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Germany: Reservation For Women On Executive Boards Of Companies

by Aakash Sharma
Germany: Reservation For Women On Executive Boards Of Companies

November 30, 2020

Move deemed as historic by pro-equality groups

We are putting an end to women-free boardrooms at large companies.

- Franziska Giffey, minister for women and families, Germany

This move is one step forward on the long road for gender equality in workplace.

Germany’s government is bringing laws to ascertain a mandatory quota for women on the boards of listed companies in the country. The move is hailed as a historic step by many and a significant boost to gender equality in the workplace. Coincidentally, Germany’s chancellor Angela Merkel, the most powerful woman in the world, has completed 15 years in the position, becoming the first longest-serving woman and one of the longest-serving chancellors in the country’s history.

German Government Agrees On Fundamental Changes

The Federal Ministry for Family Affairs, Senior Citizens, Women and Youth released a statement on November 20 which stated that listed companies with management boards of more than three executives must appoint at least one woman to the C-suite, i.e., Chief Executive Officer (CEO), Chief Financial Officer (CFO), Chief Operating Officer (COO), and Chief Information Officer (CIO) positions.

Germany introduced a binding quota for supervisory boards in 2015 which has resulted in women now making up 36% of non-executive board roles in big companies of Germany. But, as per the country’s corporate governance laws, supervisory boards only oversee management boards and do not hold the power to make decisions that affect day-to-day operations.

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Chancellor Angela Merkel, left, and Manuela Schwesig, the minister of family affairs who helped a law requiring more women on corporate boards clear legal and political hurdles in Germany.

Support Voiced for the Move

The current decision to ensure a quota for women in key roles at the executive table ‘for women’ is the result of decades of lobbying ‘by women’ for gender equality in workplaces in Germany. “We are putting an end to women-free boardrooms at large companies,” said Franziska Giffey, the minister for women and families, calling it a “historic breakthrough”. (Source- CNN)

Gender Equality in Europe

Germany lags behind many major economies in the proportion of senior executive positions held by women. Women make up just 12.8% of the executive boards of Germany’s 30 largest companies, as compared to 28.6% in the US, 24.9% in Sweden, 24.5% in Britain and 22.2% in France. (Source- Allbright Foundation)

Five other EU countries — Belgium, France, Italy, Austria and Portugal — have adopted mandatory gender quotas for the boards of large listed companies. Norway was the first country in the world to legislate gender quotas for corporate boards, requiring that women fill 40% of board seats.

We support the efforts to encourage the appointment of women to top leadership and executive posts, but a quota for women on the board of directors will raise questions about their credibility.

- Federation of German Industries (BDI)

Opposition by Lobbying Groups

The move is opposed by some business lobby groups. Opponents argue that this may result in women being unfairly promoted, or perceived as being unfairly promoted, with hindrances to entrepreneurial freedom. But in the absence of quotas progress has been slow.

The Federation of German Industries (BDI), which leads 40 trade groups in the country, said it supports the efforts to encourage the appointment of women to top leadership and executive posts, but added that a quota for women on the board of directors will seem like an “easy enterprise” for women, raising questions about their credibility.

Lobbyists are also raising concerns if companies will be given “as long as possible” to comply with the new measures, saying that companies should be protected against sanctions where it is “not practically possible” to meet the requirements.

Long Road Ahead for Germany

It is imperative now that politicians muster up some courage for solving the question of why there are so few women on company boards and address the needs to expand digital infrastructure to make it easier for everyone to balance work and family life. That seems like the only way forward to ensuring equal and equitable participation.

Do you think a quota for women in the workplace can be implemented in India, given the incessant controversy India has around the reservation? Tell us in the comments below.

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