Group Of Business People Having Board Meeting Around Glass Table With CEO.

Following the introduction of legal measures intended to increase the proportion of women in leadership positions in German publicly-listed companies, we looked at a snapshot of some of Germany’s largest public companies at the time of their most recent AGMs to consider whether legislation is changing the status quo. While the intentions, and initial outcomes, of the legislation have faced substantial criticism in the German press, our study suggests that female representation in the controlling organs of leading German companies is continuing to rise and that increased reporting requirements have firmly drawn the issue onto many companies’ radars.

Two-pronged legislative approach

In March 2015, the German Federal Parliament passed a bill with the aim of increasing the proportion of women in leadership positions in German publicly-listed companies. The two-pronged approach combines a mixture of a fixed quota and increased disclosure requirements, with the country’s largest listed private sector employers (just over 100 companies) being required to work towards a 30% quota for female representation on their non-executive supervisory boards as seats become available, whereas mandatory, but non-binding, targets for the composition of the supervisory and management board, as well as the two levels of senior management below the management board, would have to be set by all exchange-listed companies.

Voluntary measures had fallen short

Political and public debate surrounding the introduction of legislation to increase female participation at the highest level of German public companies spans nearly two decades. In 2001, proposed gender equality legislation was put on ice, in particular following resistance from industry associations. Instead, the associations agreed to a voluntary commitment to promote equal opportunities, with one of the key goals being the increased presence of women in leadership positions.[1] The effect of this agreement on the composition of controlling bodies of Germany’s largest companies was however minimal.[2]

While some progress was made regarding measures to increase female representation on a regional level, the topic regained traction on a national level in 2010 with the inclusion of comply-or-explain recommendations regarding female representation on supervisory boards into the German Code of Corporate Governance[3] and the debate of a bill seeking to implement a supervisory board gender quota in parliament.[4] In 2011, the 30 constituent companies of Germany’s DAX index voluntarily agreed to intensify their efforts to promote the representation of women in order to avoid a regulated gender quota. While this led to improved reporting on gender diversity from the companies, figures reported in 2015 showed disappointing improvement[5] and Germany continued to be one of the globally worst-ranked countries for the representation of women in senior management roles.[6]

Quotas or targets?

Germany is far from alone in Europe with its measures to increase gender diversity in listed companies. In 2003, Norway became the first country in the world to introduce a gender quota which, following insufficient voluntary take-up, was made legally binding in 2005 and applied to all Norwegian public companies from 2008.[7] Countries such as France, Italy, and now Germany, have since followed suit with binding quotas, with penalties for non-compliant companies.

Other European countries, such as the Netherlands and UK, have opted for a soft law approach. The Netherlands’ comply-or-explain method required large companies to increase female representation on both the management and supervisory board to 30%, with non-compliant companies having to report on why this had not occurred. In the UK, following a government-led study, FTSE 350 companies were recommended to set composition targets, with FTSE 100 companies expected to work towards female board representation of at least 25% by 2015, which has since been increased to 33% for the FTSE 350 by 2020.

While progress in the Netherlands has been slow, leading the minister responsible for emancipation issues to suggest that pressure for a binding quota would increase,[8] the FTSE 100 met its 2015 targets as an index, with the voluntary system lauded as a success by the UK government.[9] At an EU-level, the Commission expects its 2012 Women on Boards Directive to be adopted in the near future[10]. While the Directive would respect the EU subsidiarity principle, it could see pressure on Member States to introduce hard law provisions if gender diversity targets are not hit.

Proponents of binding gender quotas are often quick to note that voluntary, industry-led initiatives have generally come up short and that quotas certainly get results; female representation on Norwegian boards hit 40% in 2009 and women accounted for around 60% of board nominations in France in the 2016 AGM season as companies rushed to meet the quota.[11] However critics often point out that, given the historic low level of women in senior management positions across Europe, there is a smaller pool of candidates for vacant board positions which could give rise to highly sought-after female directors holding multiple mandates or could lead to reduced experience on boards[12]. Furthermore it is often questioned whether a quota actually devalues female directors and discriminates against those who made it to the top by themselves.[13]

Our findings

During the 2016 AGM season, two important milestones for female representation on the supervisory boards of DAX index companies were reached: women now account for in excess of 30% of non-executive positions and there are no longer any supervisory boards consisting solely of men. Interestingly though, improvement in female board representation across our sample was much more pronounced in companies that are not subject to the gender quota. While female representation in these companies has historically been lower, due in part to higher female representation among employee board representatives than those representing shareholders, the data suggest that the boards of companies not subject to the legislation are also keen to increase diversity.


Looking at the management board composition targets that all companies were required to set, the data initially appears disappointing: one third of DAX index companies set a 0% target, a target that was shared by almost 60% of companies in the sample. However, considering the standard length of management board contracts and that the initial target date was required to be set at June 2017 at the latest, this should be of little surprise. In fact, many of the companies with 0% targets in our sample justified them on this basis. While other studies indicate that the number of female management board members is continuing to grow[14], women continue to be chronically underrepresented in the upper management of German companies.


