Volkswagen AG (VOW3) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the Volkswagen AG Live Audio Webcast and Conference Call on the Volkswagen AG Teach-In New Remuneration system. For your information, today's conference is being recorded. At this time, I'd like to turn the conference over to Ms. Helen Beckermann, Head of Group Investor Relations for Volkswagen AG. Please go ahead, madam.

Hello, ladies and gentlemen. We welcome you to today's event in which we will present the remuneration scheme of our Executive Board members. As part of our commitment to improve our ESG performance as much as possible, we fully realize that accountability and clear responsibilities are critical. For that reason, we have taken an important step and have now included ESG criteria in the remuneration of our Executive Board members. Please move to Chart #2. To kick off today's event, I would very briefly like to outline the framework conditions around the remuneration of our Board members. So basically, the matters that are relating to remuneration system of each individual member of the Volkswagen AG Board of Management are decided on by the Supervisory Board, as most of you know, our 2-tier system here in Germany, on the basis of the Executive Committee's recommendations. The remuneration system fully reflects the targets set by the management in the corporate strategy. The prior version of the system, we kicked off in February 7, back in 2017, as you're aware, the capital stock of Volkswagen AG is divided into 2 types of shares, ordinary shares and nonvoting preferred shares. Every ordinary share shall carry 1 vote at the general meeting. The preferred shareholders have no voting rights. If, however, the preferred stockholders are entitled to a voting right under any mandatory provisions of the law, every preferred shareholder shall also carry 1 vote. To give you a rough guide on our voting rights distribution, over 50% is Porsche Automobil Holding, 20% State of Lower Saxony, 17% Qatar Holding and the rest is your shareholding, our financial community. I would now like to hand you over to Michael Bursee -- sorry, next chart, please. I would now like to hand you over to Michael Bursee, who is the adviser to the Volkswagen Supervisory Board on matters relating to Executive Board remuneration. Michael is a very experienced expert, having spent over 20 years in this field. I would also like to take the opportunity to welcome Christian Arnold, a legal expert, who also advised on the scheme. Now I'd like to pass over to you, Michael. Next chart, please.

