Critics say it lacks both ambition and teeth.
Germany’s proposed bill to set quotas for women on executive boards is touted by its backers as a breakthrough for the country’s gender-equality push. Its detractors, however, point out that it will still leave Europe’s biggest economy with among the most male-dominated corporate suites in the developed world.
Germany, whose Chancellor Angela Merkel is the longest-serving female head of state in the world, has one of the poorest records for promoting women in business in Europe. The quota bill — asking companies to have at least one woman on their management boards — will bump up the share of female executives to about 15%, taking Germany’s ranking to about 17 from 24 in the 27-member European Union, according to Boston Consulting Group.
“I don’t believe it’s going to create the impact you’re wanting,” Maria Ferraro, chief financial officer of Siemens Energy and among the few high-profile women in corporate Germany, said in an interview. “One individual who is different doesn’t do the trick, though it is progress.”
The bill, to be presented to cabinet in coming days, requires boards with four or more members to have at least one woman. But since it demands nothing from boards with fewer than four members or those that already have a female executive, it would only affect about 30 of the country’s top 107 companies.
The proportion of women on executive boards at Germany’s 30 biggest listed companies fell 1.9 percentage points this year to 12.8%, compared with 28.6% in the U.S., according to the Allbright Foundation, which promotes diversity in management. About a third of Germany’s top 100 companies have no women on their management boards.
The failure to add women comes in the face of evidence that of the 100 largest listed companies, the 30 with the most gender diversity outperformed the benchmark DAX index by more than two percentage points. Also, if corporate Germany doesn’t buy into management diversity more fully, it risks blunting its competitive edge, cautions Ferraro.
“Everybody loves that stamp of ‘engineered in Germany,’ but how is a homogenous pool of individuals going to be able to solve the world’s problems if they can’t understand the world’s problems and talk the language?” she asks.
Playing Catch-Up
Share of companies with at least two female board members
Source: The German-Swedish AllBright Foundation
This isn’t the first time Germany has pushed for greater gender equality at companies. In 2001, under then-Chancellor Gerhard Schroeder, business leaders pledged to do more, but did little. A 2015 law asked the country’s largest listed companies to appoint 30% women to their supervisory boards, leaving the powerful, decision-making executive boards untouched.
In May last year, addressing a roomful of women entrepreneurs in Berlin, Merkel could barely conceal her frustration at the number of German companies with no female executive board members. She characterized it as “an attitude of refusal.”
It’s not clear yet what penalties companies will face for failing to meet the quota. The bill also leaves other gender-equality metrics untouched. At about 20%, Germany has the second-worst gender pay gap in the EU, behind Estonia. Also, none of the country’s 30 largest companies has a woman chief executive officer.
A woman “can become chancellor in Germany but not a CEO,” said Wiebke Ankersen, managing director at Allbright. While quotas have been successfully deployed in countries like Norway and France to improve the gender balance, policy makers and public opinion in Germany have exerted less pressure for change.
Not surprisingly, efforts by German companies have been perfunctory, said Monika Schulz-Strelow, head of a Berlin-based advocacy group for women on boards called Frauen in die Aufsichtsraete, or Fidar.
“They fulfilled the minimum requirements of the law but they didn’t change the corporate culture and attitude,” she said.
Entrenched interests have perpetuated structures going back decades that inhibit women from pursuing a career, much less pushing into the upper echelons of management.
These include tax rules that penalize double-income households, daycare facilities that lagged behind other nations, rules that grant non-working spouses free social security benefits and a generous pension for widows, says Jutta Allmendinger, president of the Berlin Social Science Center.
“We have a welfare state that was built in the last century, and the contours of which still today make it difficult for women to be independent,” says Allmendinger, one of a group of women who launched a media campaign in October for the quota bill. “That explains the relatively small number of highly educated women who quickly return to work after having a child.”
For Schulz-Strelow, real change will come from stringent laws.
“As long as decision-makers sit up there that hold on to a monolithic, patriarchal, and hierarchical structure, and giving up power is their biggest issue, you won’t convince them with studies,” she said. “You’ll only advance with pressure and legally-binding rules.”