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Germany will require companies to put women executives on their boards

18 November 2020, Berlin: Franziska Giffey (SPD), Federal Minister for Family Affairs, Senior Citizens, Women and Youth, is waiting for the debate to begin before the adoption of the amendment to the Infection Protection Act, the law to protect the population in the event of an epidemic situation of national importance. The law will adopt far-reaching measures to enable government action in a situation like the Corona pandemic. Photo: Michael Kappeler/dpa (Photo by Michael Kappeler/picture alliance via Getty Images via CNN)

(CNN) — Germany’s coalition government has agreed to a mandatory quota for women on the boards of listed companies in what’s being hailed as a landmark moment for Europe’s biggest economy.

Listed companies with management boards of more than three executives must appoint at least one woman to the C-suite, according to a statement Friday by Germany’s ministry for family affairs, senior citizens, women and youth. A final decision on the new measure is expected next week.

“We are putting an end to women-free boardrooms at large companies,” said Franziska Giffey, the minister for women and families, who described the decision as a “historic breakthrough.”

Janina Kugel, the former chief human resources officer at Siemens, was among several prominent women leaders and campaigners in Germany who welcomed the news. Jutta Allmendinger, president of the WZB Berlin Social Science Center, said the decision was “historic.”

But business lobby groups pushed back on the decision. The Federation of German Industries (BDI), which represents 40 trade groups, said it supports efforts to encourage the appointment of women to leadership positions, but added that a fixed board quota is “a major intervention in entrepreneurial freedom.”

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“The tendency to try to rectify socio-political problems through the economy and companies must in no way become the rule,” BDI executive board member Iris Plöger said in a statement. “Politicians should rather show greater courage in tackling the reasons why there are so few women on company boards,” she added, pointing to the need to expand digital infrastructure “to make it easier for everyone to balance work and family life.”

Plöger said companies should be given “as long as possible” to comply with the new measures and should be protected against sanctions where it is “not practically possible” to meet the requirements.

Germany lags several major economies when it comes to the proportion of senior executive positions held by women. According to the Swedish-German Allbright Foundation, a nonprofit, women make up just 12.8% of the management boards of Germany’s 30 largest listed companies.

By comparison, women have been hired for 28.6% of the senior leadership roles at leading companies in the United States, 24.9% in Sweden, 24.5% in Britain and 22.2% in France.

None of Germany’s biggest companies are led by women, according to the Allbright Foundation. And it appears the country is going backwards when it comes to gender diversity: The number of women on the management boards of companies listed on the blue-chip DAX 30 index fell to 23 at the start of September from 29 a year earlier.

Still, legally-binding quotas as a tool for achieving gender equality are controversial. Opponents argue that they are too prescriptive and may result in women being unfairly promoted, or perceived as being unfairly promoted. But in the absence of quotas progress has been slow.

According to Allmendinger, the decision to introduce a quota follows decades of lobbying by women in Germany on issues pertaining to gender equality in the workplace. “A long stalemate has finally been broken, when leading conservatives started to support the reform, thanks to the tireless efforts and pressure of many women and networks,” she told CNN Business.

Over the past few months, women from business, civil society, academia and the arts engaged in a coordinated campaign to push for the legislation, including through social media and the hashtag #jetztreichts and #ichwill, meaning Enough is Enough and I Want.

“Despite our success, we still have a lot to do,” Allmendinger said, pointing to the need to enhance diversity more broadly in governing bodies and tackle structural inequalities in the tax system that she said favor male breadwinners. “The gender issue is just one important dimension,” she added.

Germany adopted mandatory quotas for supervisory boards in 2015, with the effect that women now account for 36% of the non-executive board roles at large companies, according to the European Institute for Gender Equality. Under the country’s corporate governance system, supervisory boards oversee management boards but do not make decisions involving day-to-day operations.

Five other EU countries — Belgium, France, Italy, Austria and Portugal — have adopted mandatory gender quotas for the boards of large listed companies.

“The impact of these quotas is clear. In 2020, women accounted for 37% of the board members of the largest listed companies in member states with binding quotas, compared with 25% in countries with only soft measures or which have taken no action at all,” the institute said in a recent report.

Norway was the first country in the world to legislate gender quotas for corporate boards, requiring that women fill 40% of board seats.

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