Board Diversity Not Enough Ladies in Waiting

State-owned businesses such as Deutsche Bahn may struggle to find enough women to fill 30 percent of seats on their corporate supervisory boards, as a new German law is likely to require.
German companies may struggle to meet a new law that mandates 30 percent of some corporate board seats for women.

 

Michael Frenzel, a one-time chief executive of travel giant TUI, is one of the first people affected by a move in Germany to reserve 30 percent of corporate supervisory board seats for women.

The quota was proposed by Germany's family affairs minister, Manuela Schwesig, last year, and may be adopted by lawmakers on Friday.

Economics Minister Sigmar Gabriel had nominated Mr. Frenzel for the supervisory board of state-owned railway Deutsche Bahn.

But Mr. Gabriel, who is also Germany's vice chancellor, was overruled by other members of Chancellor Angela Merkel's cabinet, who wanted a woman on the board.

Brigitte Zypries, a state secretary in the economics ministry, eventually got the job instead.

Now there are at least three women on Deutsche Bahn's 20-member supervisory board, the non-executive panel that hires and fires the chief executive and sets major policy. German law already requires that at least two seats on corporate supervisory boards are held by employee representatives. The new rules would enforce gender quotas for the first time.

But even Ms. Zypries' appointment to the railroad's board won't meet the 30-percent quota the Bundestag will consider this week.

German companies above a certain size are required to have supervisory boards. If the Bundestag approves on Friday, companies will have to fill 30 percent of supervisory board seats with women starting in 2016, and half of all seats by 2018.

Companies that are state-owned must meet the quotas too.

A total commitment to parity would mean that equal numbers of men and women would have to be invited to attend interviews.

"The federal government must lead by example. Anything else would be difficult to explain to the public," said an official at the German finance ministry, which supervises the government's business holdings such as Deutsche Bahn, Deutsche Post and the government's 27-percent stake in Deutsche Telekom, the market-leading telecom company.

But leading by example, even for the German government, is easier said than done.

According to internal estimates, women currently make up 23.5 percent of supervisory bodies at government-owned companies.

Ministries have been trying for months to take the new expected female quota into account as they fill positions. Junior ministers and senior civil servants tend to represent the federal government on supervisory boards of state-owned firms.

"We can't expect our state secretaries and department heads to have sex changes," said one finance ministry official, who declined to be named.

The government could choose non-government workers as its appointees for these boards, but the finance ministry claims this only works on a case-by-case basis, and it has to be justified. The federal government wants to maintain influence over state-owned or partially state-owned companies, and outside candidates could theoretically reduce this influence.

Germany's Family Minister Manuela Schwesig is responsible for the law on women's quota.

 

The issue of female quotas on corporate boards has divided Germany’s right-left governing coalition.

The center-left Social Democrats, the junior partner in Ms. Merkel's coalition, has pushed hard for the the quota, while Ms. Merkel's center-right Christian Democrats have been cautious.

Many in industry complain the resulting legislative compromise before Bundestag lawmakers this week was "poorly done."

Some complain the laws will give  supervisory boards power to dictate quotas to management.

Torsten von Roetteken, a presiding judge on the Frankfurt Administrative Court, warns that the goal of the package, to achieve full gender parity in public service positions, is "clearly unconstitutional" and "incompatible" with European law. He warned that the legislation would trigger a wave of lawsuits.

Marcus Weinberg of the CDU party told Handelsblatt that the aim of the legislation should be to reduce structural discrimination against women, not achieve complete parity, as the SPD had wanted.

Nadine Schön, the CDU deputy parliamentary leader, said that complete gender parity would have been impossible.

"The requirement to establish gender parity in public administration positions at all levels would have triggered too much bureaucracy," she said.

A total commitment to parity would mean that equal numbers of men and women would have to be invited to attend interviews. Gender equality would shape personnel policy in kindergartens and police stations alike.

Parity has now been downgraded from the top objective to being simply one of several goals.

When it comes to politically appointed positions, it is clear that parity is a problem.

Nadine Schön, a member of Chancellor Angela Merkel's Christian Democratic CDU party, is fearing additional bureaucracy because of the women's quota.

 

Last year, when it was time to appoint lawmakers to the advisory council of the Federal Network Agency, the German regulatory office for electricity, gas, telecommunications, post and railway markets, Mr. Gabriel, who is chairman of the SPD,  noticed that parliamentary groups had submitted lists dominated by men.

He  demanded more women, and as a result, eight women were appointed to the body, making up 25 percent of the board.

One of them is the former family minister, Kristina Schröder.

The federal government will also increase the share of women at Deutsche Bahn soon.

Mr. Frenzel will get a seat on the railroad's supervisory board after all, but another two male members, Knut Löschke and Heinrich Weiss, will make way for two additional women. The federal government is currently represented on the board by SPD member of parliament Kirsten Lühmann as well as Ms. Zypries.

And in future, the federal government will simply have to make sure more women are promoted, so they can become department heads and state secretaries and fill the quotas on these supervisory boards.

After all, that was the point of the law.

 

Daniel Delhaes reports on politics, transport and airlines from Handelsblatt's Berlin office. Dieter Fockenbrock has been Handelsblatt's chief 'companies and markets' correspondent since 2005. Jan Hildebrand leads Handelsblatt's financial policy coverage from Berlin. To contact the authors: [email protected][email protected] and [email protected]