On January 1, 2016, Germany introduced a 30% boardroom quota for women at companies listed on the stock exchange. A welcome decision regarding gender and diversity - but what are the benefits?
Whenever I discuss the quota for women in management positions with my students during my lectures on gender and diversity at the University of St Gallen, most of them agree and say: “No way”!
Under the quota system it is not about performance but about preferential treatment due to gender, which especially my female students do not like. They want to be taken seriously as professional women.
But why does it still take a gender quota to give women a chance to prove themselves as highly performing female professionals and climb up the career ladder? In Germany as well as in Switzerland the legal right for gender equality has prevailed for a long time. But still, when it comes to management positions, this law does not seem to apply.
In Germany, just like in Switzerland, the top seats on boards of directors of the biggest companies are occupied by 95% and 94% men respectively. This certainly contradicts what business representatives have repeatedly said - namely that the market itself would take care of getting “capable women” into top positions.
Direction defined at start of career
Even though a remarkable number of well-qualified female students have graduated from German as well as Swiss universities with Bachelor’s or Master’s degrees in economic sciences over the past few years, their career chances are significantly smaller than those of their male colleagues. And this is not at all related to their performance, but solely to their gender.
Women not only receive less support once they become mothers, it already starts in the first five years after having obtained their university degrees: according to a study by the Higher Education Information System (HIS), around 40% of men already get promoted in the first five years while only 24% of professional women enjoy the same treatment.
The fact that elites like sticking to their own peers remains undisputed. In other words men like promoting men - and if they graduated from the same university, it’s even better. More controversial is the question whether this is of economic benefit for a company.
Existing studies show that mixed management teams achieve better results than teams consisting of the same species, which means that the ‘Old Boys Network’ practice is likely to harm a company.
An extensive study on Luxemburg’s banking sector conducted by the University of St Gallen in 2015 found that women in top management positions substantially improve the performance of a bank.
More working mothers and childless academics
However, when it comes to equal opportunities it is the justice argument that counts: many women still don’t have the same opportunities on the labour market as their male counterparts and they often get a worse deal when taking a job.
This is because their employers often jump to conclusions expecting them to have children and reducing their working hours or quitting altogether.
Those women, who opt for motherhood at one point – just like those men, who opt for fatherhood – are indeed faced with the compatibility question. However, jumping to the conclusion that a woman is not interested in a career because of potentially having children is inadmissible – no matter how she chooses to arrange her family life at a later date.
Apart from that, 30% of female academics remain childless and the tendency is rising. These figures also oppose the prevailing practice.
Look at Norway
In Norway, the gender quota has turned out to be a useful instrument. In 2003, the government introduced a legally binding quota system for women on boards of directors of governmental and communal companies, cooperatives and some private listed companies. If not observed, there is a threat that the company could be dissolved.
Opponents of the quota system immediately talked about the downfall of the economy as well as a decline in the prosperity of the country.
However, Norway remains one of the richest countries in the world. And there has never been a recruitment problem – a fact that even the Norwegian employers’ association now admits. The quota system has actually achieved that now 40% of the seats on boards of directors are occupied by women, which is up from 8% in 2003.
Chancellor Angela Merkel’s concessions were pivotal for the introduction of the quota for women in Germany. We can only hope that Switzerland will follow suit soon, even though the percentage of women in the Federal Council has dropped significantly.
In Swiss politics it is common practice to take into account party affiliation as well as language region when allocating political offices – but a quota system? It still seems difficult to apply such a system to the gender category but maybe the German example will serve as an implementation tool for Switzerland.
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University of St Gallen