For a long time, European and Japanese auto execs looked longingly at their American colleagues who command princely salaries (along with a royal air force.) The times and sums, they are a-changing. Chump change we’re talking not. Porsche’s Wendelin Wiedeking and his CFO Holger Härter already come close to benchmark-setting Wagoner. But Porsche is different; after all; they’re a bank with attached sheetmetal-fabrication. Now, it’s raining money on the leaders of Porsche’s takeover target, Volkswagen. The Financial Times learned that “Volkswagen’s five executive board members made $31.7m selling shares in the middle of a controversial share spike at Europe’s largest car maker.” They were not alone.
Volkswagen announced that “large parts of the workforce” sold shares from VW’s options program, and together “collected a three-digit million euros sum.” To deflect criticism, the five execs quickly announced that they would donate 10 percent of their sudden windfall to charity. The Bürgerstiftung in Wolfsburg helps children in need, and only a battalion of Scrooges will deny them $3m before Christmas. (A call to my German CPA revealed that donations to charitable organizations are tax-deductible.)
To cash in on the sudden spike of the VW share required some nimble dealing. In the US, transactions like these would attract the SEC’s insider trading squad, but this is Germany. Bafin, the German securities watchdog, had launched an investigation last month. But since then, no growling, barking, or even excited tail-wagging has been reported. And an entire workforce that received hundreds of millions should have a benign view of those who just made them richer.
I don’t have an issue with this, since the people on the floor shared in the windfall. The charitable donation is the perfect topping.
Wait, I thought only American executives and directors got financial windfalls. And if it was UAW workers getting bonus checks (as they have when the Detroit 3 have been profitable) instead of German autoworkers cashing in stock options, we’d be hearing about “lavish” benefits and $70/hr wages.
@Ronnie Schreiber: Yeah, that’s because benefits and bonuses are part of the wage and have to be paid by the employer. However autoworkers cashing in their VW shares during the recent spike only hurt hedge funds who had shorted VW stock. It didn’t cost VW a dime.
That’s why employee participation is a good thing.
Vega
Employee stock options certainly cost employers money. You think those shares come out of thin air?
The hedge funds might have taken a hit, but VW had to acquire those shares (or issue new ones, but there are costs involved there too) in the first place.
Ronnie
I’m aware of that. In Germany “Mitarbeiteraktien” (employee shares) are usually offered to employees at a FIXED discount towards current share price. This discount is payed by the employer as a bonus. As a result, the share price rally of recent weeks didn’t cost VW a dime.
Employee shares offer two positive effects compared to wage bonuses:
1.Employees have an inherent interest in the well-being of the company
2.If the company is successful and the value of the shares go up, workers benefit without increasing wage costs for the employers.
Your initial comment insinuated that the windfall VW workers received is comparable to high wage levels of US autoworkers. This is simply not true.
I don’t even think insider trading charges would be appropiate, even if US security laws applied in this case. Insider trading requires insider information. That simply wasn’t the case here. This was a supply/demand thing-Porsche was buying all of VW’s shares, stupid hedge funds needed those shares to cover their retarded short positions, so everybody who owned shares in VW would be stupid not to sell. This was all very public, and involved no insider information. I don’t see anything legally, morally, or ethically wrong with any part of this situation. The only losers were a bunch of rich morons who should have known better (one has to be quite rich to have money invested in the type of funds that lost money here).
I like that doscounted shares in the company thing. Maybe someone who knows more about airlines could give us a rundown on how it failed at United. I have always been curious how a company owned by the employees ended up having such surly customer service.