November 18, 2013 10:11 pm

Coalition poised to introduce women quotas on German boards

Germany’s new coalition government is poised to force listed German companies to fill 30 per cent of non-executive board seats with female candidates from 2016 in a victory for campaigners seeking greater gender equality in the boardroom.

Companies will also be obliged by 2015 to set and publish individual binding targets to increase female representation in top management, according to a tentative agreement thrashed out by Christian Democratic and Social Democratic party negotiators on Sunday evening.

However, the parties – which are holding weeks of talks ahead of officially forming a government – stopped short of setting a mandatory female quota for management boards, which in Germany remain dominated by men.

Under Germany’s two-tier system of corporate governance, supervisory boards hire management board members and control and advise management on operational matters.

The issue of whether to force companies to appoint more women to leadership positions divided chancellor Angela Merkel’s last centre-right government. Several members of her Christian Democratic Union remain sceptical about such intervention.

“It’s a toad that we’re going to have to swallow,” Michael Fuchs, CDU parliamentarian, said. “There are companies where that’s going to be difficult,” he added, referring to the engineering sector where the pool of women in management positions remains quite small.

Until now German companies have set themselves voluntary targets to increase female representation in key management positions.

Ms Merkel previously supported voluntary quotas but also expressed frustration with the slow progress of Germany’s largest companies in promoting women as senior executives and company directors.

Viviane Reding, the EU justice commissioner, attempted to get EU-wide rules adopted last year that would have required all public companies to reserve 40 per cent of board seats for women. The proposal was watered down after objections from other commissioners and has stagnated ever since with several northern and eastern member states, including the UK, blocking it from moving through the EU’s legislative process.

It’s a toad that we’re going to have to swallow

- Michael Fuchs, CDU parliamentarian

In Germany, women currently fill just 17.4 per cent of positions on the supervisory boards of the top 160 listed companies and only 6.1 per cent of management board members are female, according to a study published in September by FiDar, a German initiative that seeks greater female board representation.

Monika Schulz-Strelow, president of FiDar, welcomed the coalition agreement on Monday.

However, the Cologne Institute for Economic Research cautioned against introducing a supervisory board quota due to a potential lack of female candidates with the necessary management experience.

Under the new coalition proposals, companies who cannot find women to fill at least 30 per cent of supervisory board seats will be forced to leave those seats vacant until they do.

Joe Kaeser, the new chief executive of Siemens, said earlier this month that it was up to companies to promote diversity and “only if companies cannot achieve [greater female representation] in the long term then I could imagine the state stepping in”.

“I also believe it’s about more than quota rules and new kindergarten places,” he added.

Germany’s biggest engineering company has faced criticism after announcing that the only two women on its management board are set to leave the company.

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