Women's Quota 2.0 – Federal Government Tightens Gender Quota

Konstantin WarnowizkiLaw

Since the introduction of the Leadership Positions Act ("FüPoG") in 2015, companies that are listed and co-determined on a parity basis must appoint a fixed women’s quota of 30 % to their supervisory or management boards. Companies that are listed or co-determined must set a target for the proportion of women on the management board and in the second and third levels of management. The federal government has now decided to expand and tighten the gender quotas. We take a legal look at the target provisions and board quotas and see how the federal government intends to abide by its own rules.

Effects of FüPoG

An evaluation of FüPoG commissioned by the Federal Ministry for Family Affairs, Senior Citizens, Women and Youth (BMFSFJ) found that although the fixed quotas are being met and, as a result, the proportion of women on supervisory boards of listed companies has risen to one third, only one in twelve management board members is female. Three quarters of companies had even stated a target of "zero" for women on the management board. For the two levels below the management board, targets of less than 30 % were mostly given, which the companies justify with a lack of qualified female candidates. In addition, the reporting obligations do not go far enough for the BMFSFJ.

The federal government now wants to address these and other criticisms of the FüPoG with the recently published draft of a Second Leadership Positions Act ("FüPoG II"). Among other things, this will amend the Acts on limited liability corporations (GmbH), stock corporations (AG), European companies (SE), and the Commercial Code (GmbHG, AktG, SEAG and HGB, respectively) as well as various other laws. In the following, we present an overview of the changes as far as they affect companies in private legal form.

More precise target setting and justification for zero target

Listed or co-determined companies as well as certain corporations in which the federal government holds a majority stake (GmbH, AG, SE) are to set their targets for the proportion of women on the supervisory board, management board and the two management levels below them in the future not only as a percentage, but also in concrete figures and publish them in the "corporate governance statement" according to section 289f HGB-draft. Those who set a target of "zero" must publish a detailed justification for this. In addition, this is where achievement of specified target figures must be published, as well as reasons for failing to achieve them.

In any case, companies will now have to be concrete in matters of management and supervisory boards: How many women should populate the management bodies in the future? Violations of these obligations to set targets can be punished with a fine of up to 10 million euros or 5% of the total annual turnover according to section 334 HGB-draft. At the same time, failure to meet the targets – apart from a duty to give reasons – remains legally inconsequential. It remains to be seen how companies will react to the new regulations.

Gender quota and "empty chair"

If a stock corporation or European company (SE) is listed and has equal co-determination and its management board or management body/executive board has at least four members, it will need to be composed of at least one woman and one man in accordance with section 76 AktG-draft and sections 16, 40 SEAG-draft (only applies to new appointments, previous members remain in office). In order to prevent companies from violating this regulation and thereby incurring a fine, appointments that lead to a single-sex (previously always: all-male) management board or management in such companies are null and void, the management board chair thus remains empty (section 76 AktG-draft, section 40 SEAG-draft).

The federal government wants to see women not only on the supervisory board, but as a next step also on the management board. Affected companies that want to fill their management board positions will no longer be able to avoid this. 

The Federal Government follows suit and leads the way

According to the current draft, the federal government also wants to adhere to the above-mentioned regulations itself – and even go beyond them: For GmbHs, AGs and SEs, the majority of whose shares are held by the federal government, a 30 % quota for supervisory boards will apply in the future, irrespective of stock exchange listing or co-determination. In AGs, this is also to apply to management board members. If the majority of their shares are held by the federal government, the gender quota will apply to these companies, if the management bodies have at least three members (instead of four in the case of private companies). Here, too, the "empty chair" rule applies, which prevents the appointment of a man as long as there is no woman on the board (all regulated in section 77a GmbHG-draft, sections 76, 393a AktG-draft, section 52a SEAG-draft).

According to information from the Federal Ministry for Family Affairs and the Federal Ministry of Finance, the regulations affect 94 companies organized under private law in which the federal government holds a majority stake, more than a quarter of which are large corporations as defined in section 267 (3) HGB – such as Deutsche Bahn AG. This probably best-known company with a federal majority currently has a 35 % share of women on its supervisory board (7 out of 20), but just under 30 % on the management board (2 out of 7). The next management board position should therefore go to a woman according to the current draft.

It remains to be seen what changes will be made to the draft and how the FüPoG II will affect practice. However, HR departments and headhunters should already make an effort to find suitable female candidates.

Many thanks to attorney-at-law Peter Holst for his helpful comments.

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