The latest curve-ball from Europe, Germany’s likely introduction of quotas, sees us back frustratingly arguing already well-trodden ground. Earlier this week, the two parties most likely to form the next German government reached a compromise over the so-called ‘Frauenquote’ rule.
The debate is not new in Germany. Angela Merkel’s CDU party successfully negated several previous attempts to introduce boardroom quotas. In April this year, and back in 2011,
the Bundestag rejected several quota proposals, and even as recently as July, Germany joined Britain in voting against the European Commission’s proposal for a compulsory boardroom quota. However, after Merkel’s CDU party failed to gain an absolute majority in September’s general elections, and her pro-business, liberal FDP coalition partners failed to get into parliament, the political resistance against a mandatory quota system largely collapsed and it became an unfortunate area of compromise with her new coalition partners. Now as of 2016, companies registered on the German stock exchange will be required to have at least 30% women on their boards under ‘Frauenquote’.
Not only is this disappointing and unnecessary, but rehashing the quota debate brings us tiresomely back us to square one. The arguments against quotas have not and will not change; to appoint women on anything other than merit creates only an optical solution and will never facilitate meaningful change.
Norway remains the classic example of how quotas do not create sustainable change. It was the first country to introduce formal quotas for women on company boards in 2003, yet this
bred a generation of ‘Golden Skirts’ – the female directors who now make up more than 40% of the boards of Norway’s listed companies. Yet, while there is female representation at the very top echelons of business in Norway, just one layer down at the executive level, the pool for the next generation of board members, there is a glaring void. None of the 25 biggest companies on the Oslo bourse has a female CEO, and only one has a female CFO. Quotas have done nothing to close the gender pay-gap in Norway either – official data shows that men in Norway earned 15.7% more on average than their female counterparts in 2012.
The real epiphany in the UK has been to regard this as a business issue, not a women’s issue, and UK government support has been implicit in this. Germany is in danger of going in the
opposite direction. It is not for government to dictate to business – the onus should be on companies to recognise the importance of this challenge and tackle the issue head on. Interestingly, German business has reacted with scepticism to the ruling, with the country’s four biggest car manufacturers – Volkswagen, Daimler, BMW and Opel – threatening to move production out of Germany if they are forced to introduce the quota.
It goes without saying that finding a solution level by level and step by step is harder and requires patience, but it is more real, and is the only way we can hope to genuinely change business culture. The FTSE 100 now has 19% women directors – up from 12.5% prior to Lord Davies’ report in 2011, and the sharp pick up in the pace of change in the UK over the past 3 years shows that progress can and will be made once business leaders see this as mainstream to their success. The argument about women on boards has received plenty of airtime, and rightly so, but it is so important that we keep moving the debate on. The real challenge, not just in the UK but globally, is to not be distracted by quotas, and continue developing the executive pipeline of women. Only when we have more women coming through and staying in the ranks will the argument about quotas finally become moot.