Gender Quotas: How German Firms Help Women Get Ahead
Germany's plans to introduce a gender quota will cause fewer problems for companies than some critics are willing to admit. Many firms have already made changes, promoting female talent and bringing women into management.
Something exceptional must have happened for Annette Widmann-Mauz to see her name mentioned in the online edition of the New Yorker. The German lawmaker from the southwestern city of Tübingen, a member of the center-right Christian Democratic Union (CDU), is the parliamentary secretary of state in the German Health Ministry, a position that doesn't garner much recognition outside professional circles.
But last Tuesday, the magazine quoted the politician after negotiators for the CDU, its Bavarian sister party, the Christian Social Union (CSU) and the center-left Social Democratic Party (SPD) had agreed to a statutory gender quota during their coalition talks. Under the agreement, 30 percent of open positions on company supervisory boards are to be reserved for women, beginning in 2016. The agreement, says Widmann-Mauz, marks a "a cultural shift in the corporate sector."
If the howls of protest immediately following her statement are any indication, Widmann-Mauz is probably right. According to corporate executives and business associations, the government-imposed quota constitutes a substantial intrusion into corporate freedom and fails to reflect the unique aspects of certain industries.
They also protested that the new rule would impair competitiveness because there are simply not enough qualified women. The chief lobbyist of German industry, Federation of German Industries (BDI) President Ulrich Grillo, even went so far as to say that management positions, including those on supervisory boards, should be "filled on the basis of suitability and performance."
This seems self-evident, even in Germany, where men have dominated corporate management and supervisory boards for decades, and the debate over putting more women in top jobs has often been derided. The situation in the 160 most important, publicly traded companies remains sobering: Women make up 17.4 percent of supervisory boards and only 6.1 percent of management boards.
Germany's laws on co-determination, which guarantee employees seats on supervisory boards, have narrowed the gender gap to some extent. Labor representatives on supervisory boards have filled about 24 percent of the 638 seats to which they are entitled with women. For representatives of capital investors on supervisory boards, the figure is only 13 percent, and in 58 of the 160 companies, not a single woman represents the capital side on supervisory boards.
This is the situation 12 years after German industry made a voluntary commitment to more gender equality. In 2001, industry leaders promised to increase the share of women in management, precisely with the aim of circumventing a legal mandate. "If industry had taken the voluntary commitment seriously, it wouldn't be whining about the statutory quota today," says Monika Schulz-Strelow, president of the Initiative for More Women on Supervisory Boards (FidAR). She believes that the agreement marks a paradigm shift. "It's no longer a question of nice-to-have," she says, "but of necessary-to-have."
But will the quota truly change the German economy as fundamentally as the reactions would suggest?
The fact is that the coalition compromise isn't nearly as groundbreaking as it appears to be. The SPD and CDU negotiators have merely agreed that, starting in 2016, "a gender quota of at least 30 percent" will apply when open positions are filled on supervisory boards, as the document developed by the two major parties states. This would mean that a third of all supervisory board members would be women by 2020. Besides, the quota only applies to the exclusive circle of companies that are publicly traded and fully required to comply with co-determination laws.
There will be no fixed quota for the far more important positions in top management. Instead, the parties' negotiators agreed on a voluntary commitment by companies, which is strongly reminiscent of the controversial "flexible quota" model proposed by Family Minister Kristina Schröder (CDU).
The roughly 2,000 publicly traded companies or companies required to comply with co-determination laws must establish "binding targets for increasing the share of women on the supervisory board and the management board, and at the highest levels of management." However, there has been no mention yet of sanctions for non-compliance.
Some Firms Making Changes
As half-hearted as the coalition plans are, the years-long debate over a gender quota has led many business leaders to recognize that they will not be able to make do without female senior executives in the future. This has even resulted in some rethinking by opponents of a legal mandate, such as Daimler CEO Dieter Zetsche.
Zetsche, like many other corporate leaders, is opposed to a gender quota mandated by law. However, he has set an internal goal for Daimler: to double the share of women in leadership positions from 10 to 20 percent by 2020. Daimler was the first automaker to bring a woman, Christine Hohmann-Dennhardt, onto the management board. And Zetsche is also putting male managers under pressure by threatening to reduce bonuses for those who do not promote enough women. The argument that women are now being promoted simply because they are women is "basically bullshit," says Zetsche, noting that he is not aware of any case in which the promotion of a woman has later proved to be a mistake. "I am aware of a few such cases with men," he adds.
On the supervisory board, at least on the capital investor side, Daimler is already meeting the 30-percent target now being discussed. Three of the 10 members on the capital side are women: former Nokia executive Sari Baldauf, former Nestlé Executive Vice President Petraea Heynike and former Avon CEO Andrea Jung. The women are from Finland, the United Kingdom and Canada, thereby also bringing more of an international flavor to the supervisory board. This has improved debate within the board, say male members.
Other major corporations have also reacted to the changing environment. In March 2010, Deutsche Telekom was the first company listed on Germany's DAX stock index to announce that it plans to place women in 30 percent of middle and upper management positions by the end of 2015.
The example of Lufthansa shows that it is possible to fulfill the quota. The airline's supervisory board adopted a resolution to increase the share of women in management, and the company is also changing its corporate culture to this end. Leadership positions throughout the company will now be filled in a way that satisfies certain criteria, including gender and nationality.
Energy giant RWE, based in the western city of Essen, is taking a different approach. It currently has only one woman on the capital side of its supervisory board, but it has also made a voluntary commitment to double the share of women in management positions by 2018. The company has a very active women's network, let by Marie-Theres Thiell, managing director of RWE East in Prague. Her lobbying even led the management to adopt the goals of the "Women on Supervisory Boards" initiative. CEO Peter Terium says: "RWE wants more women on supervisory boards and in top management, because it's an important tool in better positioning the German economy for the future."
Under the energy company's plans, it will be standard procedure to nominate women already working for RWE for supervisory board positions opening up within RWE subsidiaries. The company offers them special training programs.
- Part 1: How German Firms Help Women Get Ahead
- Part 2: Pool of Female Candidates
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