Porsche Exposed
1) Do you believe that Porsche’s management is appropriately concerned with stockholder wealth? Does Porsche’s ownership structure work to the benefit or detriment of public shareholders?
Although Porsche is publicly traded, the company is controlled by only two stockholders, the Porsche and Piéch families. As the quotation by Holger Härter makes clear, the two families hold exclusive shareholder influence over management. An interesting point for class discussion is whether the families actually ever exercise these rights. It is not clear from the information or evidence presented that they influence or direct current management headed by Dr. Wendelin Wiedeking. They may simply agree with current leadership and therefore remain quietly complicit. What this means for minority shareholders is that they do participate in the distributed profits and any and all capital gains (losses) which the traded preference shares provide, but they have no voting rights and therefore no ability to act as owners in whole. It also explains in part the company’s relatively uncooperative response to the requests of analysts and stock exchanges for more frequent reporting (as well as more detailed disclosure in their financial reporting). A final related component of this governance discussion is the structure of management compensation. The compensation packages of senior management were nearly exclusively focused on the recorded profitability of the firm from year to year, and not on the market’s assessment of that performance, the share price.
2. In your opinion is Porsche’s current currency hedging strategy protecting it from adverse exchange rate changes? Will it work as well in the long run as in the short run? Evaluate the other hedging strategies available to the firm and compare and contrast alternatives.
Exposure: Porsche’s currency exposure is fundamentally a long-term operating exposure arising from where and how it operates its business. Because the company is
Although Porsche is publicly traded, the company is controlled by only two stockholders, the Porsche and Piéch families. As the quotation by Holger Härter makes clear, the two families hold exclusive shareholder influence over management. An interesting point for class discussion is whether the families actually ever exercise these rights. It is not clear from the information or evidence presented that they influence or direct current management headed by Dr. Wendelin Wiedeking. They may simply agree with current leadership and therefore remain quietly complicit. What this means for minority shareholders is that they do participate in the distributed profits and any and all capital gains (losses) which the traded preference shares provide, but they have no voting rights and therefore no ability to act as owners in whole. It also explains in part the company’s relatively uncooperative response to the requests of analysts and stock exchanges for more frequent reporting (as well as more detailed disclosure in their financial reporting). A final related component of this governance discussion is the structure of management compensation. The compensation packages of senior management were nearly exclusively focused on the recorded profitability of the firm from year to year, and not on the market’s assessment of that performance, the share price.
2. In your opinion is Porsche’s current currency hedging strategy protecting it from adverse exchange rate changes? Will it work as well in the long run as in the short run? Evaluate the other hedging strategies available to the firm and compare and contrast alternatives.
Exposure: Porsche’s currency exposure is fundamentally a long-term operating exposure arising from where and how it operates its business. Because the company is