GERMAN BRIEF: WOMEN
Women board members
contribute to profitability
June 2023: If at least one woman is a member of a German company’s supervisory board (1), the attendance rate at meetings is higher than if only men are on the board. Two or more women on a supervisory board can result in higher profitability for the company. This is the result of research by the University of Tübingen among listed companies in Germany. The researchers looked at the proportion of women on companies’ supervisory boards and compared the data with corporate profits.
The leading author of the study, Prof Kerstin Pull from the University’s Department of Economics, explained that different perspectives on a supervisory board can result in more alternatives being considered and consequently more informed decisions being made.
In order to better understand the results of their quantitative analyses, the researchers also conducted interviews with 17 supervisory board members. Their statements support the thesis that in supervisory boards with more than one woman, different perspectives and opinions, a wider level of expertise and a more productive tone influence the discussions.
However, if only one woman sits on a supervisory board, she is often perceived by her male colleagues as a representative of her gender rather than as an individual with specific qualities. Some even see the female colleague merely as a ‘pretty accessory’. But it is true that even with only one woman on the board, the attendance rate in the supervisory board meetings is higher than with an all-male board – but companies with only one female supervisory board member don’t seem to see higher profitability.
If, on the other hand, there are several women on a supervisory board, their different perspectives and expertise are increasingly taken into account, leading to more informed decision making.
The positive effect is only partly explained by the higher attendance rate in supervisory board meetings. Another reason suspected by the research is that women are more often recruited to a supervisory board from outside the company and therefore contribute different perspectives to the deliberations.
Since women quotas were introduced for listed German companies in 2016, the proportion of women on DAX (2) supervisory boards rose from 30 per cent to 37 per cent by the end of 2022. In 2023 for the first time, more women were newly appointed to DAX supervisory boards than men.
The proportion of women on executive boards (1) of DAX companies has also grown strongly, from only two per cent in 2010 to 22 per cent in 2022. However recently, there have also been prominent resignations of women from DAX boards: Martina Merz resigned as CEO at ThyssenKrupp at the end of April 2023, Filiz Albrecht as Labour Director at Bosch in March and Carla Kriwet as CEO at Fresenius Medical Care at the end of 2022.
1) Germany has a two-tier board system. This system separates the board into a management board (Vorstand) and a supervisory board (Ausichtsrat). The function of the latter is primarily the supervision and control of the management board. The basis for fulfilling this function is the right of the supervisory board to appoint and, under certain conditions, dismiss members of the management board and fix their remuneration. The separation between both boards is mandatory. The major advantage of the two-tier board system is this clear separation between the management function and the control function. (Klaus J Hopt)
2) The DAX (Deutscher Aktienindex, German Stock Index) is a stock market index consistend of 40 blue chip companies trading on the Frankfurt Stock Exchange (Frankfurter Börse).
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