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Bundestag Decides on Quota for Women

On 6 March 2015, the German Bundestag passed a law on the equal participation of women and men in leading positions in the private and public sectors. The fact that gender equality is stipulated in the constitution, but nevertheless is still not realized in many companies and in the public sector, was the background of this legislative initiative.  According to the German Institute for Economic Research (Deutsches Institut für Wirtschaftsforschung – “DIW”), the proportion of women on the supervisory boards of the 200 largest companies in Germany was 18.4 per cent at the end of 2014. Only 5.4 per cent of the management board members of these companies were women. A voluntary commitment agreed with the economy under Chancellor Schröder in 2001 had not brought about the desired result. Therefore, the grand coalition now wanted to do the job properly.

In the private sector, the law provides for the following rules:

A gender quota of 30 per cent applies to supervisory boards of companies that are stock-exchange listed and subject to co-determination. The quota rule therefore addresses stock corporations and partnerships limited by shares (Kommanditgesellschaft auf Aktien) with usually more than 2000 employees, as well as European Companies (Societas Europaea – “SE”), which have a supervisory board or administrative body that is composed of the same number of shareholder and employee representatives. Currently, this affects 108 companies. These companies must gradually comply with the quota from 2016 onwards, when filling any positions that become vacant on the supervisory board. The minimum quota generally applies to the entire supervisory board as a body. This overall compliance, however, can be objected to by the shareholders or employees before each election, so that each side must separately meet the minimum quota for any particular election. In the event of non-compliance the election is not valid. Any positions that are intended for the under-represented sex shall remain vacant ("empty chair").

The fixed gender quota shall apply as of 1 January 2016. The quota must then be complied with whenever supervisory board positions become vacant. Existing mandates, including mandates for deputies, can run until they are regularly terminated. The procedure for electing employee representatives to the supervisory board pursuant to the German Co-Determination Act (Mitbestimmungsgesetz – “MitbestG”) and the Co-Determination Act Amendment Act (Mitbestimmungsgesetz-Ergänzungsgesetz – “MitbestErG”) is lengthy. Therefore, a transitional arrangement is provided which furnishes practitioners with the necessary legal certainty on the applicable law. All electing procedures that are completed by 31 December 2015 shall be subject to the previous law, which does not provide for a gender quota. Election procedures that are initiated after 1 January 2016 shall be subject to the new legislation, as well as procedures that were initiated in 2015, but not completed until 2016.

The approximately 3,500 companies that are either listed or co-determined, will be obliged to set targets to increase the proportion of women on supervisory boards, management boards and at top management level. They must report publicly on the targets and whether these targets have been reached. The companies which are affected include stock corporations and partnerships limited by shares, as well as limited liability companies (Gesellschaft mit beschränkter Haftung – “GmbH”) and registered cooperations (eingetragene Genossenschaften) with more than 500 employees. A minimum target is not intended. The companies can set their own minimum targets and act accordingly. However, the following rules apply: If the proportion of women in management is below 30 per cent, then the target figures should not lag behind the actual status quo. The deadline for achieving the targets must be initially set by 30 September 2015 and may not extend beyond 30 June 2017. Any subsequent deadlines may not exceed five years. Whether self-imposed goals are met or not is legally irrelevant. No sanctions are attached to the failure to achieve targets.

Our partner Barbara Mayer was invited as a referee to the public hearing of the Committee on Legal Affairs and Family of the German Bundestag on 23.02.2015 (Öffentliche Anhörung des Rechtsausschusses und des Familienausschusses des Deutschen Bundestags) and was therefore involved in the legislative process. At the hearing, she represented the German Bar Association as an expert on company law. You can view the hearing here. Barbara Mayer’s contribution can be seen/heard from minute 42 onwards.

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