The benefits of Board diversity are well known. Despite this progress is disappointing.
Fidelio is committed to increasing diversity and enhancing Board effectiveness. Practically, we support Boards in moving the dial on diversity through Search, Evaluation and Development, as well as very simply shining a light on what works.
To this end Fidelio was pleased to co-host with CMS in Stuttgart the fourth in our series ‘Die Frauenquote – An Update on Diversity in German and UK Boards’. In particular we asked what could be learned from these two major European economies about increasing the diversity and effectiveness at the top of their major companies.
After previous debates in London and Frankfurt, Stuttgart represented a significant location as an industrial powerhouse in Germany. We were pleased to welcome guests from across Germany, and a panel that included influential voices within German business:
▪ Ilse Henne, Member of the Executive Board, Thyssenkrupp Materials Services GmbH ▪ Angelika Huber-Strasser, Head of Corporates, KPMG
▪ Elke Benning-Rohnke, Vice President, Fidar e.V
▪ Dr Philine Erfurt Sandhu, Academic Director, Strategic Competence for Women on
Supervisory Boards Certification Programme, University of Applied Sciences Berlin
▪ Dr Viktoria Kickinger, Founder and Managing Director, Directors Academy Hamburg
The debate was moderated by Martina Schmid, Partner, CMS, combining a business and legal perspective; and also by Gillian Karran-Cumberlege, drawing upon the UK perspective where Fidelio has been twice accredited for our contribution to diversity by the Hampton- Alexander Review.
The panel in Stuttgart made practical recommendations for Boards committed to building a strong and more diverse pipeline. In this Overture we summarise the findings.
(SLOW) PROGRESS TO DATE
GERMANY – TURNING TO THE LAW
Germany, for all its industrial strength and track record in electing female political leaders, has lagged behind other leading European economies in gender diversity.
With German business making little progress, the political response was to pass legislation. The purpose was to drive change in the often strikingly non-diverse Management and Supervisory Boards. The relevant law was passed in 2015 and applies to quoted companies as well as those subject to 50% worker representation on the Supervisory Board. It mandates a minimum of 30% female representation on the Supervisory Board and also requires companies to set targets for women in the Management Board, as well as two executive levels below.
The legal requirement of 30% for Supervisory Boards was first reached in 2018. Progress here has been made easier for larger companies by generally better gender balance in the union representatives who typically make up 50% of the Supervisory Board.
But when it comes to the requirement for targets, companies have been permitted – rather bafflingly – to adopt a so-called ‘Zero Quota’ which effectively maintains the status quo. As a consequence, progress in diversifying the pipeline has been slower than expected and at Management Board level female representation remains very low. Even at major quoted companies, which have a better track record here, the percentage of women in the Management Board is only just over 9%.
Women on Boards – DAX, MDAX, SDAX & TecDAX
THE UK APPROACH – “NAME AND SHAME”
In contrast to the legally binding approach in Germany, the UK has opted for voluntary targets with government-sponsored reviews publishing data on gender diversity in the FTSE 350. These started in 2011 with the Davies Review, and since 2016 the initiative has been driven by the Hampton-Alexander Review which has set a target of 33% for female representation on FTSE 350 Boards and leadership teams (Executive Committees and their direct reports) by 2020. There has been significant progress with the FTSE 100 reaching 30% female representation at Board level by 2018 and the FTSE 350 reaching 30% in 2019.
Two important drivers assisted in this development:
As part of the Stuttgart ‘Die Frauenquote’ seminar we put our panellists on the spot and asked them to award marks out of 10 for progress in Germany to date towards increasing gender diversity in Board and leadership roles.
Score out of ten
When asked the same question last year our panellists awarded 3.75 for progress towards greater gender diversity in Germany and 6 in the UK. Disappointing on both scores but highly concerning that against this crude metric Germany appears to be slipping. Indeed, some of the speakers distinguished between Supervisory Board and Management Board with progress at the Management Board level judged to be significantly worse.
It was argued that since the 30% Supervisory Board target had been reached, the momentum for change had ebbed away and that the 30% was being viewed almost as a limit rather than a first important step.
Initial media interest in lack of progress has now waned and there is growing concern at how difficult it is proving to break this glass ceiling.
