The German Mittelstand
Stock market listed SMEs could use some diversity management
No woman wants to be seen as the one who owes her seat on the board to gender equality legislation according to Katja Suding, Federal vice chair of the FDP in a recent interview published in Bild am Sonntag. And yet the “pink quota” is coming. In the wake of last May’s ratification of the law on gender equality between men and women in top management positions in both the private and public sectors, approximately 100 companies have to set aside a quota of not less than 30% of seats on the Supervisory Board. In addition to these 100 stock market listed companies “obliged to cooption”, a further 3500 mid to large-size companies have to devise an abridged version of the law in order to define its own individual quota for the Supervisory Board, the executive board, and top management. This flexible quota can vary from company to company and be pegged to specific requirements of the company or area of activity.
A stock-market listed SME with a small Supervisory Board is troubled by the new legislation. Intentions are good but put bluntly, there are few candidates available. Head hunters are sharp-eyed on the lookout for qualified women who tend to prefer positions on the Supervisory Boards of larger companies. Small enterprises with a 3-person Supervisory Board have an even bigger problem because the skills required go beyond mere supervision. These members must supervise but also do networking. Shareholders have no desire to replace crucial Board members who are fundamental to a smaller size company. Rather than losing a valued, experienced Board member, the company may decide to increase the number of Board members, but the multiple of 3 requirement could have the effect of creating a board twice as big as before, with all that that entails in terms of costs.
This is why it is important that the companies in question identify their women candidates as soon as possible, and that then they invest in preparing them. What is really needed is a textbook “diversity management”, the only way of holding on to the right people. Achim von Michel, spokesperson and political reference point of the BundesverbandmittelständischeWirtschafte.V. (BVMW) in Bavaria is of the opinion that the quota system interferes with entrepreneurs’ decisional liberty. “Nobody is better qualified than the entrepreneur in knowing who is best suited for a given position. Selecting management post appointees ought not to be based on criteria such as age, skin colour or gender but only on the basis of qualifications. This is why the legal measures are completely wrong”.
It should, however, be remembered that there’s nothing to be gained by arguing, the quotas will be imposed and stock market listed SMEs will have to get used to them, and those who get an early start by investing (or by having invested) in women candidates will find themselves ahead of the game; instead of being appointed by gender, those women candidates will be fully entitled by competence to their seat on the Supervisory or executive board. Those instead who sat tight waiting for a watered down version of the law or even its failure to reach the statute book would be well advised to get moving.