During late November, a working group of Germany’s ruling coalition parties headed by Chancellor Angela Merkel, agreed to impose a mandatory quota for the number of women working in senior management positions in the country’s listed firms. They also expanded the quota for women in supervisory boards to board members. A final decision on the key points of the legislature, called the Second Management Positions Act, will soon be announced by the cabinet.
The Federal Minister of Family Affairs, Senior Citizens, Women and Youth, Franziska Giffey, has called this move historic, and is being seen as the next step in narrowing the gap of gender inequality in Germany.
We caught up with Nicolai von Steinaecker, Director at Laurence Simons Search, based in our Frankfurt Office, to find out his views on the mandatory quota.
Laurence Simons Search (LSS): Please can you explain what is Germany’s new boardroom quota for women?
Nicolai von Steinaecker (NVS): The quota states that if an executive board of a listed company has more than three members, one of them must be female. Furthermore, companies in which the federal government has a stake, will require a supervisory board quota of at least 30% female and minimum participation in executive boards.
LSS: What is the current situation?
NVS: Since 2015, Germany, Europe’s biggest economy, has had a voluntary quota of 30% for women on supervisory boards. However, various studies have indicated this has had little impact in improving the proportion of senior executive positions held by women. The new benchmarks will build upon the voluntary quota that already exists.
Looking at a recently published report, the quota had failed to make the management levels of German corporations more balanced, in fact 115 of the country’s major publicly traded companies do not have a single woman on their board. This indicates only 12.8% of the management boards in German companies that are listed on the Dax Index have a female member, which is too low.
It states in the third and fourth annual reports on the Development of the Proportion of Women and Men in Management Levels and in Committees of the Private Sector and the Public Service released by the German Federal Minister of Women in June this year, that the proportion of women on supervisory boards rose from 25% to 35.2% since the law came into force in 2015. This is above the target number. Looking at the management boards of the companies affected by the planned law, only 7.6% have a female board member, indicating not enough has been done voluntarily.
LSS: Do we need a mandatory quota in Germany?
NVS: Yes, we do! Throughout my career as a head-hunter for the last 16 years, I can say that the approach to diversity and employing women in management positions has changed significantly. Many US clients have been focusing on diversity since the first decade of this millennium, by contrast, German headquartered firms have only been doing so in the last 3-5 years.
If you consider recent changes at the General Counsel Level, even within the “Deutschland AG”, you must dig deep to find a male appointment. Whilst promoting women into leadership roles is critical to do, the risk is that male candidates feel discrimination. The problem with any kind of discrimination, whether positive or unconscious, is that companies are not always hiring the best candidate for the job. But this might be a “necessary evil” at least in the short term to resolve the current imbalance.
LSS: What personal insight have you had to conclude that the quota is required?
NVS: I am German. My father died much too young and my mother kept working full time while raising two kids. Nevertheless, I had the fortune to study, travel to foreign countries and become a true European citizen. I studied at the Robert-Schuman University in Strasbourg where I met my Finnish wife. Having gained an insight into various educational and social systems, I personally believe that I am able to judge our situation in Germany and there is much room for improvement!
When I attended university in France, some female students already had young children – the country provides a reliable infrastructure for “studying mums”. When I visited my brother-in-law in Finland to congratulate them on their first child, he showed me a letter from the city of Helsinki outlining where his girl can go to Kindergarten soon – Ida was only some weeks old and he and his wife were planning avidly.
In comparison, I still remember 12-13 years ago in Germany when my wife and I made an excel list of all available Kindergarten in Frankfurt and it was then that I started my strongest sales efforts ever to secure school places. Regularly, “I happened to just be around and wanted to kindly ask about the status of our application” – after some minutes of small talk, sometimes a coffee as well, I saw our paper moving up again in the folder. We even sent some Christmas cards to be remembered to them!
LSS: The quota is welcome, but surely only part of the issue…
NVS: Of course. You need a descent infrastructure to allow people to combine family and work. The same could be said for men but to be honest, in my network of friends, family or colleagues, I only know of two examples where HE stepped back in his career to allow HER to continue full time – and these examples were pretty obvious as she was and still is the main bread winner. So, in addition to addressing this clear lack of infrastructure, we need a change of culture towards enabling both parents to play their part.
In a recent interview with a Managing Partner of a prestigious German law firm, she told us that there is still a clear gap with female lawyers wanting to become partners of the firm. There are, of course, many women who choose to focus on raising their children and either do not wish, or are unable to, pursue their career in parallel, and that is their personal decision and society should respect that. But this decision has to be taken at one’s free will, not because of a lack of infrastructure or financial support by the state – other countries are much better in supporting young families – or cultural aspects.
And this is what leads us back to the quota: change in culture always take time and to drive any sort of change, you need more role models. To be led from the top! This is why the decision is the right one in my eyes, supporting a journey towards a more diverse management, and, following a recent report from McKinsey, a stronger economy: mixed-run companies are, on average, more successful!