May 28, 2008
Germany Backs VW Anti-Takeover Law
For some time I have watched the dispute over the a special German law that protects VW from takeovers. The law also gives a government sub-unit, Lower Saxony, effective veto power of all significant strategic decisions. It also capped voting of large shareholders at 20 percent and put representatives of the federal government and Lower Saxony on the company supervisory board (a rough equivalent to our board of directors). Recently the European Court of Justice ruled that the law was protectionist in violation of the directives of the European Union. Germany amended the law, dropping the capped voting and government board delegates, but left intact the veto for Lower Saxony. At issue is whether the European Commission will seek to contest the veto. The changes in the law were pushed by another German company, Porsche, which owns 30 percent of VW's stock and is seeking to purchase a controlling stake. Note carefully here that the European Court of Justice has taken a tack directly opposite to that of the Supreme Court of the United States in attempting to cut back local anti-takeover laws. Europe will be healthier for it and we will be poorer.
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