German Parliament Enacts Law on Mandatory Quota for Women’s Representation in Businesses

Posted In Employment, Labor

On March 6, 2015, the German Bundestag passed a law, the so-called “women’s quota” (Frauenquote), which ensures the equal participation of women and men in the management of businesses as well as of public offices.

The Political Context

According to the German government, women are still heavily underrepresented in leading positions. There is no socio-political explanation for the fact that even though more than half of the German population and more than half of the Germans who graduate from college/university are female, this ratio does not even come close to the gender ratio in top management positions. The proportion of women in German supervisory boards currently amounts to only 19 percent; in management boards to an even poorer 6 percent. However, scientific research has proven that mixed-gender teams achieve better work results than same-gender teams.

The Quota System

Even if the new regulation is commonly referred to as “women’s quota”, (as in the medium-term it will likely counteract the underrepresentation of women) the law is legally constructed to ensure that each gender is represented by as many representatives as is necessary to meet the mandatory statutory minimum quota.  In a nutshell, the enactment of the “women’s quota” has the following effects:

As of January 1, 2016, the share of women and men in supervisory boards of listed companies that are subject to co-determination in accordance with the German Co-Determination Act (Mitbestimmungsgesetz), the Coal, Iron and Steel Co-Determination Act (Montan-Mitbestimmungsgesetz) or the German Supplementary Co-Determination Act (Mitbestimmungsergänzungsgesetz), needs to reach each at least 30 percent.

In addition, the board of directors of companies that are listed or are subject to co-determination have to determine a target figure of the share of women in the two management levels directly below the board of directors. The companies have to try to reach these self-determined quotas in a certain period of time that must not be greater than five years, and the first period has to end on June 30, 2017 at the latest. The quota has to be determined by September 30, 2015 and must not be lower than the actual share of women in the moment of determination (if it is below 30 percent). The companies have to report and disclose their determined target figures, the period of time during which the target figures shall be achieved, and after that period has expired, whether the target figures have been achieved.

Sanctions in Case of Infringements

If the positions in supervisory boards of listed companies that are subject to co-determination are not awarded as per the statutory 30 percent quota, the election of supervisory board members will be void.

If the self-determined target figure in the remainder of companies is not reached, no direct sanctions will be triggered.

Start of a Cultural Change?

It remains to be seen, if the much invoked cultural change in German companies will indeed occur based on the new law, as only 100 companies in Germany will be affected by the new mandatory 30 percent.  Moreover, the new law only regulates the gender parity in supervisory boards. Furthermore, it is still doubtful whether or not the new law is in compliance with the constitution because, for example, there are no exceptions for cases of hardship. Around 3,500 companies will be required to self-determine a target figure of the share of women in the two management levels below the board of directors. However, it is very likely that the target figures will hardly – if at all – overtop the current status quo.

Bettina Holzberger
  Bettina Holzberger focuses her practice on labor and employment law. Her practice covers cross-border transaction work as well as traditional labor and employment matters. In the area of labor and employment law, she advises clients, inter alia, on the drafting of a broad range of contracts (including traditional employment contracts as well as bonus plans, service agreements for directors and officers, and termination and assignment agreements for employees as well as executives), often in an international context that requires coordinating the advice of foreign counsel.  Read Bettina Holzberger's full bio.

Dr. Sandra Urban-Crell
Dr. Sandra Urban-Crell has vast experience across the spectrum of labor and employment law, having handled everything from day-to-day practical advice tailored to her national and international clients’ operational and commercial needs, to complex multi-jurisdictional transactions from strategic planning through post-merger integration. She regularly advises on co-determination matters on the company and board levels, and on outsourcing and restructurings, including negotiations with employee representatives. Sandra is an experienced litigator and has particular knowledge of international assignments, service agreements for board members, managing directors and executive employees (including separation processes), and bonus and benefit plans. Read Dr. Sandra Urban-Crell's full bio.




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