BMW chiefs hit out at Merkel female board quotas

27 November 2014 -

Carmaker argues that German plan to force firms to give 30% of top-flight seats to women is not the right way to promote diversity

Jermaine Haughton

World’s-largest luxury car brand BMW has ruffled feathers in its homeland by opposing chancellor Angela Merkel’s plan to impose female quotas on non-executive board posts. Yesterday, the country’s coalition government – comprised of the Christian Democratic Union and Social Democrats – settled on a draft bill for its DAX-listed firms to give 30% of their supervisory board positions to women, with the aim of boosting C-suite diversity.

However, the carmaker hit back, saying that it is committed to diversity in all areas of its business, but thinks that quotas are not the solution. Jochen Frey, a spokesman for the Munich-based company, said: “BMW as a company doesn’t believe in quotas. [But] while we hold that opinion, we want and strive for diversity in our workforce in terms of gender, ethnicity and age.”

According to the website of Germany’s Economic Ministry, women currently fill just 6% of the nation’s management board seats, and 22% of supervisory board posts. Deutsche Lufthansa AG’s chief financial officer Simone Menne is at present the only female CFO or chief executive officer at a DAX company.

Due for implementation from 2016 if the bill passes, the 30% quota will be applied to more than 100 companies with employee representation on their supervisory boards. From 2015, smaller companies will have to set their own quotas – and publicise how they intend to reach those goals. The bill will apply to 114 smaller firms in all, and will be presented early next month to the cabinet.

Merkel remains bullish that the country’s biggest companies will adopt the quota. “We can’t afford to forgo the competence of women,” she told the lower house of the German parliament in Berlin. “We’ve decided to do this, and it will happen.”

The plans chime strikingly with recommendations outlined for UK firms by Lord Davies, which set a target of 25% female board positions at FTSE 100 companies by the end of 2015. So far, the scheme has proved a success, with the number of women on FTSE 100 boards reaching 22.8%. The figure across the FTSE 250, meanwhile, stands at 17.4%. Indeed, since Lord Davies published his thoughts on gender equality in Britain’s biggest businesses, the percentage of women on FTSE 100 boards has increased by 82%, and across the FTSE 250 by 124%.

One obvious difference between the British and German method, though, is that the former has relied upon voluntary target setting, which companies had the option of committing to or not. As shown in Norway – the first European country to force gender quotas on listed companies – other barriers can still affect the progress of female leaders. In the Scandinavian nation, the government enforced a law in 2008 stipulating that women must make up at least 40% of boards at listed companies that have more than 10 employees. However, studies by the Norwegian School of Management and New York-based consulting firm McKinsey & Co found that the quota has done little to remove the “glass ceiling”, with many women still failing to succeed in the top tier of large firms. In fact, to date, not one of the 25 biggest companies on the Oslo exchange has a female CEO – and there is only one that has a female CFO.

Belgium, Iceland, Italy, the Netherlands and Spain have all enforced gender quotas with varying degrees of success – and further afield in Australia and New Zealand, gender equality in the boardroom is also a key issue. Whatever the territory, at the heart of the debate is the disheartening knowledge that while the majority of graduates in developed countries are women, they make up a smaller share of the world’s business executives and leaders.

Whether forcing large companies to hire a certain number of women is correct or not, Germany’s plan only serves to highlight the extent to which national legislators are frustrated with the pace of managerial evolution among large firms.

For further thoughts on these issues, download CMI’s white paper Women in Management: Tackling the Talent Pipeline.

Image of BMW’s Munich HQ courtesy of Bucchi Francesco / Shutterstock.