German cabinet sets quota for women on company boards

German listed companies must include women on their executive boards as part of a landmark bill agreed by the country's coalition government after voluntary efforts failed to close a gender gap.

Listed companies with four executives or more must appoint at least one woman to their boards, according to a draft law to be voted on by parliament.

The law sends "a very strong signal", Justice Minister Christine Lambrecht said on Wednesday, urging corporations to "take advantage of the opportunity presented by highly qualified women".

"We can show that Germany is on the way to becoming a modern society fit for the future," Family Affairs Minister Franziska Giffey said.

"We have seen for years, not many changes are made voluntarily, and progress is very slow."

The measure has long been a demand of the centre-left Social Democrats (SPD), but Angela Merkel's Christian Democrats long resisted the move. 

However, the chancellor has increasingly expressed frustration that companies were moving too slowly to appoint woman leaders.

Representation of women

Germany, Europe's top economy, fares relatively poorly in terms of representation of women in senior positions. 

Just 12.8 percent of management board members at Germany's 30 largest listed companies – those in Frankfurt's blue-chip DAX index – are women, according to the AllBright Foundation, which works to promote boardroom diversity.

By comparison, women take up 28.6 percent of top roles in the United States, 24.5 percent in Britain, and 22.2 percent in France, AllBright said.

Female representation has fallen back in Germany during the coronavirus pandemic, the only major economy to see such a decline, with 11 DAX companies still led by all-male board executives, AllBright said in October. 

Earnings 

Women earn an average of 20 percent less than men in Germany, compared with 14 percent less across the European Union.

No DAX company is currently led by a woman, with pharmaceutical firm Merck set to break the country's glass ceiling when Belen Garijo takes over in May.

Companies in which the government holds a majority stake will have stricter rules, with at least one woman on management boards with more than two members.

German research institute DIW said it welcomed the women's quota but noted that female participation in management boards continues to move at a "snail's pace".