Will German moves on quotas put pressure on the UK?

Board room


Fiona Hathorn of Women on Boards outlines the implications of recent German moves on quotas for women in the boardroom.

Quotas are now in Angela Merkel’s party manifesto after Annette Widmann-Mauz, the CDU coalition negotiator, said there was a need in Germany for a “culture shift within companies” – which means that if Merkel’s coalition gets re-elected German companies will have to find more women for their Advisory Boards and meet a 30% board quota target by 2020.

Currently, the UK Government is pushing for an ‘aspirational’ target of 25% women for FTSE-listed boards by 2015, a target that might be met by the FTSE 100, but one that is unlikely to be met by the FTSE 250. So what next for the UK? Are we likely to be going down the quotas route for listed companies and/or will we be forced to do it by the EU?

Women on Boards UK (WOB UK) believes that it is a sorry state of affairs when one has to use a sledge hammer to crack a nut, but given the reaction by men to changing their corporate cultures to ensure ‘true merit’ (equal access to all), then perhaps the UK will have no option but to prepare for EU imposed quotas.

Interestingly, in Australia the Government, and their various financial reporting groups, have taken a different route. They have largely moved away from the quota debate and have instead moved toward transparent gender reporting with published targets, set individually by each company’s board.

Unlike UK-listed companies, Australian companies are expected to publish their policy concerning diversity for the whole company, not just the board.  They are also expected to disclose annually their measurable objectives and the proportion of women in the whole organisation, in senior management positions and on the board – which basically means that annual reports in Australia have to contain gender metrics, with associated targets, along with a statement on the measures being taken to achieve those targets.  Each company sets its own targets, thus recognising that differences between sectors mean a ‘one size fits all’ number would be almost impossible to achieve, other than at board level.

In addition, the Australian Government has made it mandatory for companies employing more than 100 people to report their workplace gender composition publically, via a central data collection department set up under the Workplace Gender Equality Act.

WOB UK believes that transparent data on gender composition across management levels is vital to understanding what is really going on within UK corporates; information is power.  Once gender data is made public we can then act on it.  In 2013 Women on Boards Australia reviewed all 200 annual reports for ASX200, rating each company red, yellow or green under a traffic light scoring system.  In 2013 only 16 companies were green, whereas 31 were red.

Claire Braund, co-founder of Women on Boards AU, firmly believes that at the end it is all about metrics, transparency and culture – measuring the numbers, reporting them publicly and adopting practices that enable cultures to change.

WOB UK believes that Europe and the UK need to adopt the Australian approach to ensure that FTSE (and equivalent) CEOs take gender talent management seriously for the sake of company competitiveness as well as for the sake of the European economy.  Getting enough women to sit on FTSE boards is honestly not that hard, but getting boards to accept that the culture of their companies needs to change is much more difficult.

We believe that every company in the UK should set a target, not a quota, of 40:40:20 for their boards; that’s 40% men, 40% women and 20% either sex.   There is a lot of research to suggest that the role model effect of having women at the top is critical to shifting business culture throughout the employment chain.   But however powerful the role model effect might be, we believe the UK Government needs to do more – transparent reporting and knowing your employee gender composition metrics is key to talent management and we would therefore like to see the UK Government go beyond ‘Think, Act, Report’ to mandatory gender reporting.

We noted with interest this week Philip Oltermann and Rupert Neate report in the Guardian Newspaper on the ‘Frauenquote Legislation’. Their article basically said that the business world has greeted the proposals with scepticism and that so far Germany’s car industry has been the most vocal with it’s objections. It seems, having read their article, that the bosses of the country’s four biggest car manufacturers (Volkswagen, BMW, Daimler and Opel) have threatened to move production out of Germany if they are forced to introduce the quota – a comment that Women on Boards UK finds hard to take seriously.

In the Guardian article, Wolfgang Schmitz of the employers’ association said that “a quota merely treats the symptoms, not the causes of the low representation of women in leading roles”. A sensible comment, we believe, but nonetheless quotas are at least a starting point for German companies and, given the reaction of the German car industry, it is clear that something needed to be done!

However, despite all the negative comments from Germany’s heavy industries, Philip and Rupert also tell us that some German firms welcomed the quota proposal. Deutsche Telekom had already announced in 2010 that it would aim to achieve a 30% target across senior and middle management by 2015. Interestingly Deutsche Telekom first introduced targets for gender across all management groups in Australia where, as discussed above, they are expected to set targets and report on them transparently under the Workplace Gender Equality Act!

*Fiona Hathorn is Managing Director of Women on Boards UK.

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