Sir Chris Hohn, the activist investor who built up a €1.2bn stake in Volkswagen earlier this year, is calling for a new remuneration system at the carmaker to better align executive pay with shareholder values.

The TCI hedge fund manager says VW should pay its managers no bonuses at all if earnings per share is below €20, writes Patrick McGee in Frankfurt.

“VW currently pays its executives huge sums of money if the company earns anything above €5bn of EBIT [earnings before interest and tax]. This is obviously wrong,” he wrote to VW chairman Hans-Dieter Poetsch, in a letter dated September 7 but only released to the public on Thursday.

Last year VW reported a €1.6bn net loss — its worst ever result, mainly because of costs stemming from the emissions scandal — yet it still gave 12 current and former board members €63.2m in bonuses.

Sir Chris previously accused VW of “corporate excess on an epic scale,” but until now he has offered no concrete alternative plan.

In the new letter, he calls for a new standard and specifically recommends targets for earnings per share, EBIT per share, free cash-flow per share, return on invested capital and total shareholder return.

“Whatever metrics are used the system should be transparent, easily measurable and as simple as possible,” he wrote. The emphasis on “per share” is meant to discourage expensive acquisitions, share issuance and excessive capital expenditure.

Analysts have long noted that VW’s current bonus structure is complex and based on targets spread over periods of one, two and four years. As a result it was difficult for VW’s board to cut performance-related pay after the emissions scandal. Moreover, an emphasis on EBIT encouraged VW to make acquisitions to increase overall earnings – even if the company overpaid for the asset.

Arndt Ellinghorst, analyst at Evercore ISI, said management compensation and financial targets “are key to the turnaround plan that we expect later this year.”

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