Volkswagen's Governance and Reputational Risks in the EV Transition: Leadership Integrity and Its Impact on Stakeholder Trust and Long-Term Investment Potential

Volkswagen’s transition to electric vehicles (EVs) has become a focal point for investors, regulators, and stakeholders, yet its success hinges on more than technological innovation—it depends on the company’s ability to rebuild trust through credible governance reforms. Since the 2015 "Dieselgate" scandal, which revealed deliberate emissions manipulation and exposed systemic governance failures, Volkswagen has faced relentless scrutiny. While the company has implemented sweeping reforms under its "Together 2025" and "ACCELERATE" strategies, recent shareholder demands and academic analyses suggest that leadership integrity and board independence remain unresolved challenges. For investors, the question is whether these governance shortcomings will undermine Volkswagen’s EV ambitions or if the company can leverage its strategic pivot to regain credibility.

Governance Reforms: Progress and Persistent Gaps

Volkswagen’s governance framework, as outlined in its "Best Governance" module, emphasizes transparency, decision-making efficiency, and stakeholder trust [2]. The company has pledged €35 billion in EV investments by 2025 and aims to achieve 70% EV sales in Europe and 50% in the U.S. and China by 2030 [3]. However, these ambitions are shadowed by ongoing shareholder concerns. In May 2025, investors criticized the company’s "highly problematic governance" practices, calling for greater board independence and reforms to address perceived conflicts of interest [1]. A Reuters report highlighted that minority shareholders remain skeptical about the effectiveness of Volkswagen’s cost-cutting measures and restructuring efforts, which include layoffs and capacity reductions [4].

The 2015 emissions scandal, which cost Volkswagen over €30 billion in penalties and reputational damage [5], exposed a corporate culture where aggressive growth targets overshadowed ethical compliance. Post-scandal reforms, including leadership replacements and compliance programs like the Together4Integrity (T4I) initiative, aimed to address these issues [6]. Yet, academic studies note that Volkswagen’s governance improvements have not fully restored stakeholder trust. A 2025 analysis in Sustainability journal observed that while governance metrics in ESG reports have improved, environmental and social performance lags, raising concerns about greenwashing [7].

EV Transition: Strategic Ambitions vs. Execution Risks

Volkswagen’s EV strategy is anchored in vertical integration, exemplified by its PowerCo battery subsidiary, which plans to produce 200 GWh of battery capacity by 2027 [8]. The company’s €73 billion investment in electrification and digitalization over five years underscores its commitment to becoming a global EV leader [9]. However, execution risks persist. For instance, slower-than-expected EV delivery rates and weaker consumer demand in key markets like China have raised questions about Volkswagen’s ability to meet its 2030 targets [10].

Investor reports from 2025 highlight additional challenges. A Forbes analysis noted that Volkswagen’s dual leadership structure with Porsche AG could hinder agility in a rapidly evolving EV market [11]. Furthermore, supply chain vulnerabilities—particularly in mineral sourcing for batteries—pose environmental and social governance (ESG) risks. AllianceBernstein’s 2025 report emphasized that Volkswagen must address issues like lithium and cobalt extraction practices to align with global sustainability standards [12].

Leadership Integrity and Stakeholder Trust: A Delicate Balance

Leadership integrity remains a critical factor in Volkswagen’s long-term investment appeal. The company’s post-Dieselgate pivot to EVs was framed as a redemption arc, but recent shareholder demands reveal lingering doubts. A 2025 Reuters article noted that investors are pushing for "meaningful governance reform," including increased board independence and clearer accountability mechanisms [13]. This skepticism is compounded by Volkswagen’s reliance on traditional labor agreements in Germany, which critics argue may stifle cost-cutting efficiency [14].

Academic research underscores the link between governance and trust. A study in Corporate Governance found that Volkswagen’s post-scandal reforms, while necessary, have not fully repaired stakeholder confidence [15]. The company’s emphasis on governance metrics in ESG reporting, while positive, has not offset underperformance in environmental areas, creating a perception of imbalance [16]. For investors, this duality raises concerns: Can Volkswagen’s governance improvements translate into tangible, sustainable value creation, or will reputational risks continue to cloud its EV transition?

Implications for Investors

Volkswagen’s EV transition presents both opportunities and risks. On one hand, its strategic investments in battery technology and software platforms position it to compete with Chinese automakers and Tesla. On the other, governance weaknesses and execution challenges could erode investor confidence. A 2025 Bloomberg report noted that Volkswagen’s stock traded below pre-2025 levels, reflecting market uncertainty [17].

