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Study on “Women’s Quota”: Long-Term Positive Effects Anticipated

Press Release of October 1, 2015

Binding quota could combat gender stereotypes – quality of talent pool expected to improve overall – no discrimination against men anticipated

On January 1, 2016, a fixed 30-percent gender quota for supervisory boards will come into force in Germany. This is binding for all listed companies that also have employee representation on their supervisory boards (full codetermination). In the run-up to the introduction of the quota, critics had alleged that the legislation, dubbed the “women’s quota,” discriminated against men and prevented the best candidates being appointed. Dr. Norma Schmitt, a researcher in the field of gender studies at the German Institute for Economic Research (DIW Berlin), examined concerns like these in a variety of research studies. Her conclusion is that, “Early research results indicate that a higher share of female supervisory board members leads to an increase in the number of women in senior management and generally improves women’s chances of promotion. This can only be achieved, however, if convincing efforts are made to meet the target.” Companies would also benefit from the implementation of a gender quota as studies have shown that a 30-percent share of women results in a critical mass and, when this is reached, we can observe a favorable impact on company performance as a result of gender diversity on supervisory boards.

Gender Stereotypes Undermine Objective Recruitment

Frequently, gender stereotypes – usually subconsciously – play a role in appointments and promotions. Studies show that, for example, the share of female musicians in orchestras can be dramatically increased when applicants – contrary to standard practice – audition behind a curtain out of sight of the decision-makers. According to Schmitt, “These stereotypes also have an impact on men as they make it very difficult for them to break away from the breadwinner role. By combating these stereotypes, the gender quota provides the whole of society with an opportunity.” The quota could help society to ensure that its talents and abilities are more efficiently distributed. As well as providing companies with advantages, this development would also have a positive signaling effect for future generations.

Dr. Schmitt refutes the argument that the introduction of a gender quota would discriminate against men, “It is often assumed that men will now be forced out but this infers that the distribution of positions to date has actually been efficient and the quota will now see less well-qualified candidates appointed to supervisory boards as a result.” This is one stereotype unfortunately expressed all too often by the demeaning term “quota woman.” What is overlooked here is that, to date, men have been overrepresented and that there are also less qualified men on supervisory boards.

Underrepresented Group Increasingly Willing to Compete

The gender quota is likely to have a positive impact on the quality of the talent pool as it is anticipated that, with improved chances of promotion, women will probably be more willing to compete. Studies have shown that simply announcing the imminent introduction of a gender quota can result in an improvement in performance — women have the legitimate hope that their dedication might now actually be rewarded by success. Studies from Norway where a fixed and legally binding quota was introduced in 2006 provide evidence that the newly appointed women are actually substantially better qualified although, compared to men, they are still younger and have less managerial experience.

Research findings from other countries on the effect of the gender quota on company performance do not allow us to make reliable medium- or long-term projections for Germany. Consequently, Schmitt calls for immediate investment in data quality and a concept in order to conduct a systematic evaluation of the gender quota in Germany.

Schmitt also points out that the long-term opportunities offered by a gender quota depend on the extent to which companies themselves commit to a higher share of women on their boards and then actually achieve this. The law does not stipulate a fixed quota here but instead obliges companies that are listed and/or have employee representation on their supervisory boards to set their own targets by September 30, 2015. These targets must be met within a set period determined by the companies themselves. However, that target share can also be zero. Should the companies fail to meet their targets, as yet, they face no sanctions.