NORWAY - Managers at the Norway Government Pension Fund -Global are flexing their corporate governance muscles and demanding that Volkswagen call off its planned acquisition of luxury car maker Porsche.
Norges Bank Investment Management (NBIM), which runs the pension fund's assets, said the companies have failed to prove there is no conflict of interest inherent in the deal, and that the terms favour Porsche's owners.
"The planned transactions, as presented to the market, in isolation and taken together, leave the impression of being designed to suit the needs of the Porsche controlling families at the expense of Volkswagen and its non-controlling owners," NBIM officials wrote in a letter to the Volkswagen supervisory board yesterday.
In August, Volkswagen agreed to pay €3.3bn (US$4.86bn) for a 42% stake in Porsche's production business, and the company's trading business.
The Porsche and Piech families, owners of Porsche, also own over 50% of Volkswagen, according to media reports, and Ferdinand Piech is the head of Volkswagen's supervisory board.
NBIM says Volkswagen has not been transparent about how it reached the terms of the deal, and says Volkswagen could be overpaying.
The letter said: "We do not see that justifiable reasons have been presented to us for Volkswagen to assist the Porsche and Piech families by buying out their privately held automobile trading business of Porsche Holding Salzburg. We call on Volkswagen to cancel plans for buying those assets unless it shows the means by which it determined the price."
The NBIM also said the company should adhere to the corporate governance standards outlined by the International Corporate Governance Network. The guidelines include protecting minority shareholders, ensuring all levels of shareholders are treated equally and providing timely disclosure of financial matters.
Officials at VW and Porsche did not immediately return requests for comment.
Enhanced powers for The Pensions Regulator (TPR) to prosecute and fine company directors who "wilfully or recklessly" put their defined benefit (DB) pension scheme at risk will be hard to enforce, commentators say.
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UPDATE 2 - DWP publishes DB white paper: Stronger powers for TPR, DB chair statements to be introduced
The Pensions Regulator (TPR) will be given the power to fine company bosses who deliberately puts their defined benefit (DB) schemes at risk, the government has confirmed.