Yes. Thank you very much, Helen, and good afternoon from my side. The current remuneration system for the Management Board was introduced in 2017. And of course, due to the regulatory changes, needed some adjustments. So that's what we worked on in the last year. And of course, the main intent was to comply with the new regulatory framework. In addition, Volkswagen made some further adjustments in order to optimize the remuneration system. Most of these changes will come or have already come into force for all members of the Management Board from this year on. Some other adjustments will be relevant for new contracts and contract extensions only also beginning from 2021 on. Of course, the new system will be submitted to this year's AGM for resolution. So what did we do? What did Volkswagen do? First of all, definition of a maximum level of compensation, which had to be revised compared to previous maximum compensation levels because now pensions and fringe benefits have to be included according to new legislation and to new regulation; integration of ESG in the annual bonus, which was very important in order to balance the financial measures with nonfinancial strategic measures; the performance share plan, the existing performance share plan performance period had to be extended from 3 to 4 years according to new German Corporate Governance Kodex; definition of malus and clawback clause and simplification of the system for fringe benefits. Furthermore, there were some more formal changes, which I will comment on in a few minutes. Next chart, please. We think it is important to understand what the guidelines were for adjusting the remuneration system. First of all, of course, compliance with the new regulatory provisions, but also to be in line with market practice. What does that mean exactly? Concerning the remuneration levels, they will be compared to a global industry peer group. And concerning the remuneration system itself, its elements, cap, pensions, benefits, that will be compared to other DAX companies and to the local legal requirements. The whole system should, of course, be transparent and comprehensive. We got some feedback in the past from investors that the current system looks a little bit too complex, and so we tried when revising the current system to do better on that. That means, on the one hand, going on with standardization and unification of structures and elements in order to be as transparent as possible, fixed and disclosed target values and cap payouts and, of course, the system -- to come up with a system, which is in line with Volkswagen's strategy and transformation process. Of course, demanding and motivating targets should be set. In the end of the day, it's still an incentive plan. The variable compensation has to be motivating and demanding. Formula-based performance management, which means, on the other hand, we tried to reduce discretion as much as possible and to use formula wherever possible. As mentioned, Volkswagen was trying to strive for a balance between financial and ESG targets, trying to maintain a strong emphasis on shareholder interest and, as already mentioned, but it's nevertheless important, full disclosure of all metrics and bonus functions. Next chart, please. So just a quick overview about the remuneration structure and levels. First of all, you see on the right side of the slide, the elements and the target amounts for the Chief Executive Officer and on the other side, on the left side, the respective elements and numbers for the members of the Board of Management. As you can see, these elements, at least for the members of the Board, are very standardized. It's one size fits all, no differentiation. Concerning the total cash remuneration, you see that 2/3 of the total direct compensation is variable. And within the variable portion, the focus is on long-term and share-based payment. The target of the total cash remuneration is, for the members of the Board, EUR 4.57 million; and for the CEO, 9.11 million. So there are 2 caps within the system, besides the fact that every variable element is kept in itself, but 2 caps. First cap is 1 -- I'm sorry, is EUR 5.5 million for the members of the Board and EUR 10 million for the CEO. This is the cash remuneration cap, excluding pensions and benefits which you already know. So what I want to say, these numbers have been maintained. There are no changes since 2017. In addition, you'll find another cap, which is EUR 7 million for the members of the Board and EUR 12 million for the CEO. This cap was introduced in addition to the cash remuneration cap because it was necessary to also include pensions and fringe benefits, and that's what we did. So okay. Next slide, please. So I'm now talking about the nonperformance-related remuneration components. This is pretty standard, 3 elements: fixed salary, pensions and fringe benefits. The fixed salary is EUR 1.42 million for the members of the Board and EUR 2.235 million for the CEO. Starting in 2021, there were some adjustments for inflation on the fixed salary. So we increased that by EUR 70,000 for the members and EUR 110,000 for the CEO. This seems, in our opinion, to be quite moderate because we're talking about a 4-year term where no increases in base salary have taken place. Pensions also quite standard. Volkswagen has a defined contribution scheme with the contribution of 40% of fixed salary and 50% of fixed salary depending on the contracts. The fringe benefits have also seen some changes, as mentioned before, starting in 2021. We simplified and unified. We offer fringe benefits with a focus of only very few and relevant fringe benefits, for example, of course, company cars, insurance and health care. The beneficiaries have the opportunity to choose within budget according to their individual preferences, and the budget itself is EUR 175,000 for all members of the Management Board, including the CEO. Next slide, please. So the annual bonus. The annual bonus is basically the same mechanism as it has been -- it has always been since 2017. Starting in 2021, we introduced an ESG multiplier as a new dimension. This ESG multiplier substitutes the former, so-called, performance factor. The idea behind is that, yes, first of all, I wanted to constitute a balance between financial -- key financial performance indicators and ESG targets as nonfinancial measures. These performance measures reflect Volkswagen's strategy and the transformation process. In detail, it's still the financial measures; operating results, including China; and return on sales, the key financial measures, both equally weighted. And there's a multiplier for ESG, which contains the environmental dimension and the social dimension. The target achievement of these 2 components will be multiplied with a third component, with a governance multiplier. And I will comment on these on the next slide in a little bit more detail. Just to comment on the target values. The target value for the annual plan for the Management Board is EUR 1.35 million for the members and EUR 3.045 million for the CEO. Cap is 180% of the target value, all fixed and disclosed targets. By the way, the discretion in this plan has been minimized or reduced compared to the one before by using formal measures and bonus functions also for the ESG targets. You will see that in a few minutes. Next slide, please. The 3 ESG dimensions are environmental, social and governance. In the environmental dimension, we use a so-called Decarbonization Index. Decarbonization, of