Female executives German companies that don't try harder at gender equity could be fined millions

The next German government plans to enforce its gender quota rules more seriously, setting significant financial punishments for businesses that don’t appoint enough senior female managers.
The boys' club.

It’s a small clause on the 24th page of the 177-page agreement that German political parties negotiated to form a possible coalition government. But if it's enacted, it could see large companies paying millions of euros in penalties.

Companies that do not adequately explain why they are not adhering to the government's set goal of 30 percent females in senior management and on boards could be punished with fines of up to €10 million, or 5 percent of a company's annual turnover. Stiff fines, even for major multinational corporations like Volkswagen but Steffen Kampeter, boss of the BDA employers’ association, says the fines are unnecessary and aren't really about equality. "It's all just political activism," he said, labeling the fines as “inappropriate and unacceptable."

The possible multi-million-euro penalty is the next stage in Germany’s plan to set gender quotas in local boardrooms and upper management. When the country first legislated for gender in 2015, it was hailed as a “historic milestone.” The policy was set by Manuela Schwesig, the former minister for family and youth, and a member of the center-left Social Democrats. And now, three years later, the proposed new coalition government – potentially made up of the Social Democrats and Angela Merkel’s Christian Democratic Union - is circling back to the issue. And judging by the clause on page 27, they are planning to play hard ball.


The only area in which the gender quota rules have really worked are on supervisory boards, the only sector where they were enforced.

When the gender quota rules were first made, around 3,500 German companies had the option to set a voluntary target for themselves. The government wanted to see 30 percent of seats on the board go to females as well as positions at the top two levels of management. Companies could move toward that by setting themselves a goal to achieve within the next two years. They needed to inform the German government of the goal and then, if they did not achieve it, explain why.

As it turns out, many of companies set a goal Ms. Schwesig didn’t like: zero. Many of the firms doing this reasoned that none of their board members were going to retire in that time so it would be unrealistic to set any other goal. After the two year deadline expired in June 2017, they were expected to set another goal, this time to be achieved within five years.

In 2015, companies setting their goal to zero included car makers Porsche and Volkswagen, power company E.ON, industrial giant ThyssenKrupp, semiconductor maker Infineon and Commerzbank. The latter bank did say they were committed to getting more women into senior management but that the timing was wrong.

26 p07 Women in boards and executive boards-01

Up until now, setting the goal to zero was accepted and was the chosen path for around 30 percent of all companies. Another two-thirds chose a goal of between 10 and 29 percent. On the MDax, around 70 percent chose zero percent change whereas on the Dax only 33 percent did. But, if the new coalition government is formed and if it sticks to that plan, companies that violate obligations to disclose and explain the proposed goal may be punished financially. While she was still in power, Ms. Schwesig had threatened to take a tougher stand.

But that might be excatly what is needed. According to Germany's justice ministry, around 41 companies have simply ignored the requirement to set goals. And the German Institute for Economic Research says that in 2017 the number of women in corporate boardrooms stagnated at 8 percent in the 200 German companies with the highest sales. In the top 30 German companies on the DAX, the number of top female managers increased slightly, while the opposite trend was recorded at companies listed on the SDAX, which tracks 50 of the country's small- and medium-sized enterprises. In fact, the only area in which the gender quota rules have really worked are on supervisory boards, the only sector where they were enforced.

There is one glaring hypocrisy to all this however: When it comes to companies partially or fully owned by the government, the situation is hardly better. Of the 150 executive positions at semi-public companies, such as railway operator Deutsche Bahn or telecommunications giant Deutsche Telekom, only 26 were occupied by women in 2017. That’s 17.3 percent. Numbers are even less encouraging at the 65 companies owned exclusively by the government. Forty-one didn’t have a single female executive at the end of 2017 and only a handful of public companies had a fair gender allocation.

Kerstin Andreae, a member of the German parliament with the Green Party, called Germany's progress at ensuring better gender equality at corporate level a "real tragedy", saying the government needs to set a better example. One problem is that there is no statutory quota for female executives in semi-public companies; the law applies only to private firms.

And, as Ms. Andreae, argues, “It is only fair to apply the same standards to oneself.”

Barbara Gillmann covers education, research, family policy, demographics and the Green party. This story was adapted in English for Handelsblatt Global. To contact the author: [email protected]