Women’s quota in major enterprises

These days, in Germany there is a lively discussion about women’s quota in major enterprises. The facts are clear: in most German businesses, especially in leadership positions, women are still underrepresented. Only 13 percent of the boards of directors of the 30 leading firms in Germany are women. Many politicians believe it is not enough that political parties or private businesses establish self-made women’s quotas for their organizations. They claim that there must be a regulation to ensure an appropriate proportion of women in big businesses. Thus, Germany should again win the leadership among the international competition. For comparison, Norway adopted the women’s quota for boards of directors in 2003. Spain followed in 2007 with a similar regulation. France took the step on January 13, 2011.
However, the Chancellor of Germany, Angela Merkel, recently declared that there will not be a women’s quota in Germany, since it would not be enforceable anyway. Rumors are circulating that she decided this way because she was concerned to lose votes in this very important election year 2011. Yet, clever enough, she also mentioned that she only decided against women’s quota because economy should once again try to give themselves quotas without any state regulation.

Finally the women’s quota issue also made it in Swiss headlines. Whereas in Swiss politics and government, women slowly compete men (four out of seven federal councils, 26 percent of the National Council and 24 percent of the Council of States, the head of the Swiss financial market supervisory authority and the head of the state secretariat for economic affairs are female), in economy there are still not enough women visible, and there is no perspective of change in the next couple of years. On an international comparison, Switzerland is among the last if it is about women in the executive suites.

Voices are getting loud for women’s quota only partially. Arguments against are made and say that especially young women don’t want to be so called ‘quota women’. Others fear that state regulation displaces the individual freedom. Other arguments are made that it is unconstitutional: Art. 27 of the Swiss Federal Constitution provides the freedom of economy for individuals and private companies. However, given a statutory basis, it could be a legitimate restriction as being within a public interest and proportional. Another constitutional argument says that quotas violate the prohibition of discrimination based on gender according to Art. 8 Abs. 3 of the Swiss Federal Constitution. Yet, this argument is highly controversial.

Anyhow, some concerns might be more legitimate. Many examples show that women who finally made it to a leading position had to fight even harder to prove that they were not only quota women but qualified at least as much as a competing man was.

However, from my point of view, there are reams of reasons for the introduction of women’s quotas for major enterprises. There are several studies (among others one from McKinsey) which show that the equity return and the profit in all of a business is clearly higher in businesses with gender-mixed management teams than in men-only teams. A UN research study shows that US firms with women in the business management feature a 42 percent higher operating margin than firms led only by men. The hope that the older men dominated generation would step back from their leading position in big firms and both female and male would fill their positions, did not occur. If the economy is not able to fill the free seats in their leading management with woman, coercion is probably the only solution to achieve gender equality.

Women supply half the market of enterprises. Their exclusion possibly leads to an alleviation of the potential for economic growth. Also, women are half of the market of businesses. They make half of the decisions regarding consummation. Furthermore, researches show that women are needed in leading positions of big businesses because of the aging of our society. It is assumed that in 30 years in Europe there will be an absence of 24 Million employees. If women would participate to same parts in the working life as men, the number could be reduced to 3 millions.

Although I believe that women’s quota for big businesses are the best solution to reduce the discrimination against women, there would be several good alternatives and softer forms to augment the number of female employees in leading positions. One would be to reward the commitment for women’s quota of every major enterprise. Another possibility would be to certify enterprises which advocate gender equality and exhibit a certain women’s quota in their businesses. It is also possible that an enterprise can assert factual reasons to not fulfill the requested quota of female employees, e.g. because not enough women applied for open jobs, and that this would lead to the fact that these businesses would have to take action in respect of affirmative action programs for women and provisions for the advancement of women in big businesses. My favorite solution, however, is to legally regulate a women’s quota on time for major enterprises. Therewith it would not be a rigid institution but a promoter for a self-supporting development.