HANOVER, Germany (Reuters) - Volkswagen's VOWG_p.DE top shareholders closed ranks behind management on Wednesday, defying a torrent of criticism from smaller investors about the German carmaker's emissions test cheating and its response to the scandal.

Europe’s largest automaker held its first annual shareholder meeting since admitting in September to rigging U.S. diesel emissions tests in a scandal that risks costing it tens of billions of dollars.

The crisis has led to calls from some investors for greater openness at a business that is almost 90 percent controlled by its founding Porsche-Piech families, its home region of Lower Saxony and the Gulf state of Qatar.

But there was little sign on Wednesday of a change in corporate governance, with key shareholders easily defeating two motions aimed at replacing Hans Dieter Poetsch - Volkswagen’s chairman and also head of the Porsche-Piech family’s holding company - as chair of the meeting.

Poetsch, who is also VW’s former finance chief, repeated an apology to investors.

“We sincerely regret that the diesel issue is casting a shadow on this great company,” he told the meeting of about 3,000 shareholders in Hanover.

But some investors were not mollified.

“We are looking at a shambles,” said Ulrich Hocker of Germany’s DSW association of private investors, citing “collective failure” by top executives for the scandal.

“The stock has plunged 50 percent, market share keeps shrinking and diesel engines which long have been portrayed as the savior are just a big bluff,” Hocker said.

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Chief Executive Matthias Mueller sought to assuage investors by stressing VW’s readiness to change, noting the efficiency drive it has announced to fund an increase in spending on electric vehicles and services such as ride-hailing and car-sharing.

Alexander Scholl of investment firm Deka was not convinced.

“It sounds appealing to aim to become the leader on electric mobility, but the actual plans behind this are shallow,” he said at the meeting, which finished late on Wednesday.

ACRIMONIOUS DEBATE

Prosecutors in Braunschweig near VW’s Wolfsburg headquarters are investigating former VW CEO Martin Winterkorn and VW brand chief Herbert Diess over whether they effectively manipulated markets by delaying the release of information about the emissions test cheating.

A person familiar with the matter told Reuters on Tuesday that German financial watchdog Bafin had asked prosecutors to investigate VW’s entire management board at the time the crisis erupted, arguing it was collectively responsible.

That would include both Poetsch and Mueller, who sat on the management board at that time as finance director and head of sports car brand Porsche, respectively.

Some critics have argued that VW’s current corporate governance would make it difficult for the company’s supervisory board to seek any damages from its former management board, because it would mean Poetsch deciding to sue himself.

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However, VW told investors on Wednesday it was confident it had not violated market disclosure rules.

“VW remains convinced that it met capital markets obligations,” management board member Christine Hohmann-Dennhardt told the shareholder meeting.

Minority investors have strongly criticized a recommendation by VW’s boards to ratify the actions of executives in 2015 at the meeting - at a time when investigations into the emissions test cheating are ongoing. Such a vote is common at German firms, amounting to a show of confidence.

After an 11-hour debate, VW shareholders late on Wednesday endorsed the proposal by VW’s two boards to ratify the actions of all top executives and supervisory board members in 2015, Poetsch said.

Poetsch, Mueller, Winterkorn and Diess were each cleared by more than 97 percent of voting shareholders, the chairman said.

Lower Saxony, VW’s No. 2 stakeholder, abstained from the vote on ratifying the actions by Winterkorn and Diess as both are subjects of the probe by Braunschweig prosecutors, who are also investigating 17 lower-level VW managers over the scandal.

“The state of Lower Saxony wants to avoid giving the slightest impression amid current (legal) proceedings that it is positioning itself on the question of ongoing judicial inquiries,” a spokeswoman for the state government said.

Shareholders also ratified a proposal by both boards to slash the 2015 dividend to 0.11 euro ($0.1243) per ordinary share and 0.17 euro per preferred share, from 4.80 euros and 4.86 euros, respectively, for 2014.

“At VW, much more will be at stake in coming years than clearing up the diesel issue,” said Hans-Christoph Hirt from shareholder advisory firm Hermes EOS.

“What’s needed besides a new strategy will be a fundamental change in corporate governance including more independent members of the supervisory board,” he said.

VW’s preference shares showed little reaction to the acrimonious debate and were down 0.4 percent at 123.1 euros.