Tuesday, September 07, 2021
Process for works council salaries
Ex-VW board members reject allegations
The public prosecutor’s office is convinced that Bernd Osterloh and four other high VW works council members received excessive salaries for years. Was this the way the management wanted to ensure their favor? Two ex-corporate board members and two other managers defend themselves in court.
A responsibility like a top manager, but payment like it used to be on the assembly line? According to one of the defendants, that would have been the result if the long-time works council chief Bernd Osterloh had not run for his office before the latest move to the VW truck division Traton – and the management had gone over to him on the salary at the start of his career downgrade. The Braunschweig Regional Court is now concerned with how much employee representatives are allowed to earn on the basis of which rules. The criminal case is about the allegation of infidelity. The public prosecutor is convinced that excessive remuneration and bonuses have flowed to Osterloh and four other high works councils for years. That was a conscious decision by management.
It’s a tricky subject. Because in addition to allegedly overly lavish remuneration for members of the employee’s bank in Germany’s largest company, the suspicion that resonates with them also harbors the potential for excitement that they wanted to buy the favor of the other side, so to speak. On top of that, the legal situation is anything but clear because of the outdated Works Constitutional Court.
The defendants include the former VW Group HR directors Horst Neumann and Karlheinz Blessing. In addition, the allegations are directed against two other managers, one of whom is still in a higher position in the group. Prosecutor Sonja Walther said that the executives had chosen the criteria for determining the salary “deliberately in such a way that apparently an increased salary was justified, although this was not correct” and that it was only due to the position of the men in the works council.
Public prosecutor sees five million euros in damage
It is not about own advantages for Osterloh, who is to appear as a witness on September 20, nor his colleagues. The central point of contention is the question of how the remuneration of high works councils should be determined. There are comparison groups of employees with similar qualifications. But how can you know at what management level and with what salary someone would probably be today if he or she had not opted for the “honorary position” in the works council – which is de facto a full-time position with a lot of work and pressure, not least at corporate level. What does appropriate remuneration mean?
The basic legal rules are defined relatively vaguely in the Works Constitution Act, which has not been comprehensively reformed for a very long time. So far, only one thing is certain: “The law does not allow works council members to be favored or disadvantaged because of their position,” said a spokesman for the regional court. There are no precise salary corridors in relation to non-works councils. For the public prosecutor, however, it is obvious that the human resources managers deliberately set the pay inappropriately high from 2011 to 2016 – which has reduced VW’s profit and income taxes.
According to Walther, the defendants had “abused their authority to dispose of other people’s assets” in 26 individual offenses. It is about a “labor law unlawful classification,” which ultimately caused total damage of around five million euros. The defense sees it completely differently – besides, a criminal trial is not at all the appropriate format for the discussion of labor law controversies.
Osterloh earned up to 750,000 euros
Blessing, who took over responsibility for personnel at the largest European car manufacturer at the beginning of 2016, is not aware of any guilt: “I did not start out from the assumption that I could unlawfully favor Mr. Osterloh and others.” It was also clear that Osterloh and other higher works councils – comparable management positions – had acquired a lot of experience and “considerable and strategic qualifications”. Therefore, the approved salaries were also in order.
In good bonus years, Osterloh earned up to 750,000 euros. Neumann, VW Group Head of Human Resources until 2015, said that legal requirements were always adhered to. Nor could it be a solution to continue to pay senior works councils at the level of their starting salary. That was especially true for Osterloh: “We would certainly not have used him as a porter.” Another defendant said that paying him according to his initial qualifications before his works council career would not have been an option: “That is absurd in my eyes.” If convicted, breach of trust is threatened with imprisonment from six months to ten years in particularly serious cases.
Blessing’s defense attorney Hanns Feigen tackled the prosecution’s strategy head-on. In the end, such a procedure belongs “in the end to the Federal Labor Court, which has already issued statements on this several times that make it clear that the position of the public prosecutor’s office is absolutely out of date”. VW itself is not involved, but reiterated its opinion “that in connection with the determination of the remuneration of individual works council members no criminally relevant misconduct can be ascertained”. Incidentally, the corporate lawyers also believe: “The Works Constitution Act and the previous case law on it leave important questions unanswered. It is regrettable that the politicians have not implemented the original intention to provide legal clarification.”
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