Following the reelection of Chancellor Angela Merkel in September, Germany’s two reigning parties – the Christian Democratic Union and the Social Democrats – continue to negotiate the terms of their new coalition government. In the course of the parties’ less-than-productive discussions, one proposed law has received the praise of leaders from both parties: the introduction of a legal quota for women in boardrooms. If approved, Germany would become the seventh European country to institute such a rule.
According to reports, the new law will require that at least 30% of all seats on German supervisory boards be held by women from 2016 onwards. German public companies have two boards, one consisting of executives and another consisting of non-executives, which is known as the supervisory board. As planned, the law would apply only to non-executive boards at companies with more than 500 employees. Any company unable to appoint an appropriate number of women by that time would be required to leave seats vacant. When the European Commission proposed very similar guidelines in 2012, Germany resisted, arguing that such rules should be determined nationally.
Although Ms. Merkel has personally criticized the creation of legal quotas in the past, the chancellor reversed her position last spring while under pressure from within her party. At that time, Ms. Merkel agreed to support legal quotas starting in 2020.
Currently, women hold around 12% of all supervisory seats in Germany, but at the country’s 30 largest companies, this figure is closer to 22%. By comparison, roughly 17% of seats at Fortune 500 companies are currently held by women.
While the institution of a legal quota for German boardrooms has not been seriously entertained in the past, the creation of a voluntary, flexible quota gained significant support over the last several years. Most recently, the majority of companies listed on Germany’s blue-chip index voluntarily agreed that at least 30% of supervisory board seats will be held by women in the near future. If approved, the proposed law will affect the vast majority of companies on Germany’s large- and mid-cap indices.