New Law Sets Gender Quota on German Companies

Chancellor Angela Merkel has announced a quota law that will
require German businesses to hire more women.
Image:  360b / Shutterstock.com

Chancellor Angela Merkel announced this week that her three-party coalition have agreed to a draft law that would require Germany’s leading companies to allocate 30% of seats on non-executive boards to women starting in 2016 and moving forward.  The law would apply to listed companies with employee representation on their supervisory boards, which adds up to more than 100 large firms.  A further 3500 medium-sized firms would be required to determine their own quota and put it into action by 2015.

Despite the fact that Germany has a female leader and a 40% female federal cabinet, women are significantly under-represented in higher office.  According to the German Institute for Economic Research, only 6% of management board positions and 22% of supervisory board seats are held by women in the 30 companies on Germany’s blue chip DAX index.  And Deutsche Lufthansa AG Chief Financial Officer Simone Menne is the only female CFO or chief executive officer at such a company.

"This law is an important step for equality because it will initiate cultural change in the workplace," said Merkel.

Some companies aren’t pleased with the potential quota, however, claiming that they would prefer to award positions based on ability.  “In our view, quotas aren’t the right way to go but rather to award positions based on ability,” said a spokesperson for BMW, where women reportedly hold only 25% of the supervisory board at the company.

"Stiff quotas are not the way to bring women into leadership roles," said a spokesperson for the medical company Fresenius, which currently has no women in its executive positions.

In 2003, Norway became the first country in the world to set a gender quota, requiring a minimum of 40% of top company board members to be women.  France, Spain, and the Netherlands followed.

Manuela Schwesig, the minister responsible for drafting the legislation for Germany, hopes that the new law will provide “a cultural change in Germany” as well modernizing corporate culture.   “It’s one of the biggest reform projects in this field in 30 years,” she said.