course, is highly relevant due to the strategic priorities of the company and due, of course, to current climate debate. The Volkswagen Decarbonization Index measures the average carbon dioxide and carbon dioxide equivalents throughout the overall life cycle of the product portfolio. So it's a holistic view. And yes, this is the starting point for measurement and for action. We think it's suitable because it's highly transparent and can also be used in the capital markets communication. Target setting will take place on an annual basis. So that means it's also derived from the strategic planning. To give it a little bit more flavor, you see the strategic target for decarbonization and for the index is 30% carbon dioxide reduction by 2025 compared to the starting point 2015 on a comparable basis. The social dimension consists of the Employee Opinion Index and the Diversity Index, both equally weighted. The Employee Opinion Index is an established and well-rehearsed instrument, which combines different relevant social criteria. The employee dimension, of course, is and was always of high strategic value for Volkswagen. In addition, we also have the Diversity Index, which is also increasingly relevant and strategically important, also for capital market communication. What is it exactly? It's the share of women in management and also the degree of internationalization in top management. Strategic targets for diversity as well, and this index was introduced in 2016, starting with an index value of 100, and the aim is to drive it to 157 by 2025. That means for women in management to increase the portion from 12.1% to 20.2%, and internationalization from 17% to 25%. So the third dimension is the governance factor, as we call it, a compliance and integrity factor, which is also an integral component of the annual bonus. It's a multiplier in the range of 0.9 to 1.1. How is it measured? It's a 2-step approach. First step, collective assessment of the entire Board of Management by the Supervisory Board in terms of compliance and integrity. And the second question is, does anybody stand out from the individuals in a positive or in a negative way compared to the other board members? So this instrument serves 2 purposes. On the one hand, to recognize outstanding performance or also to sanction, if there were violations, through an individual discount within the range of 0.9 to 1.1. Why is that also important? Because the implementation of this factor follows the recommendation of the monitorship. In the report of the monitor, this was an important issue, to have something which does not only sanction compliance and integrity behavior, but also serves as a -- can serve as a kind of incentive for very good compliance behavior. So it's a very important KPI for Volkswagen. Next slide, please. So on this slide, you see the bonus functions. As mentioned, they are all derived from strategic planning and fully disclosed. For the key -- financial key performance indicators, they are derived from strategic planning, and they shall be kept constant over time from the target values cap and threshold. The cap is 150%. The ESG targets are also derived on an annual basis from strategic planning or respectively from historical values. For example, for the opinion index, the cap is a factor of 1.3. Next slide, please. Yes. You see an overall example calculation for the members of the Board. I don't want to comment on that. I think it's quite clear how the system works. No rocket science behind it, and hopefully, quite transparent. Next slide, please. Yes, talking about the performance share plan. First of all, it's a virtual performance share plan. It's a so-called classic design, I would say. It's market prevalent. And the KPIs, the main KPIs or the value drivers are the share price and earnings per share. Earnings per share in order to determine the number of the virtual shares to be delivered to the individual and the share price after 4 years to determine the overall value of the package. The plan was introduced as well in 2017, and the only change is that the performance period has been extended to 4 years. So as you see, Volkswagen already complied with the new recommendation of German Code of Corporate Governance to grant variable compensation components mainly based on shares. This is the new duration of the performance period. It's valid for contracts and contract extensions in this kind, so extending them from 3 to 4 years. Target values remain unchanged by EUR 1.8 million for the members of the Board and EUR 3.83 million for the CEO. Cap is also -- has also not changed. It's 200% of target value. Next slide, please. So on the next slide, you see an example calculation for the LTI as well. It's the first tranche of the performance share, 2017 to 2019. So it's a real-life example. And you can also find these numbers in the annual report as well. Next slide, please. So this slide provides an overview of other contractual conditions. That's also not very spectacular. There's no change of control clause in the contracts, but there is a malus and clawback provision in the new contracts and contract extension. Severance payments are capped at a maximum of 2 years, and special bonus is not included in the contracts. So should the Supervisory Board think it's necessary to have a special bonus, nevertheless, they can, of course, do so. But that would be in a completely -- would be a complete exception, and there have to be a separate agreement. And previously, all the specifications and the target setting had to take place and of course, only for outstanding exceptional performance. But as I said, this is a complete exception. And of course, if this should ever happen, it all has to stay within the cap of the total direct compensation of EUR 5.5 million and EUR 10 million, respectively. Next slide, please. So this was already the system and the elements behind. And let me just comment on the peer group, so you get the whole picture. Volkswagen uses an industry peer group for many years now. And when we were reviewing the system, the peer group was adapted to the current strategy as well. The peer group currently consists of 18 companies. And you see some of them have a green circle around their logos, and that means that these have been introduced this year for the first time due to strategic ideas behind that. For example, in the group on the bracket of the automotive companies, we have BYD, it's a Chinese electronic car manufacturer, as well as Tesla as a U.S. car manufacturer, as you all also know. But we did not include the CEO, Mr. Musk, in the peer group due to obvious reasons. But all the other members of the Tesla Board, they are there in this peer group. Then we have some other industry companies, which have been there for quite a long time, technology and service companies. Of course, SAP is included for the first time because software engineering becomes more and more important for Volkswagen as well. So we have to cover this aspect as well. Uber as a mobility service company also reflects the changes in the Volkswagen business model, and Samsung as a big technology company with a big focus on battery production. Below that, you see the industry mix and the regional mix. Overall, we think this constitutes a suitable mix in terms of industry and region, and it reflects Volkswagen's business strategy very well. That was the overview of the system. So thank you very much for your attention so far, and I'm, of course, happy to discuss your questions. Thank you.

