A report on the current status of steps to improve board and management representation for women in Germany has concluded ‘Little is done voluntarily, only the fixed quota works.' This article provides details.
In the context of the coronavirus pandemic, the relapse into traditional gender roles (the woman at home with the children, the man working) has been noticed and has rekindled the debate on gender equality. In keeping with this topic, the German Federal Minister of Women's Affairs Giffey and the German Federal Minister of Justice Lambrecht presented the third and fourth annual Report on the Development of the Proportion of Women and Men in Management Levels and in Committees of the Private Sector and the Public Service (press release of 10 June 2020). In summary, the reports state: ‘Little is done voluntarily, only the fixed quota works.'
In the federal government's report on the evolution of the proportion of women and men at management levels, the Ministry of Family Affairs and Justice states the following for the private sector:
The proportion of women on supervisory boards of companies that fall under the fixed gender quota has continued to grow. Since the law came into force in 2015, the proportion of women on supervisory boards has risen from 25% to 32.5% and in 2017 and this year even to 35.2%. According to the current legal situation, the fixed quota of 30 % on supervisory boards applies to listed and co-determined companies in accordance with s96 (2) of the German Stock Corporation Act (AktG).
In contrast, the so-called flexible women's quota applies to listed or co-determined companies in accordance with s111 (5) of the German Stock Corporation (AktG). According to this, targets must be set annually for the proportion of women on the Supervisory Board and the Executive Board and a timetable for implementation must be determined. The law does not provide for sanctions if the target figure is not met. The targets need only be included in the management report of the company in accordance with s289 German Commercial Code (HGB). The Federal Government's report shows that in companies that do not fall under the fixed quota, the proportion of women on the Supervisory Board is only 19.9%.
The proportion of women on management boards is even lower. In 2015, it was 6.3% and has only risen to 7.7% in the 2017 financial year. There is also currently only a flexible quota for the appointment of members of the Management Board. The Federal Government's survey also shows that 80% of the companies do not have women on the Management Board, and about 70% of the companies have set themselves the target figure of ‘0'.
Outlook and current legislative initiative
According to Federal Minister of Women's Affairs Giffey, voluntary action will not get us anywhere; political pressure is needed instead. In this context, the legislative text already available as an unofficial draft bill to tighten the current regulation on gender quotas should be taken into account. The draft bill of the second law on executive positions (FüPoG II) of 16 January 2020 provides for a tightening of the regulations with regard to the introduction of the quota and the possibility for imposing sanctions.
The basic goal of the draft is to convert the flexible quota for women in companies with supervisory boards into a fixed quota for women, which must be introduced by companies step by step. The plan is to establish a nationwide quota of women on supervisory boards of at least 30% and also to increase the proportion of women on management boards. The new version of the current draft bill for s111 (5) of the German Stock Corporation Act (AktG) reads as follows:
‘The supervisory boards of companies that are listed on the stock exchange and subject to co-determination shall set targets for the proportion of women on the supervisory and management boards. The target figures must describe the number of women targeted for the Supervisory Board and the Management Board and the targeted proportion of women in the total membership. If the Supervisory Board sets a target figure of 0 for the Supervisory Board or the Management Board, it must give clear and generally understandable reasons for this decision. The justification must explain in detail the considerations on which the decision is based. If the proportion of women in the determination of the target figure is below 30 %, the target figures may no longer fall below the respective proportion achieved. At the same time, the deadlines for achieving the target figures must be set. The deadlines may not exceed five years in each case. If the minimum share requirement pursuant to s96 paragraph 2 already applies to the Supervisory Board, the specifications shall only be made for the Management Board. If the shareholding requirement pursuant to s76 paragraph 3a applies to the Management Board, the obligation to set target values for the Management Board shall also not apply'
This revised s111 of the German Stock Corporation Act (AktG), on the one hand, that the proportion of women on the Management Board and Supervisory Board is to be successively increased and that the target figures require very precise justification, especially if the figure ‘0' is set. In addition, the sanctions for violations are to be tightened. The draft bill provides for fines of up to EUR 50,000.00 in accordance with s334 of the Commercial Code. To what extent this draft will be implemented cannot be foreseen at present, however, according to the press release of 10 June 2020, Ministers Giffey and Lamprecht are pursuing its implementation before the end of this year despite the corona pandemic, which is why the date of entry into force on 1 May 2021, as stated in the draft bill, is not completely unrealistic.
In practice, this means above all that if the draft bill is implemented in its current form, more companies will fall under a fixed quota of women or the target figures will have to be justified in more detail in any event, especially if the proportion of women is below the desired level of 30%. In practical terms, the following question then becomes crucial: How can maternity leave, parental leave or nursing leave best be combined with a mandate on a management board or supervisory board? For a detailed discussion of this issue in Germany with commentary from 17 other jurisdictions, please see here.
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