At Last: A Quota for German Supervisory Boards

By: Katharina Miller

It's official: A 30% women's quota has come to German supervisory boards. I know there are many males who share the joy and hope to change the transparency in German administrative boards and we are looking forward to a cooperation of both sexes, within the meaning of the magnificent speech HeForShe, delivered by Emma Watson.

Remember that a quota is important because, according to the European Court of Justice (C-409/95, Marshall), "male candidates tend to be promoted in preference to female candidates particularly because of prejudices and stereotypes concerning the role and capacities of women in working life and the fear, for example, that women will interrupt their careers more frequently, that owing to household and family duties they will be less flexible in their working hours, or that they will be absent from work more frequently because of pregnancy, childbirth and breastfeeding". But all that glitters is not gold.

Firstly, the German quota has impact on only 108 German enterprises and six European companies (including BASF, ALLIANZ, SAP, E.ON and FRESENIUS), altogether 114 companies. In proportion to the 160 enterprises listed on the DAX, MDAX, SDAX and TEC-DAX, the quota affects 71.25% of all companies listed in Germany. However, the quota applies only to supervisory boards.

German corporations have a dual management system. The management falls to the board of directors, the members of which assume responsibility collectively and are coordinated by the chairman of the board, whereas the supervisory board appoints, monitors and advises the board and is directly involved in decisions of crucial importance for the company. In turn, the supervisory board has a chairman who coordinates its work.

The members of the supervisory board are elected by the shareholders at the general meeting. In enterprises with more than 500 employees within the territory of the state, or 2.000 respectively, these are represented in the supervisory board as well, in such a way that one third of the board members, or respectively the half, are elected by the company's employees. In companies with more than 2.000 employees, the chairman of the supervisory board, who is virtually always a shareholder representative, has a casting vote in decision making.

Currently, there are 18.9% of female members on the supervisory boards of the 160 companies listed in Germany. Thereof 9.4% are shareholder representatives and 9.5% employee representatives. And speaking of the center of power, we find only 5.9% of female members on the boards of directors.

The 30 companies listed on the DAX (the German counterpart to the IBEX 35) have a 24.7% representation of women on their supervisory boards and 7% of female executives on their boards of directors. Anecdotally, there is only one chairwoman of a supervisory board: the Spanish Eva Catillo Sanz who chairs the board of Telefónica Deutschland Holding AG.
Given these figures, the arrival of the quota is a good sign. It means that by next year companies will be required to select and appoint women if the female presence in the relevant bodies does not equal 30%.

At this point it is crucial to remember that a quota will only be upheld by the attorney general and the judges of the European Court of Justice if it "provides for male candidates who are equally as qualified as the female candidates a guarantee that the candidature will be the subject of an objective assessment which will take account of all criteria specific to the candidates and will override the priority accorded to female candidates where one or more of those criteria tilts the balance in favor of the male candidate. Such criteria are not such as to discriminate against the female candidates."

The defect of the quota consists in the fact that it does not affect the center of power, the board of directors, where the female representation amounts to only 5.9% (or 7% in the DAX companies).

We are convinced that the German quota will have a contagious effect with regard to the European directive proposed by Mrs. Viviane Reding, the ex Vice-President of the European Commission, currently discussed in the Council of the European Union. And in very brief time, a quota of 40% will be discussed in the companies of the 28 EU-member states. It will be a glorious moment as finally corporate commitment and transparency will arrive at the management bodies of the European Union.