Thank you very much, Michael, for your very comprehensive deep dive. Before we begin the Q&A session, we have already received some questions in advance, somebody who're traveling. So we would like to start with those. And immediately after that, we'll hand over to the operator.

So Michael, I would like to ask the questions on behalf of the particular investor. Question one. For better transparency, will you publish your Opinion Index, Diversity Index and Decarbonization Index each year?

Thanks, Helen. The Opinion Index, the Diversity Index, both, and the Decarbonization Index as well have already been published in our annual reports, and we will continue to do so in the future. If you need more information on these indices, please go to the respective pages, which are 158, 161 and 164 in our Annual Report 2020, so at least the English version, where you find the most recent description of each index and its link to our strategy as well as the performance of each index in 2020. As these indices are part of the targets for executive compensation as of January 1, 2021, we will also start reporting the target achievement of these indices for the purposes of executive compensation in the remuneration report for 2021.

Okay. Thank you, Michael. We'll now move to question 2. Will you publish the compliance factor individually per Board member every year as described with the other disclosures in the annual report, for example?

The compliance factor will be published individually per Board member in the remuneration report. Taking into account the importance of compliance and integrity and the joint responsibility of all Board members for this issue, we anticipate that the factor may be the same for all Board members and may only differ in extraordinary circumstances. However, the Supervisory Board will review the factor on an individual basis for each Board member.

Great. Moving on now to number 3. In case of extraordinary events, the Supervisory Board can adjust bonus and LTI with reasonable discretion. Could you please specify reasonable discretion? Are there any boundaries to that?

Yes, the right to adjust the bonus and the LTI has been introduced on the basis of a new recommendation of the German Corporate Governance Code, its recommendation G11. And according to the recommendation, the Supervisory Board should have the opportunity to take into account extraordinary events appropriately. In our remuneration system, we defined more precisely what this means. First, we defined certain events as extraordinary to make the adjustments more predictable. For instance, the sale or acquisition of a company. Second, we use the legal term reasonable discretion coming for the German civil code to introduce critical review and the need for specific justification when the Supervisory Board intends to make use of the -- excuse me, use of the right, for example, why such adjustments is in the best interest of the company. Third, the different remuneration caps still apply even if the Supervisory Board intends to adjust the bonus or the LTI. So there are clear boundaries for each favorable component and the overall maximum remuneration.

Thanks, Michael. The next question refers to the Opinion Index and how it's evaluated. Is this through an independent company or external auditor? If the Opinion Index is an internal instrument, what measures have you implemented to ensure a fair calculation?

Yes. The Opinion Index is a strategic KPI of the Volkswagen Group. And as such, it is evaluated by the auditor yearly. The index has been measured for many years and is an important factor to develop and amend our HR strategy. This is why the Supervisory Board has decided to make it part of the ESG component of the executive compensation. As already mentioned, you may find a description of the Opinion Index in our annual report, for example, on Page 161 of our annual report.

Okay. The second last one I have here, could you provide the constituents of the factor compliance, integrity or examples for achievements and shortfalls?

The Supervisory Board evaluates the collective performance of the Board of Management as a whole and the individual performance of the respective Board of Management members with regards to integrity and compliance during the financial year. As a rule, the governance factor is to be 1.0. It can be reduced to 0.9 if there is any individual or collective misconduct, for example, violations of legal regulations or the code of conduct of the Volkswagen Group, the latter includes Volkswagen's responsibility as a member of society, its responsibility as a business partner and its responsibility in the workplace. In case of an outstanding performance, as mentioned before, it can also be increased a maximum of 1.1; within this range, 0.9 to 1.1.

