The Ideologies of the Female Quota: Numbers as Self-Criticism, Complaint or Controlling Tool?

When it comes to the proportion of women in management, the fronts seem to be ideologically hardened. From data selection and analysis to interpretation and choice of words, polarised positions rumble all over the country. (Almost) all of them, however, want to achieve the same goals and could all work together. A reframing for business practitioners.

When analysing the development of women in management positions, different approaches compete with each other, competing for the interpretative control. Regular analyses exist for the companies listed in the German DAX, MDAX, SDAX, TecDAX indices, for the approximately 100 companies for which the German Quota Act applies, for the 200 companies with the highest turnover or for a representative cross-section of all companies. It is not surprising that the results for these populations vary – the observation could, however, also have to do with the different perspectives of the respective stakeholders. These are ultimately reflected in the very different results or recommendations.

The representative overall view

In a representative survey of some 16,000 companies in Germany, the Institute for Employment Research (IAB) of the Federal Employment Agency is collecting data on, among other things, the demographic distribution at management levels. According to the survey, 26 percent of top-level managers in the private sector were women in 2016. At the second management level, their share was 40 percent. By comparison, the proportion of women in the public sector at the first and second management levels is eight and four percentage points higher, at 34 and 44 percent respectively. However, women are relatively more under-represented in management positions in the public sector, where they account for 61 percent of the workforce, compared tothe private sector (where their overall share is 44 percent ). The measure of representation provides a plausible, albeit not entirely valid contextualization of the absolute values, which is lacking in many other analyses: the proportion of women (or some other) in an area is compared to the representation of the group in the total workforce. This fails in so far as today’s management levels are derived from workforce diversity 15 – 30 years ago, when even fewer women (or cultural minorities) were part of the workforce. Nevertheless, it seems important to indicate the relativity of percentages by using appropriate indicators. This is because they are essentially determined by the diversity of the respective talent pipelines that exist to fill, for example, management or supervisory board positions. Both the IAB’s analyses and other evaluations show that these differ not only fundamentally but also by sector.

Varying industry differences – depending on the research methodology used

EY regularly analyses the 160 companies listed in the various benchmark indices and currently concludes that the telecommunications and financial sectors have the highest proportion of women on their boards – followed by transport/logistics and automotive. In IAB’s representative analysis, health/education, retail and hospitality are the leading sectors. The differences show how much the focus on listed companies alters the results – and thus the perception and possible conclusions. This persists when looking at size effects: while EY concludes that the (larger) DAX companies exhibit higher increases – at a higher level – than the (somewhat smaller) MDAX, SDAX and TecDAX companies, the representative overall view shows that both the proportion of women at the two top management levels and the respective representation measures for large companies (here from 500 employees!) are lower than in all smaller clusters. This result is consistent with long-standing findings that the syndromes of the hierarchy lead, among other things, to larger organisations (qua nature) allowing less diversity. The high DAX values, however, are explained by the concerted efforts of this group of companies, which has been under strict public observation in this area over a number of years.

Positive depiction of quotas legislation

Whether purely organically, with intelligent change management or with legal requirements – how to best achieve which kind of progress has the least consensus among the various experts. DIW Berlin analyzed various groups of large companies, such as the Top 100 and Top 200 (each excluding the financial sector), the 160 listed companies and those subject to the FüPoG as well as those with government shareholdings. The so-called Managerinnen-Barometer also describes the gender composition of the supervisory boards and names all female board members for various clusters. In contrast to EY’s analysis, DIW Berlin reports “no great dynamics” in the percentage of women in listed companies. In the top 100 and 200, the study also points out that “only on the supervisory boards is the trend moving upwards”. This and the examination of (sometimes small) companies with federal participation lead the DIW report to descriptions of “positive effects of the gender quota”. This is illustrated by the fact that those companies that are obliged to do so would have increased their proportion of women on supervisory boards, while other groups would have done so less. To further support the positive assessment of the Quota Law, the report shows similar developments in other EU countries.

A strong argument in favour of introducing a gender quota for supervisory boards was that these boards are responsible for appointing board members and it was assumed that a higher proportion of women would also lead to more female management board-members. According to the data available, this has not yet materialised in the short term, and it has always been controversial whether this mechanism should be subject to regulation. Nevertheless, the first voices are emerging calling for the gender quota to be extended to executive boards. “It would be more important to first critically question the overestimated effects of the supervisory board quotas,” comments diversity expert Michael Stuber on these “hasty moves”.

Questionable effectiveness and sustainability of equality laws

In general, some analyses seem to be overly condensed and hastily conclude that legal regulations have a positive effect. Even the first comparative study of the highest federal authorities with large German corporations for the period 2001 – 2011 showed that the Federal Equal Opportunities Act in force at the time did not result in a higher increase in women’s representation rates than the simultaneous voluntary commitment of the private sector. The representative IAB figures also show that the development in the public sector, which is largely regulated by BGleiG and LGGs, is by no means linear and thus not sustainable. The DIW calculations also show that achieving higher figures sometimes does not lead to further increases (for management and supervisory boards, of course, the rotation can play a major role here). Finally, many years of experience with statutory regulations in the field of severe disability also show that tough regulations – and even penalties – limit the level of activity (and even more so the motivation). “It is incomprehensible that a lot of experience and knowledge is being ignored in political and even expert discussions,” says Stuber.

For business practice: Differentiated considerations necessary

The analyses conducted from different angles impressively demonstrate the importance of differentiated considerations and context-sensitive evaluations. In the latter, the pursued objective plays a distinct role, which is different for politics and business: From a political perspective, fairly distributed participation is a legitimate goal and allows (or requires) an isolated view of representative figures. From a business point of view, only the productive combination of different facets of diversity with reference to stakeholders forms a viable goal. According to the analysis of the diversity expert Michael Stuber, the successful (and accepted) transfer of political objectives (not only regarding gender) in the corporate environment must take 5 key points into account:

  • Reference to relevant markets: For companies, their sales and labour markets should be used as a reference value. The existing diversity there is the primary benchmark.
  • Consideration of the respective talent pools: For good reasons, different rules and criteria apply to the filling of Supervisory Board and Executive Board positions. They must be acknowledged in discussions.
  • Maintaining proportionality: For internal promotion processes, clear requirements can be set with regard to the respective population. This leads to a controlled organic development of diversity at least up to the second level.
  • Observance of time restrictions: In quantitative analyses, an appropriate time horizon must be included in the evaluation – e.g. the average duration of a promotion from middle to upper management.
  • Corporate and management culture: Without a focus on values and conduct in practice, diversity, agility and flexibility cannot be achieved successfully in the long term. Quantitative targets are – contrary to what is claimed in a recent publication – not a proven instrument for cultural development.

In essence, a valid system of KPIs should also comprise the paradigms “corporate culture/valuing” and “inclusion” for cooperative and leadership behavior as well as processes. “Only a holistic measurement system meaningfully reflects the requirements of corporate reality,” adds Stuber.

Further contributions to the topic

An alternative study approach

Quota versus business case

Comparative study: voluntary commitment versus Federal Equality Act

F. A. Z. Journal: No performance without acceptance