen whether the business disposes of some of Piech’s glamorous acquisitions, such as Bugatti and Lamborghini. 

In terms of governance, shareholders should insist that nothing much changes. The combination of family chairman and non-family CEO is the gold standard for top-level family businesses these days and it is to be hoped that this model continues.

VW’s complicated oversight, involving a 20-strong board that includes 10 employee representatives and two from the regional government, is also an excellent thing that contributes to the business’s long-term focus.

As we have written before, VW’s diffuse oversight is a massive strength. The departure of a chairman after two decades would herald an upheaval in many businesses. No doubt things will change. But its governance should ensure stability and continuity. Sometimes the strength of a family business is as much in its non-family stakeholders as its family ones.