I'm sorry. We're now coming to the final question that we received in advance per e-mail, it's related to LTI. Michael, could you explain to us why the LTI does not include any ESG components and a link to your decarbonization reduction targets as an example of how it could have been done?

Okay. So the LTI is a share-based remuneration component and, first of all, intended to create an incentive with regard to increasing shareholder value. This is why the LTI is based on earnings per share, the performance of Volkswagen shares and the dividend paid to our shareholders. The aim is to ensure a sufficient alignment of the interest of the Board and the shareholders. In addition, the aim is to make the remuneration system, as a whole, transparent and comprehensible. Supervisory Board decided to integrate all ESG components into the measurement of the annual bonus. And the Supervisory Board has been convinced that the annual bonus may provide better incentives to pursue ESG targets. First, ESG targets are not only long term, but should also be part of today's strategy with a clear focus on quick implementation. Decarbonization is a good example for this. We want to achieve ambitious goals, not only on a 4-year basis, like, as LTI, but also this year and the following years. And second, the Supervisory Board is in a better position to set ambitious ESG targets if such targets may be set for the annual bonus each year, not on a 4-year basis, so practical ideas behind it.

Thanks, Michael. We would now like to start the outside Q&A session. So I'd like to hand over, Ashlynn, to you, our operator, to kick off.

[Operator Instructions] We'll take our first question from Hendrik Schmidt of DWS Investments.

Thank you very much for presenting this, and I must admit it was quite interesting to read through the document on your website prior to this call. I would have loved to have the slides also available, that would have made some understanding a little bit easier. But I do have a couple of questions. Some of them were already asked, so I would certainly not touch upon them. But when I summarize what you've just presented, I still have a feeling that the markets and the investors' expectations are very much ahead of what you are just proposing here. There are a couple of very crucial elements that, in my opinion and probably also of others from the investment community, are certainly not anymore a state-of-the-art. And I was very surprised to understand that there was no input sought from shareholders prior to setting up the system because it's, again, a situation where we are basically confronted with the solution that has already passed through the bodies within the organization of Volkswagen, and we ultimately only have the chance to vote on that next year. But let me start with some of the questions that come to my mind. So with regard to the general idea of having a special bonus possibility agreed in the system, when would those special bonus agreements be signed and when would they be discussed? So at which point would shareholders have knowledge about that?

Well, if the special bonus should ever be a realistic option and should be set by the Supervisory Board, they will be published or these commitments will be published and disclosed as soon as possible in the compensation report of the current year, if it makes sense, so upfront. And if not possible, then, of course, in the next remuneration report at least.

Okay. But there is no chance that shareholders could at any point say we don't want that these elements are agreed?

So I think it's not decided. I would say no. So it's -- since this is only a theoretical option, it's a good point to think, whether this -- if this should ever happen, if Supervisory decides to disclose upfront or to do something different in terms of shareholder communication. But for the time being, no.

Okay. And then...

And also if I may add. We still had one open section of that. We did actually engage and exchange in advance with a selected number of shareholders. So we did listen to the market and take advice from the market.

Okay. It doesn't appear to me like that, but okay. Anyway, why is there no differentiation between Board members' responsibilities laid out in the at least annual targets of the bonus?

Well, it was discussed also to differentiate between the Board members. But the decision was not to do so in order to keep complexity low. And the idea behind is that all Board members should have the same level of responsibility, and this promotes also a cross-function thinking together. We don't want to create -- or supervisory did not want to create silos. And yes, that was the idea. So it's a question of remuneration policy altogether. But the question was discussed. I know that there are other companies who take a different approach. In this case of Volkswagen, it was -- yes, it was the way to proceed.

And with regard to the multiplier, and that's quite an interesting operation that you've conducted there. On the one hand, we do have the range between 0.7 to 1.3 in the E&S, and then we have an additional layer represented by the governance sector between 0.9 and 1.1, ending up with a range of, I think, something, 0.64 to 1.43 or something. I mean I'm honestly not aware that this kind of amplitude for discretion for the Supervisory Board is still very much backed up in the market. At least, I do recall that from the conversations I'm having with my German colleagues but also with my Anglo-Saxon colleagues. There is usually the agreement that this range should not be more than 0.2 -- or 0.8 to 1.2 in order to avoid that there is this trickling and tackling by the Board. So why did you decide or why did you propose or why did the Supervisory Board decide to set this factor or this multiplying factor down to 0.7 to 1.3?