For long-term investors, the key is to assess whether Volkswagen’s governance reforms are structural or superficial. The company’s ability to demonstrate board independence, transparent decision-making, and consistent ESG performance will be critical. Additionally, investors must monitor its EV delivery rates, cost-cutting effectiveness, and alignment with global regulatory trends, such as the EU’s CO2 emission rules [18].

Conclusion

Volkswagen’s EV transition is a high-stakes endeavor that hinges on more than technological prowess—it requires a governance framework that fosters trust and accountability. While the company has made strides in post-Dieselgate reforms, shareholder demands and academic critiques highlight persistent gaps. For investors, the path forward involves balancing optimism about Volkswagen’s strategic vision with caution regarding its ability to execute and sustain credibility. In an era where ESG factors increasingly dictate investment decisions, Volkswagen’s success will ultimately depend on its capacity to align leadership integrity with its green ambitions.

Source:
[1] Volkswagen shareholders demand carmaker reform 'highly problematic governance',
https://www.reuters.com/business/autos-transportation/volkswagen-shareholders-demand-carmaker-reform-highly-problematic-governance-2025-05-16/
[2] Five modules of the TOGETHER 2025 + strategy,
https://annualreport2019.volkswagenag.com/group-management-report/goals-and-strategies/five-modules-of-the-together-2025-strategy.html
[3] Volkswagen's 2025 Vision: Leading the Green and Digital Revolution,
https://inspirepreneurmagazine.com/volkswagens-2025-vision-leading-the-green-and-digital-revolution/
[4] Volkswagen seeks new era in Germany with old methods,
https://www.reuters.com/business/autos-transportation/volkswagen-seeks-new-era-germany-with-old-methods-2025-01-22/
[5] The Volkswagen Emissions Scandal and Its Aftermath,
https://www.researchgate.net/publication/332327135_The_Volkswagen_emissions_scandal_and_its_aftermath
[6] Integrity and compliance - Volkswagen Group Annual Report,
https://annualreport2021.volkswagenag.com/group-management-report/sustainable-value-enhancement/integrity-and-compliance.html
[7] The Effects of Environmental, Social, and Governance (ESG) Factors on Profitability and Market Capitalization in the European Automotive Industry,
https://www.mdpi.com/2227-7072/13/2/82
[8] Volkswagen's PowerCo Charges Up EV Transition,
https://www.forbes.com/sites/sap/2025/03/04/volkswagens-powerco-charges-up-ev-transition/
[9] Volkswagen Group takes the offensive in China by strengthening tech capabilities and reducing costs,
https://www.volkswagen-group.com/en/press-releases/volkswagen-group-takes-the-offensive-in-china-by-strengthening-tech-capabilities-and-reducing-costs-18350
[10] Expect 2025 EV Price War Led By VW, As EU CO2 Regime Bites,
https://www.forbes.com/sites/neilwinton/2024/08/30/expect-2025-ev-price-war-led-by-vw-as-eu-co2-regime-bites/
[11] Volkswagen Shareholders Demand Governance Overhaul,
https://evxl.co/2025/05/19/volkswagen-shareholders-governance-overhaul/
[12] Sustainable Investing Through the Supply Chain: Electric Vehicles,
https://www.alliancebernstein.com/corporate/en/insights/investment-insights/sustainable-investing-through-the-supply-chain-electric-vehicles.html
[13] Volkswagen shareholders demand carmaker reform 'highly problematic governance',
https://www.reuters.com/business/autos-transportation/volkswagen-shareholders-demand-carmaker-reform-highly-problematic-governance-2025-05-16/
[14] Volkswagen seeks new era in Germany with old methods,
https://www.reuters.com/business/autos-transportation/volkswagen-seeks-new-era-germany-with-old-methods-2025-01-22/
[15] Toxic governance: an overview of the Volkswagen saga,
https://www.aicd.com.au/organisational-culture/business-ethics/issues/toxic-governance-an-overview-of-the-volkswagen-saga.html
[16] The Effects of Environmental, Social, and Governance (ESG) Factors on Profitability and Market Capitalization in the European Automotive Industry,
https://www.mdpi.com/2227-7072/13/2/82
[17] Volkswagen Gathers Investor Support, But EV Performance Needs Work,
https://www.forbes.com/sites/neilwinton/2025/03/22/volkswagen-gathers-investor-support-but-ev-performance-needs-work/
[18] Expect 2025 EV Price War Led By VW, As EU CO2 Regime Bites,
https://www.forbes.com/sites/neilwinton/2024/08/30/expect-2025-ev-price-war-led-by-vw-as-eu-co2-regime-bites/