What happens when the board of directors of a public limited company is charged by the judiciary for possibly punishable conduct in his capacity as a hired manager? Quite clearly, the Supervisory Board has to check very carefully whether the Executive Board can still sufficiently fulfill its current tasks if it comes to the process. If there is any doubt, he must - at least temporarily - exempt him from his duties.
But that will hardly work for Volkswagen. The key players are simply too closely linked. Finally, the prosecutor has brought charges against the current CEO Herbert Diess, his predecessor Martin Winterkorn as well as the current supervisory board chief Hans Dieter Pötsch because of "market manipulation". Who should absolve whom from his position?
When did you know?
The core of the case is that, from the point of view of prosecutors in Braunschweig, all three managers - independently of one another - did not warn investors in good time of the potentially serious financial consequences of the manipulation of diesel engines, even though they would have been obliged to do so under the Securities Trading Act. The prosecution believes this on the basis of testimonies and other evidence that they have gathered in the four years since the diesel scandal became public knowledge.
Of course, the lawyers of the three defendants deny that. But in the case of a guilty verdict, the court could impose prison sentences of up to ten years on Diess (then Kurz board member of the VW brand), Winterkorn (then CEO) and Pötsch (then CFO).
Volkswagen Supervisory Board Chairman Hans Dieter Pötsch (left), former CEO Martin Winterkorn (in the middle) and current CEO Herbert Diess. © Thomas Kienzle, Johannes Eisele, Christof Stache / AFP / Getty Images
The process hits the world's largest automotive group at a very unfavorable time. Volkswagen is in the midst of exhausting and costly conversion to an e-car producers. Ironically, the now accused VW boss Diess is driving forward the change significantly - with backing from, of all people, the also accused of supervisory board chairman Pötsch. It is inconceivable how the big project without the mighty duo should succeed.
Just now, it seemed as if Volkswagen had the most part of the punitive and damages paid for the diesel frauds reasonably put away - there could now be high civil rights claims of investors added, including powerful financial funds. A model lawsuit is already running. Although criminal proceedings have nothing in principle to do with civil claims, a guilty verdict would enormously increase the chances for investors to pay damages.
Although no trial has been opened, and of course, as with any other charge, the presumption of innocence applies. But the process has consequences for Volkswagen, just now, when times are so difficult for the auto industry. It could take years before the allegations can be finally clarified, as well as in the other processes around the diesel scandal. But nothing is more damaging to a company's development than persistent uncertainty.
VW will not go down
The indictment has made the management of the group fragile. Now it would be up to the Supervisory Board to ensure that the Group prepares for the worst conceivable consequence, financially and personally. If Diess and / or Pötsch become unbearable in the course of the proceedings, the company must be prepared for it - after all, it also involves the jobs of more than 600,000 employees worldwide, almost a third of them in Germany.
In the end, VW will not go down, the company is too important for the German economy. But if there is a lesson to be learned from the events in Wolfsburg, then it is this: With the bad habit that top managers directly from their active work to the head of the Supervisory Board back, should be over, because they always bring the risks of their previous activities ,
Hans Dieter Pötsch was made chairman of the supervisory board in October 2015, even though he was the head of finance in the group during the diesel scams. At that time, the powerful shareholders of the Porsche and Piëch families enforced his appointment, even though they had been warned by other members of the Supervisory Board. But the clan prevailed against all concerns. This takes its revenge now, because the damage is already great - even if Pötsch turns out to be innocent.