Yes. Previous, in the system, the performance factor had been exactly in the range of 0.8 to 1.2, but there was more discretion in that. We think there's very little discretion because we measure those indices in case of the social component as well as the Decarbonization Index and so on. So that's no discretion in our view. So that's hardly wired or it's hardwired measurement. And so there's no discretionary decision from the Supervisory Board besides the limited -- factor with a limited swing of 0.9 to 1.1 when it comes to the corporate governance component, which is compliance and integrity. And that is for a good reason, also with the idea to limit the discretionary swing. But when it comes to ecological and the social component, we would say that's really hard measurement with bonus functions and no discretion of the Supervisory Board at all. It's all disclosed, and it's all transparent. So we don't have bad feelings with that. Although I have to admit this is -- especially the governance factor is -- or might be special in case of Volkswagen. I tried to illustrate what the ideas behind that were and how it relates to the monitorship.

I would have 3 more questions, if I may, and I would have more, but those are the most important ones from my side to allow also others, obviously, to step into the discussion. But first of all, you're talking about a share performance plan, but the payout is finally done in cash. And I have not witnessed any share ownership guidelines associated with. So how does that fit into the picture when we are talking about the alignment of shareholders' interest without having any, let's say, link also to relative TSR, but only by the EPS factor in the long term? So first question, why is there no equity-based payout? Second, why is there no relative total shareholder return component add to it? And why are there no share ownership guidelines?

Okay. Let me summarize. The first part of your question was why is there no equity-based payouts? And the second, why don't we have a relative TSR measure and share ownership guidelines, right?

Exactly.

Okay. So the first question was there are no equity-based payout? I mean we're quite positive that this is a share-based construction, although it's a virtual share plan. But the Supervisory Board decided that this should be virtual performance share plan because it's easier to administrate and so -- for other reasons. So it's more or less has practical reasons. The share price is still -- and EPS are still the dominant factors and so share price, the relation to the share price development is quite obvious. So the second question is, why is there no relative total shareholder return measure -- performance measure? And of course, this is a very good question, like all the others as well. But we discussed that. The Supervisory Board discussed the question extensively, whether there should be 1 or 2 KPIs besides the share price? So should that be only EPS? Or should that only be relative TSR? Or should it be both? In the end, decision was -- I mean we were coming from a traditional system, I would call it, with a backwards-looking LTI plan. The idea was to come up with one because we wanted to reduce complexity, keep it transparent as possible. And it was preferred to have one measure, which was more in the -- which could be better influenced by the Board, which is the EPS. And we did not want a double measurement with an additional KPI of total shareholder return. So that was the idea behind that. And of course, you could say, okay, why are there no share ownership guidelines as well? We also discussed that -- or the Supervisory Board discussed that intensively, and it's the same reason. The Supervisory is of the opinion that the share-based LTI is okay and is sufficient. There's no double measurement with share ownership guidelines. It does not really contribute to having a simple and transparent system as well, if there's another component parallel to the original system. I know this is something which is more and more common in the market, but that was the decision of the Supervisory Board to do it like that. And by the way, if you -- or you probably know that some people in the Management Board, for example, the CEO, Mr. Diess, is already heavily investing in Volkswagen stock and holding that. You could -- you will probably have read that in the press. So these are the ideas behind that. So the Supervisory Board discussed that, but came to a different decision than you suggested.

Thank you, Hendrik. We would now like to move, operator, to the next participant, please.

We'll take our next question from Rodrigo Kohn of Schroders.

