Boardroom Quotas The Slow Pace of Gender Equality in Corporate Germany
Germany's statutory gender quota for supervisory boards took effect at the beginning of the year, yet the ratio of women to men is still alarmingly low. Many companies don't even seem to realize that the new law applies to them.
Sometimes, in cases when the present seems less than appealing, remembering the past can be helpful. Take the year 2001, for instance. Deutsche Bank's then-CFO and eventual supervisory board chairman Clemens Börsig was appearing before a congress of European businesswomen when he took the liberty of advising the approximately 1,000 participants to orient their career ambitions not only vertically, but "horizontally" as well. There are plenty of positions to be had in middle management, he said, women don't always have to set their sights on the highest positions.
When the women in the audience started laughing, Börsig apparently didn't even understand why.
It's comforting to think that no board member at Deutsche Bank -- or any other major industry player for that matter -- would dare suggest such a thing today. It goes without saying that women are as deserving of a place in the upper echelons of Europe's largest economy -- and that they are as qualified academically and as esteemed -- as their male counterparts. Political and societal pressure is just too great to deny women's access to leadership positions, top jobs and, consequently, power.
In May last year, the so-called "Law on Equal Participation of Women and Men in Leadership Positions in the Private and Public Sector" came into effect. It was meant to ensure that at least 30 percent of all supervisory board positions in Germany's largest companies are held by women. Since Jan. 1 of this year, these firms must fill vacant board positions with women until that 30 percent threshold is reached. Furthermore, around 3,500 other public companies are also required to present a strategy for getting more women into top jobs.
It's a law that above all shows one thing: Not a whole lot has changed since Börsig's revealing remarks about the advancement of women. It has been known for two years that a binding quota was imminent, yet the ratio of female to male board members at the 102 companies that are either listed on the Frankfurt stock exchange or that have employee participation in decision-making still stands at 23.1 percent. For all the talk of inclusion in the last year, that number has risen by only 1.8 percent.
Even More Depressing
Corporate law in Germany stipulates that all public companies must have a management and a supervisory board. Half of the supervisory board members are chosen by employees. The other half are selected by shareholders. At 12.8 percent, the share of women on the employee-elected side of supervisory boards is slightly higher than on the shareholder-elected side, where it is 10.4 percent. But of Germany's largest 102 companies, 16.7 percent don't have any shareholder-elected female supervisory board members at all.
The proportion of women on management boards of these corporations is, at a paltry 5.5 percent, even more depressing. That represents an increase of a mere 0.6 percent since the beginning of 2015. On the positive side, though, there are only two companies left that don't have any women on either their supervisory or management boards.
These statistics all come from a study conducted for the German Finance Ministry by FidAR, an organization that advocates getting more women onto supervisory boards. And it doesn't bode well for the German economy -- the same economy that 15 years ago promised to voluntarily increase the number of women in management, and then after years of inaction, complained when a mandatory quota was introduced. Now, it seems like businesses would simply prefer to ignore the new law.
There is hardly a law German companies have prepared for less than the gender quota. According to the FidAR study, only 59 of the 102 surveyed firms have set binding targets for the number of women in board and management roles, although the law requires all of them to do so. Of those companies, around 60 percent are planning "an increase to the status quo" for supervisory boards, while 27 percent say they mean to raise the number of female board members by at least 10 percent.
Plans for management boards are even more sobering. Only 11 of 102 firms are planning an increase, while only six consider a rise of at least 10 percent possible.
"We are crawling slowly toward the target," says Elke Holst, a research director and senior economist at the German Institute for Economic Research (DIW) who has studied gender equality for years. "The reason companies have been progressing so slowly is surely because their upper echelons are occupied by men with other perceptions of the world," she says. "Most of them have wives that take care of things at home. Women work for them in the office as well, as secretaries or consultants, but they're rarely at the same level, as a counterpart or equal."
The state, for its part, does little to discourage such traditional divisions of labor with tax schemes that reinforce an outmoded family model. "Sure, you can pass a law and hope it's obeyed," says Holst. "But without the appropriate framework and effective sanctions for noncompliance, progress will be snail-paced. After all, we're talking about power and money here. No one gives that up willingly."
But sanctions aren't foreseen in the new law. Businesses that don't meet the required level of women in board positions are threatened with little more than an empty chair. A vacant position on a supervisory body might do some reputational damage, but only at companies that are in the public eye. Others need not fear any consequences if they don't reach statutory or self-imposed targets.
German Family Minister Manuela Schwesig, under whose auspices the regulation emerged, has realized how bad this looks. Together with Heiko Maas, the German justice minister, she has admonished businesses to take the law seriously. But their words sounded somewhat helpless, which is how they were received in business circles.
