May 10, 2015

German Corporate Boards Face Gender Quotas

Germany took a major step toward advancing gender equity in corporate governance, passing a law on March 6 requiring approximately 100 of the country’s largest companies to allot 30 percent of supervisory seats on corporate boards to women. (See G.M. Filisko’s article on gender equity gains on European boards on page 10.) The law requires an additional 3,500 German companies to submit plans to increase the share of women in the two management levels directly below the board of directors.

The legislation is significant, especially in light of the number of multinational companies based in Germany, including Volkswagen, BMW, and Daimler—which makes Mercedes-Benz vehicles—as well as chemical giant BASF, Bayer, Deutsche Bank, Merck, and Siemens. Although the law does not apply to public-sector employees, it is a milestone in the shattering of the glass ceiling in corporate Germany, where, despite the presence of Angela Merkel as chancellor, fewer than 20 percent of the seats on corporate boards are held by women.

The law, which the German parliament passed by a simple clear majority, faced strong resistance from conservatives and from others who opposed a legislated quota, even though a voluntary system adopted by German businesses in 2001 under duress had failed, according to a March 6 report by the New York Times. Justice Minister Heiko Mass and his Social Democrat colleague, Family Minister Manuela Schwesig, reportedly spent months working to overcome legal and political obstacles to get the measure enacted.

“Whether ultimately this legislation will lead to further increases in the number of women on boards in Germany remains to be seen,” says Lisa Savitt, chair-elect of the ABA Section of International Law and chair of the International Committee of DirectWomen. “Still, the law sends a message to German companies and to other countries about the seriousness of the issue regarding the lack of women on corporate boards. It also provides an interesting balance between those who favor targets and those who favor quotas. This will be an interesting jurisdiction to watch.”