I'll try and keep it quick. I mean just on those 2 targets, on the Decarbonization Index, a 30% reduction versus 2015 levels, I don't think even gets you to EU CO2 targets by that point in time. Now I know obviously, there's a difference between that and the rest of the world. But it just seems to me that rewarding management for doing the bare minimum of what's required to meet the current strategy, it doesn't seem appropriate to pay some of the bonus. And so when it comes to compliance and integrity, we've spoken a little bit about range. I'd like to know why -- if we do trust the Board members to assess each other on compliance and integrity, why, if someone fell down to the bottom of that level of performance, would a 0.9x multiply be appropriate. The last time we had problems with compliance and integrity, the company lost shareholders' EUR 30 billion. So I don't really know why anyone would be paid a bonus at all if that was going to be the case?

Okay. Thank you.

Rodrigo, if you could just wait, we will get a more expert answer from our person who works in department on Decarbonization Index as well. Maybe then in the meantime, you can explain, Michael, if -- compliance and integrity, if there was a huge fall in the performance on that, what the consequences would be?

I mean if there is a huge fall and a big problem, then it would not be solved via the remuneration system, but the relevant person would probably be removed from the Board, from its position. So the consequence would be a termination of the contract. So I mean what are we talking here? The baseline for this integrity and governance factor is still, of course, a good conduct and small variations below, which will be shown in a decrease or in a discount of the bonus. And if somebody is very good and is very -- constitutes a very good example for compliant behavior, this will also be rewarded just within a small range. But you're talking about somebody falls down in this area of performance, then, of course, it will have other consequences than just the bonus system. So Volkswagen will not solve such kind of problems via the variable compensation. It's more severe consequences. And as mentioned before...

Okay. Sorry...

After you.

No, I was just going to say it's probably a bit of an unfair or a leading question. But my response to that, I kind of expected that would be the answer. It's just -- it would make, certainly on our side, I feel a lot more comfortable if we then believe that people would be comfortable assigning their colleagues or peers with a 0.9x multiplier or whether -- just showing us the framework of how this won't just be used to get to the 1.1x multiplier and people gaining their bonuses each year. It feels very much like if there's no serious indiscretions when it comes to C&I on their sides, people probably aren't going to be getting a bonus if those happen. So the 0.9x multiplier feels unlikely. It feels like people will probably always at least meet or exceed. And so yes, just a bit more clarity going forward on the framework and how we can kind of just to ensure that, that 1.1 is actually a stretch and people will have to exceed expectations to get there?

Could you -- was that more -- I understood that was more a comment, right? Or...

Yes. No, sorry, That's not a question, sorry. Yes. No, that's fine. So just more detail on that going forward would be super helpful.

We'll take note of that, Rodrigo. And I would like to get back to, as I mentioned, on your question about the ambition level within our Decarbonization Index. The plan goes beyond the existing intermediate goals for 2025 because the new 2030 goal is to be achieved through CO2 reduction, and it includes not only a goal for passenger cars, but also a target for heavy trucks and buses from Scania, which represents a subtarget for the group. The new additional target for 2030 was verified by the independent Science Based Targets initiative. The SBTi then confirmed to the Volkswagen Group that the group meets the conditions for limiting global warming to significantly below 2 degrees with its climate goal. So hopefully, that answer is appropriate for your direction that you were trying to get to.

Yes. No, yes, definitely. Again, I would just say, as a comment, publishing kind of gram targets or actual specific numbers would just be super helpful because I think, as you stated, there's a lot of nuance. So yes, I think dealing with that internally if someone who didn't know the company that well saw that number, they'd be a bit concerned. So that, again, would be great to get a lot of detail on.

Yes. Maybe if I could just add, Rodrigo, we are in very close -- much closer dialogue with the rating agencies, the benchmark rating agencies, than we would have been in the past. So we are really analyzing appropriate disclosure, where we need to be more active and where we need to be more clear. And we will intend to build that into our sustainability report, our financial report, et cetera. So is that your last question, Rodrigo?

Yes, yes, that's it.

Okay. Great. In the interest of time, we'd like to wrap up for today. I would like to thank everybody for your participation, also for your very constructive questions. Once again, I would like to thank you, Michael, and also Christian for taking the time to support us today. I know a lot of work went into it. Also many thanks to the members of the Supervisory Board for the joint support; and especially then also my colleagues, Alex and Ulrich, who represent the ESG team within our IR department. So I hope everybody has a good day, a good weekend and most importantly, still in this time, stay very healthy. Thank you, and bye-bye from Volkswagen.

Thank you. That now concludes the call. Thank you for your participation. You may now disconnect.