German boards race to appoint women to escape quota

FRANKFURT/BERLIN (Reuters) - German firms, lagging European peers in appointing women to board posts, have stepped up their efforts in hopes of averting legal quotas as a campaign to smash the glass ceiling gains momentum.

Deutsche Telekom (DTEGn.DE) and SolarWorld (SWVG.DE) each appointed female executives last week, in moves noteworthy for a country where no woman was appointed to the management board of a blue-chip firm until 2008.

While the leader of Europe's largest economy is a woman, just 3.2 percent of executives at the top 200 firms were female last year, according to think tank DIW.

By contrast, some European countries, such as Norway, France and Spain, legally require top listed companies to ensure at least a third of top management is female.

Deutsche Telekom and SolarWorld join a cluster of German companies which have moved to bolster female leadership since the issue took centre stage in Chancellor Angela Merkel's cabinet and in Brussels this year.

"There's a threat clearly. EU (Justice) Commissioner (Viviane) Reding has said she will look at the issue again in 2012 and if by then nothing happens, she might introduce quotas in the European level," said lawyer Jutta von Falkenhausen.

"Companies are rushing to appoint women to the boards," said von Falkenhausen, vice president of pro-quota group FiDAR.

Germany's justice minister last June warned companies it was their last chance to make progress on a voluntary basis and a year later, she declared: "A rethink is in progress among companies. This should not be discouraged by legal measures."

Politicians and businesses tout the fact that in the first six months of 2011, nine out of 23 vacant supervisory board seats of the 30 blue-chips were filled by women.

However these are non-executive positions. Only six blue-chip firms in Europe's largest economy have women on their executive board.

"Companies are finally doing something, appointing women to various boards but not to the top executive board," said Birgit Kersten of a lobby group which stakes out the AGMs of top firms to quiz them about their progress on appointing female executives.

WOMEN'S ISSUES

"Germany is so innovative on so many issues, such as the environment. But it can't seem to move on women's issues," said Avivah Wittenberg-Cox of 20-first, a gender consultancy.

"German-speaking countries are appallingly behind on this issue compared to other European states and extraordinarily resistant to change," she said.

In addition to European states using quotas, there are others pressing for more representation of women without imposing them.

In Britain, women make up 46 percent of the economically active population but just 12.5 percent of boards at firms listed on the FTSE 100 stock index. Half of the companies listed in the wider FTSE 250 index have no women directors.

A British government-commissioned review recommended in February that FTSE 100 companies aim to have a minimum of 25 percent women on their boards by 2015, opting against enforceable quotas.

Germany has long wrestled with the question of whether a quota was the right tool to help women join the ranks of top executives. It opted to introduce voluntary targets in 2001.

A decade later, little has changed and, in March, Germany's blue-chip companies agreed to set themselves voluntary targets to boost women at top management levels by the end of the year.

That may be too late. The European Union has been consulting on whether companies should be required to follow women quotas.

At home, Merkel's cabinet is split on how to push for more women to sit on boards, with three female ministers not agreeing on a common line. One of the three is pushing for a quota, the justice minister strictly opposes it, and the third is rooting for a "flexiquota" law this year and requiring firms to determine their own goals by 2013.

ECONOMIC BOON

Increasing the number of female executives could improve corporate leadership style and boost earnings, surveys show. Companies with a higher proportion of women in management outperform their sector in terms of return on equity, operating profit and stock price growth, according to McKinsey.

In a country like Germany with an impending labour shortage and ageing population, it also makes business sense to broaden the talent pool.

Women's lobby groups also say it is tough for women to break into the tight-knit corporate ranks where men tend to promote men, making legal quotas a must.

"We need to have a critical mass. You have only one or two women there and they end up adapting to the male mode. You need to change the corporate culture," says von Falkenhausen. Her group wants a 25-30 percent quota on boards.

Opponents of a quota say measures such as extending childcare options to make family and career more compatible would be more effective in promoting gender diversity.

Klaus-Peter Mueller, head of the Corporate Governance Commission, says he wants self-imposed targets and the government should create social infrastructure so women in their mid-30s do not stop working to attend to their toddlers.

"Germany for the past decades has not managed to have kindergartens and day care schools for kids of working women like in France or many other countries," Mueller says.

Brigitte Ederer, a board member of Siemens, is against quotas, arguing instead for a system that will expand the number of women at all levels. Deutsche Telekom recently announced a 30 percent quota at all levels.

Mueler and Ederer said one way of retaining women in their companies is to set up in-house kindergartens, which is what was done at Commerzbank and Siemens, for example.

"How will a 30-year-old woman benefit if there's a quota for supervisory boards?" asked Ederer. "We need women on all levels, from the bottom up." (Additional reporting by Peter Maushagen in Frankfurt)