There are, however, a few rays of hope. Take, for instance, the Frankfurt-based energy company Mainova. With its nearly all-male management team, Mainova would seem to be a typical regional utility company. The three men that make up its management board recently said goodbye to the first and only woman to ever hold a board seat after she was lured away by a competitor. Indeed, males are also in the majority on Mainova's supervisory board -- 15 men sit alongside five women, which is less than the legally required 30 percent -- but the company is still regarded as a role model in the industry. That's due to its long history of promoting female employees and targeting female graduates in schools or at job fairs. Seventeen percent of Mainova's managers are women, while its competitors only manage 5 percent.
Not Much Has Happened
But companies like Mainova are still the exception in the great mass of small to mid-sized enterprises known as the German Mittelstand. Beyond the roughly 100 listed companies that appear in nearly every statistic or study, there is hardly any mention of smaller firms with between 500 and 2,000 employees. But the law also applies to them as long as they are listed on a stock exchange or required to have a supervisory board of which one-third of the members are selected by the employees. They too were supposed to have established targets by the end of last September for how many female managers they intended to hire by the summer of 2017.
But not much has happened at these companies to date. "Many haven't even realized that the new law applies to them or that they could face fines of up to 50,000 if they fail to set any targets," says Heiner Thorborg, a personnel consultant in Frankfurt.
Of the some two dozen firms with more than 500 employees contacted by DER SPIEGEL for this story, only about a quarter were willing to comment. Of those few, some claimed they were not affected by the new regulation at all. Others ensured that they had established targets in accordance with the law. They said they would provide further details when they announced their performance reports sometime in 2016.
Critics have been warning of the deficiencies in the boardroom quota law all along. Hardly any private limited partnerships fall under the regulation, for instance. There are around 18,000 businesses around Germany with this legal structure, including household names like the appliance manufacturer Miele, which has said it intends to "considerably expand" the number of women who hold top positions in the company. Whatever that means.
Another weakness of the law is the fact that whether or not it affects a company is totally dependent on whether or not that company is subject to co-determination, the principle of giving workers a say in a firm's management. But particularly small and lesser-known businesses tend to avoid that requirement and, consequently, the quota law.
More than half of all of Germany's small and medium-sized limited liability companies don't have a supervisory board, although their workforce size and legal status requires it. That evaluation comes from a study by the corporate lawyers Walter Bayer and Thomas Hoffmann from the Friedrich Schiller University in Jena. It includes well-known firms such as Media Saturn Germany, the package holiday tour specialist Alltours Flugreisen and the engineering company Kannegiesser. Of those three, only Alltours responded to a request for information by DER SPIEGEL. The firm was of the opinion that it did not fall under the new law, according to a spokesman.
How can it be that companies which dedicate themselves so passionately to innovation can be so lackadaisical when it comes to gender equality?
"The German economy is still very conservative," says Holst from the DIW. There is ample room for improvement, such as in the area of flexible work and career models for women and men. A reorganization of company structures would be necessary, one that more strongly takes into account the general vicissitudes of life. "Young fathers today want to watch their children grow up much more closely than earlier generations," Holst says. "Companies haven't really grasped the fact that younger generations aren't living according to the single earner principle, but that 'dual career couples,' especially among highly skilled people, are the new societal reality."
Monika Schulz-Strelow, head of FidAR, is also amazed at the tenacity with which many male managers cling onto their privileges. "The amount of time and energy that some of them have spent in the past years being closed-minded and trying to ward off change is amazing," she said. "How can any company afford to say: 'We don't need more women?'"
There appears to be a certain amount of grasping at straws by an elite which refuses to recognize that gender equality is not some gracious act of individual promotion, but rather an economic policy that can be advantageous in times of skilled labor shortages and highly qualified women. Above all, however, women and men are equal under the constitution. In other words, there is no good reason not to choose a female candidate if she is equally or better qualified.
At the moment, that seems to be a dream dreamt almost exclusively by women. "When it comes to the issue of equal opportunity, most men don't feel affected," says Allyson Zimmermann, the head of Europe for the consulting firm Catalyst. "For them, it's strictly a women's issue." Then there's the fear of losing their job to a woman or having to deal with more competition for promotions.
But ignoring the new law completely will likely be difficult for companies. Together with auditors from KPMG, the Federal Women's Ministry and the Justice Ministry have developed a relatively simple guide with four questions to help executives and board chairmen determine whether the gender quota law applies to their company. Talking their way out of things could therefore be tricky.
Minister Schwesig has in fact received an unexpected boost from KPMG economic auditors of all people. Their industry isn't exactly known for being favorable to women, but the auditors are paid to make sure that their clients comply with new legislation. Some renowned representatives of their trade have been imploring their customers to under no circumstances wait out the problem. Otherwise, they warn, they could risk receiving a warning in their audit report.
Maybe that will help -- if arguments don't convince them first.