Yahoo Finance Why Germany’s New Quota for Women On Boards Looks Like a Bust
Germany's new law requiring that women hold 30% of top board seats went into effect this January--but many companies don't seem to have noticed.
Women now hold about 22% of supervisory board seats at Germany's top companies, according to a new study from the Hans B?ckler Foundation, which researches workplace issues. While the share of women in those top board positions has doubled during the past five years, it falls dramatically short of the new federally mandated quota.
The law, which passed last year, requires the top 100 or so publicly traded companies to hit the 30% figure figure as of January 1, 2016. The quota applies specifically to supervisory boards, which are made up of outside directors elected by shareholders and workers, who appoint management and approve major business decisions. They are separate from a management board that runs day to day operations.
Germany's government lags behind many of its European counterparts in promoting women in the workplace. Norway, France, the Netherlands, Italy and other countries on the continent already have corporate gender quotas in place. (In the U.S., which has no quotas, women held about 19% of the board seats of S&P 500 companies as of early last year.)
Unlike the new German requirement, the quota laws in many other European nations have teeth. In countries like Norway and France, for example, companies face fines and other tough sanctions for not complying. In Germany, by contrast, companies that can't find enough women to fill board seats have to keep them empty until they do. The country's midsized companies, which are the real backbone of the German economy, have until next year to set their own quotas.
The B?ckler Foundation analysis shows that public shaming is having some impact on German companies. "No company wants to be trotted out as a negative example," says Marion Weckes, the study's author. Even just the threat of quotas spurs companies to start thinking about promoting women.
The share of women on supervisory boards at a sample of 160 publicly traded companies hovered around 10% from 2005 to 2010, according to the study. In 2010, the threat of gender board quotas started to become real, when a German corporate governance group recommended companies start hiring more woman to non-executive board positions. That's when German companies began to take action, and during the next five years the share of women holding supervisory boards seats at those 160 companies doubled to 22%.
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Still, the effects of the quota haven't resulted in other gains for women in German corporate life. By the end of 2015 women held just 6% of management seats at the country's top 200 companies--an increase of less than 1% from 2014, according to DIW, the German Institute for Economic Research.
Overall, women hold 15% of senior roles in the country, compared with 23% in the United States, according to a report from advisory firm Warth & Klein Grant Thornton AG. The report also showed that 60% of German businesses have no women in senior management--nearly double the percentage of U.S. companies with no women in senior roles.
Globally efforts to put women into senior roles are moving at a snail's pace, according to the report. In the last five years the share of women in senior roles around the world has risen 3%. The report estimates that if growth continues at the same rate, workplace gender parity won’t be attained until 2060.
Elke Holst, DIW's research director for gender studies, is optimistic that the situation for women in Germany's workplaces will improve, but agrees that it will take time. “There are a lot of structural problems in the country that slow things down," says Holst. "Culture is important.”
Women in post-Second World War Western Germany were encouraged to care for their families instead of participating in the workforce. Until 1977, Western German women had to get permission from their husbands to work.
Even today German women struggle with issues like lower pay and workplace discrimination. Holst says that while measures like a gender quota force companies to at least think about workforce gender parity, they can't actually force companies to act.
“The discussion about women in leadership positions is very split," she says. "Some companies are just not very enthusiastic about promoting women.”
It's slow going even among companies that have long been working on getting women into senior management positions. On March 7, Frankfurt-based Commerzbank promoted the first woman to its management board--but a spokesperson said that the bank has been working on efforts to promote women for twenty years.
Commerzbank, which aims to get women into 30% senior positions, is trying to build a pipeline of female executives using mentoring schemes and programs that allow women to get short-term management experience and shadow senior executives. Currently women hold 28.2% of positions at the company’s top four management levels in Germany. Even so a former female employee at Commerzbank's London office is suing the company for discrimination.
"Everything won't change from one day to the next," says Weckes, author of the B?ckler Foundation study. The question, she says, is whether the 30% female board quota will kick off a bigger culture change that will eventually lead to equal female presence in German companies. The danger, she says, is that 30% will end up as a ceiling. Once they hit that number "companies might think, 'I did my part, that's enough,'" she says. "Still better 30% than 20%."
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