In Germany, your 18th birthday marks your coming of age and is often combined with a lavish party. Unfortunately, we can’t celebrate this particular 18th birthday as far as diversity in top German boards is concerned. The new edition of our global study has come out, 18 years after its first publication in 2004. And it clearly shows that progress is too slow, with sobering results.
Since 2004, Egon Zehnder has been collecting global data with its Global Board Diversity Tracker (GBDT) to measure diversity progress in terms of gender, age and internationality: 44 countries and almost 1,800 companies, 54 of them from Germany. Due to the governance system, which is unusual in a global context, figures are only partially comparable, but they are still revealing. How have German executive and supervisory boards developed since 2004? What are the particular successes and where are the challenges on the road to more diversity in German companies?
Egon Zehnder champions diversity and inclusion, firmly believing that inclusive leaders create an environment where individuals and organizations not only grow but thrive. Empirical research consistently proves that organizations deliver better performance when all people can simultaneously embrace their uniqueness and experience a true sense of belonging at all levels.
But if we look at boards around the world, you might ask yourself whether diversity is actually happening or is simply a topic for discussion in speeches and in the media. Yet diversity is more important than ever. An individual leader may be decisive, but it is much more important to have a top team that stands for resilience and relevance thanks to its diversity. This is the only way to meet the many challenges that companies are facing in ever shorter succession and with ever greater complexity. We live in a time that represents an unprecedented stress test for leaders and their teams. So, it’s surprising that change is so slow in Germany, especially in international comparison.
Below you will find the key insights for this spotlight on Germany.
On almost every metric of gender diversity, Western Europe shows higher proportions of women in the boardroom than the global average. However, Germany is one exception. It’s often one of the few – and sometimes the only – Western European country that scores below the global average on measures of gender diversity.
Germany has a unique two-tier board system as part of its corporate governance, with both a supervisory board and an executive board. The supervisory board is made up of shareholders and, when needed, employee representatives. This board establishes the dividend, votes on strategy changes, sets executive pay, and holds the power to fire executives. The executive board manages day-to-day operations, proposes strategy changes, and dividends to the supervisory board. On the whole, supervisory boards tend to have better female representation than executive boards in Germany, but there is a need for increased gender diversity across both.
Overall, the data for Germany shows that although there has been a shift toward having more women in the boardroom, the transition has been too slow. Germany’s position below the global average on many of these measures tells us that there is still a lot of work needed to make corporate culture more accessible for women.
There has been much talk of the gender quota. A gender quota of 30 percent was introduced in 2016 for supervisory boards of listed, equally co-determined companies in Germany.
A quota for executive board positions, on the other hand, did not come into force until August 2021 with the Second Leadership Positions Act (Fü-PoG II). For affected companies, a minimum participation requirement of one woman applies if the executive board consists of more than three persons. If the personnel requirements are not met (i.e., if a position is nevertheless filled by a man instead of a woman) the position is considered legally vacant. In future, even stricter gender quotas will apply. It is significant that a change toward more diversity obviously won’t happen without a quota.
In order for a company to be diversified at the highest levels of management, it’s necessary to dismantle disadvantageous mechanisms. This includes, not least, long-term, systematic succession planning for top management roles. Once a high proportion of board members with diverse backgrounds has been achieved, they can act as role models and create perspectives for other, previously underrepresented candidates at all organizational levels.
Diversity is not just about gender balance: In a globalized world, internationality within an organization and its management bodies is also an important entrepreneurial success factor. This is especially true for companies that do a large part of their business outside their home country.
Western Europe continues to lead the way in terms of internationality and is the only region to record a continuous, yet slow, upward trend.
Even though German corporate boards are more diverse today than in the past, many organizations are slowly realizing that the most difficult step to bring this diversity to real fruition is to develop an inclusive culture. A diverse leadership team can contribute to creating such a culture, but the reverse is also true: An inclusive culture attracts diverse talent. This requires a holistic approach that aims to further develop the organization, its culture and — at its core — its leaders, with whom an inclusive culture stands or falls.
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