BMW Speaks Out Against Plan for German Female Board Quota

Bayerische Motoren Werke AG and others in German industry spoke out against a plan by Chancellor Angela Merkel’s coalition to force companies to install more women in non-executive leadership positions.

Business leaders voiced opposition to an agreement reached last night between the Christian Democratic Union and Social Democrats to proceed with a bill requiring listed companies to allocate 30 percent of their supervisory board seats to women.

“BMW as a company doesn’t believe in quotas,” said Jochen Frey, a spokesman for the Munich-based company. “While we hold that opinion, we want and strive for diversity in our workforce in terms of gender, ethnicity and age”

While Europe’s largest economy has a female chancellor and women hold several key government posts, including the Defense Ministry, just 6 percent of management board positions and 22 percent of supervisory board seats are held by women at companies in Germany’s benchmark DAX Index, according to the Economy Ministry’s website. Deutsche Lufthansa AG Chief Financial Officer Simone Menne is currently the only female CFO or chief executive officer at a DAX company.

The government’s planned 30 percent requirement will start in 2016 and apply to the more than 100 biggest listed companies with employee representation on their supervisory boards. Beginning in 2015, smaller companies will have to set their own quotas for women and publicize how they’ll reach the goals. German supervisory boards hire top management and sign off on strategic decisions.

Setting Targets

“We can’t afford to forgo the competence of women,” Merkel told the lower house of the German parliament today in Berlin. “We’ve decided to do this and it will happen.”

All companies will also have to set targets for increasing the number of women on their management boards, which are responsible for day-to-day operations. The draft bill, which expands the mandated supervisory board quota to 114 companies from the original 108, will be presented early next month to the cabinet, said Manuela Schwesig, the minister responsible for drafting the legislation and a member of the SPD.

“The law will lead to a cultural change in Germany and modernize corporate culture,” Schwesig, who runs the family affairs ministry, told reporters today. “It’s one of the biggest reform projects in this field in 30 years.”

While part-time job programs have pushed the portion of women in employment in Germany above levels in the U.K. and U.S., female pay levels lag those of men. In 2012, 68 percent of German women aged 15 to 64 had jobs, compared with 60 percent in 2005, statistics from the Organization for Economic Cooperation and Development show. Yet the gender pay gap remains at 22 percent, the third-biggest in Europe, according to Eurostat data published in March of 2013.

Critical View

The BDI federation of German companies said it rejects mandating the number of women on boards.

“German industry still has a critical view of the planned rigid quota for publicly traded companies,” Holger Loesch, a member of the BDI’s executive board, said in a statement today.

Women hold 25 percent of seats on the supervisory board at BMW, the world’s largest maker of luxury cars, and the company’s management trainee program is 35 percent female, Frey said in a telephone interview.

“In our view, quotas aren’t the right way to go but rather to award positions based on ability,” Frey said.

Norway was the first country in Europe to enforce a law stipulating that women make up at least 40 percent of the board at listed companies with more than 10 employees. Yet Prime Minister Erna Solberg has said the rule, introduced in 2003, hasn’t led to significant improvements.

Swedish Plan

It has done little to help women succeed in the top ranks of the biggest corporations, according to studies by the Norwegian School of Management and New York-based consulting firm McKinsey & Co. None of the 25 biggest companies on the Oslo exchange has a female CEO, and only one has a woman as CFO.

The new government in neighboring Sweden, formed by the Social Democrats and the Greens after a national election in September, has pledged to introduce gender-quota legislation unless 40 percent of board members at Sweden’s listed companies are women by 2016.

Merkel, who rejected a mandatory quota for women in her previous coalition with the Free Democrats, has urged companies for years to accelerate their efforts to get more women into supervisory board positions to avoid legislative action.

“Executive positions are desirable because they mean power and power is, after all, a good thing,” Merkel told a group of German female executives and entrepreneurs at the chancellery last month.

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