Our speakers noted that of 1,750 companies covered by the ‘Die Frauenquote’ 81% either have a ‘Zero Quota’ for women in the ‘Vorstand’ (Management Board) or no target at all. Of 160 quoted companies, fully 64% are ‘woman-free zones’ at Management Board level; there are only 10 female Chairs in Germany’s 185 largest companies; and women are poorly represented in Supervisory Board Committees.
By contrast, many of those companies that have established greater gender diversity in the Supervisory Board have noted a change in dynamic and indeed effectiveness. This simply needs to be replicated in much greater numbers.
PRACTICAL STEPS TO DRIVE DIVERSITY
Practically, how can Germany and the UK increase female representation in corporate leadership? At our recent ‘Die Frauenquote’ seminar we prompted our panellists to provide practical steps that will move the dial. We set out below seven recommendations principally for the German market, a number of which are also relevant for the UK:
SO, WHAT’S NEXT?
Both Germany and the UK recognise the benefits of greater Board diversity. Both countries have made progress, but it is arguable whether the most influential roles at the top of leading quoted companies have fully opened up to female talent. The dearth of female Chairs in Germany and the UK speaks for itself.
So, what comes next and what can Boards do to keep moving the dial?
Based on our research and assignments, Fidelio sees the next steps as critical:
Fidelio will continue to support our clients in the UK, Germany and internationally in increasing and embedding Board and leadership diversity. We shall do this through Search, Evaluation and Development.
We also recognise the benefits of establishing an international network of senior executives and directors who are committed to diversity and to learning from best practice across different countries, sectors and organisations. Fidelio therefore looks forward to collaborating again with CMS in 2020 to increase the momentum towards gender balance in UK and German Boardrooms.
ABOUT FIDELIO AND CMS
Fidelio Partners is a Board Development and Executive Search consultancy. Our focus is Board effectiveness and Board composition, as we build Boards and leadership teams fit for the future. We do this through Board Evaluation, Development, and Search.
We have a track record in supporting Chairs cross-border, cross-sector, cross-function. Fidelio has strong public company experience and also supports private and non-profit organisations. 50% of our Search, Development and Evaluation is outside the UK.
In 2018, Fidelio was accredited for the second consecutive year by the UK Government’s Hampton-Alexander Review for our contribution to increasing Board gender-diversity beyond the FTSE 350. Fidelio’s flagship “A Seat at the Table” Board Learning Programme for Senior Executives and Directors is also core to our contribution to diversity and reflected in our accreditation. We will host the eighth iteration of the programme in March 2020.
Fidelio’s advocacy of the governance of Search is reflected in our strong Search process and outcomes. Our approach to Search is distinctive and forward-looking and predicated upon an exceptional international network. Diversity is hardwired into every aspect of our Search process and 50% of our appointments are female and our track record on mandated Search is well above industry benchmarks.
Fidelio is recognised for thought leadership, advocacy, and primary research on topics including Board composition, diversity, how leading Chairs prepare their Boards for disruption, and stakeholder and shareholder engagement.
CMS is one of the leading commercial law firms in Germany.
More than 600 lawyers, tax advisers and notaries public operate out of eight major German business locations and five international locations. Most recently, CMS opened an office in Hong Kong in 2016. At all our locations, we advise German and international companies and institutions from many different sectors on all aspects of national and international commercial law.
We have long experience of working with corporate legal departments and in-house lawyers. In addition to the required specialist legal knowledge in all areas of commercial law, our lawyers understand the business needs and market-specific requirements of every industry and sector.
CMS advises SMEs and major corporations on all aspects of national and international commercial law. Our strong teams comprise experienced specialists across a wide range of legal areas, making us a partner you can rely on. We are one of the few commercial law firms to possess expertise in all fields relevant to business enterprises, the public sector, high net worth individuals and entrepreneurs.
Digital transformation has profound consequences for the global economy, with the impact already being felt in everyday corporate life and across almost every industry. As an innovative partner with strong digital expertise, CMS can assist you with key issues around the digital economy and its legal implications.
Our success is underpinned by the knowledge and experience of our more than 4,800 lawyers and tax advisers in over 70 offices worldwide.
Dr Martina Schmid
+49 711 9764 670 firstname.lastname@example.org
Dr Alexandra Schluck-Amend
+49 711 9764 278 email@example.com
+49 711 9764 788 firstname.lastname@example.org
Head of Chair Advisory
+44 (0)207 759 2200 email@example.com