Is Germany Getting Board Quotas?

By Melissa J. Anderson (New York City)

Last week, it seemed like the next country in line for boardroom gender quotas might be Germany. Over the past few years, Germany has championed an effort to encourage top companies to set their own gender targets. Reportedly, Chancellor Angela Merkel has been frustrated with the slow pace of change, but has favored a voluntary, cultural approach to improving the percentage of women board directors.

Last week, Merkel’s governing coalition reached a compromise, pushing forward a vote by Germany’s parliament on quotas. If the proposal had been approved, the agreement would see a legal “Frauenquota,” or a requirement that supervisory boards of publicly traded companies be 30 percent female by 2020. But, based on Thursday’s vote, the country is not moving forward with quotas – for now.

The vote was the result of political wrangling within the ruling coalition – a contingent of members had threatened to join a different coalition if a compromise on quotas was not found, thus forcing the coalition to face the quota issue or risk losing power. This begs the question: is it a good thing that boardroom gender diversity is being viewed seen as a sticking point for political leaders? Are women being treated as a “political football” as it has been suggested by some, or is this an example of leaders trying to use political leverage to stand up for what they believe in?

Targets and Quotas

According to a recent study by Fidar, a German organization representing women in business, only 11.6 percent of the supervisory board seats are held by women at the 160 leading publicly traded companies in Germany. The increased focus on gender diversity in recent times has led to an improvement of 4.2 percentage points in the last two years alone.

This is also related to Germany’s flexi-quota policy, whereby top companies set their own gender targets. In late 2011, each of the DAX 30 companies set their own targets to move toward greater gender diversity in management.

“For example, Allianz, Commerzbank, and Deutsche Telekom promised to reach the 30 percent mark by 2015. Adidas said it plans to increase the percentage of women to between 32 and 35 percent by 2015. BMW plans to double its percentage of women to between 15 and 17 percent by 2020.”

But, as the Fidar research shows, this has led to only a marginal increase in women on boards. Now Germany’s politicians are examining ways to move the issue forward.

Political Battle

The vote on quotas came as the result of an insurrection within the ranks of Merkel’s coalition party government. Two parties that will challenge the coalition in national elections in the fall had made the gender quota a leading issue, promising, if they come into power, to install a 40% quota for women on boards. Some members of Merkel’s coalition threatened to join the others if the quota were not addressed. Her coalition holds only a slim majority, so this would have represented a threat to its preservation.

Merkel has said in the past that she does not support quotas, but she has also expressed impatience over the slow adoption of more women into the boardroom and executive roles in Germany. This challenge to her coalition brought the issue to the fore.

Last week, members of Merkel’s coalition came to an agreement on a quota – although less stringent than the one being proposed by the opposition. Under the agreement, 30 percent of board positions would have to be held by women by 2020.

This would have given the business-directed flexi-quota room to do its work in the meantime, suggested Germany’s Family Mister Kristina Schroeder. Companies will still have to work toward the goals they set themselves in 2011, and she believes, by 2020, the 30 percent quota would simply be irrelevant.

For now, it seems that women in Germany will have to wait until the national elections this fall to see if a gender quota will be in place. If a different coalition comes into power, a 40 percent quota could be installed. The other issue at play is whether potential EU-installed quotas would override German legislation on the topic. Whatever the outcome, the focus on executive women in Germany and across Europe is far from settled. This, ultimately, is a good thing – only by keeping the spotlight on gender equity and the benefits of women leaders can parity be achieved in any real measure.