However, when looking at the disclosure in connection with the targets in the companies’ annual reports and corporate governance declarations, the picture appears more positive. One in six companies in the sample have prematurely set and disclosed management board composition targets for the period beyond June 2017 which exceed the status quo and around a quarter of sample companies have stated that they are planning to raise their targets going forward.

Looking beyond the targets themselves, the disclosure in relation to gender diversity in the sample companies suggests that the process of setting targets may have also led to meaningful discussions about diversity policy in the management and supervisory boards of German companies. While disclosure improvements among DAX index companies were not particularly pronounced, owing largely to these companies’ prior voluntary commitment to report on measures to increase female representation, many of the MDAX and TecDAX companies in our sample provided shareholders with additional information on their attitudes to gender diversity and measures to increase diversity, which were not present in their previous year’s public disclosures. Overall, while there were some companies that set targets at the status quo without further discussion of the rationale behind this decision, and others which stated that they believe that raising female representation is subordinate to other interests, the vast majority of companies in our study provided meaningful disclosure above the level required by the legislation.


The main focus of attention on the legislation to increase female representation in German companies has been on the binding supervisory board quota, although this only applies to just over 100 companies. While the gender quota has undoubtedly forced some companies to take action to find suitable female directors to fill empty board seats, our findings suggest that large German companies not subject to the quota are also taking steps to increase gender diversity.

It is currently too early to judge the potential effects of the requirement for all public companies to set composition targets for the supervisory board, management board, and the next two layers of senior management, but despite many companies opting to maintain the status quo with their inaugural targets, initial signs suggest that large companies are taking these reporting requirements seriously, are generally avoiding boilerplate disclosure, and in many cases appear to be formulating medium-term plans to improve the representation of women in senior positions.

Female representation on German supervisory boards has been increasing steadily over the past five years. While the legislation does not appear to have dramatically increased the rate of growth, aggregate female representation on the supervisory boards of Germany’s largest listed companies could be approaching parity within five years if current growth levels are maintained. The litmus test of the legislation, however, will be whether this increase can be replicated in senior management.



Author: Chris Rushton

Contributors: Cormac Chesser; Sinéad Barry

Sample and methodology:

Our sample consisted of all DAX index companies, MDAX companies with a market capitalisation of >€5 billion, and TecDAX companies with a market capitalisation of >€2.5 billion as of August 29, 2016. Certain foreign-incorporated companies included in the MDAX and TecDAX indices were removed from the sample due to non-applicability of the German legislation.

The data utilised in this study were collected as part of data collection for Proxy Papers written by Glass Lewis on the AGMs of the companies in the sample and reflects proposed changes to the composition of the supervisory board at 2016 AGMs as well as the management board composition as of the publish date of the Proxy Paper. While every attempt has been made to ensure the accuracy of the data utilised for, and information contained in, this report, Glass Lewis accepts no responsibility for any errors or omissions, or for the results obtained from use of the information provided in this report.

[1] Krell, G. & Ortlieb, R., Umsetzung der Vereinbarung zur Förderung der Chancengleichheit. Hans-Böckler-Stiftung, 2003.

[2] Women-on-Board-Index (WoB 160). FidAR, 2016. As of January 2011, women accounted for just 5.01% of supervisory board shareholder representatives and 3.01% of management board positions of 160 German indexed companies.

[3] Updates to the German Code of Corporate Governance in 2010 included comply-or-explain recommendations that the supervisory board “specify concrete objectives regarding its composition [which …] shall, in particular, stipulate an appropriate degree of female representation”.

[4] Entwurf eines Gesetzes zur geschlechtergerechten Besetzung von Aufsichtsräten (DE) [17/3296], 2010

[5] Frauen in Führungspositionen: Entwicklungen und Zielsetzungen der 30 DAX-Unternehmen. Bundesvereinigung der Deutschen Arbeitgeberverbände, 2015.

[6] Women in business: the path to leadership. Grant Thornton, 2015. According to the study, women account for only 14% of senior management roles in German companies – the second lowest level in the global study.

[7] Teigen, M. Gender Quotas for corporate boards in Norway. EUI Working Papers: Law 2015/22, 2015.

[8] Plantenga, J. & Remery, C. The Policy on Gender Equality in the Netherlands. EU Policy Department for Citizens’ Rights and Constitutional Affairs. 2015.

[9] Lord Davies: FTSE 350 boards should be 33% female by 2020. Press Release: UK Department for Education. October, 2015.

[10] No Time for business as usual. EU Parliament, Council, Economic and Social Committee, and Committee of the Regions Communiqué. October 2015.

[11] Boisseau, L. Les femmes sont plus nombreuses que les hommes à entrer dans un conseil d’administration. Les Echos. April 26, 2016.

[12] e.g. Ahern, K.R. & Ditmmar, A.K. The Changing of the Boards: The Impact on Firm Valuation of Mandated Female Board Representation. Quarterly Journal of Economics, Vol. 127(1), 2011.

[13] Meck, G. “Wer will schon Quotilde sein?” Frankfurter Allgemeine Zeitung. October 25, 2014.

[14] Women-on-Board-Index (WoB 160). FidAR, 2016.