Investors put pressure on gender diversity

The topic of gender diversity is becoming increasingly important. In Germany, the average proportion of women on the supervisory boards of DAX40 companies is 39%, while it is only 22% on management boards. Only 2.5% of CEOs are female (all figures as of August 2023). In MDAX companies, this ratio is even lower at 15.6% of board members. And just half of the companies have a woman on the board at all.

The national share of women in the first and second management levels is significantly lower than their share of all employees. This confirms there’s still a glass ceiling that makes it difficult or even impossible for women to reach top positions.

Against this backdrop, Allianz Global Investors, Amundi, Candriam, Columbia Threadneedle, Legal & General Investment Management (LGIM) and Sycomore Asset Management have founded the 30% Club Germany Investor Group. Its main aim is to achieve a minimum quota of 30% women on the management boards of DAX40 and MDAX companies. But the investor group is also committed to introducing an internal talent pipeline for women and greater transparency from companies on issues relating to the gender pay gap, progress towards gender-diverse middle and senior management levels and procedures for identifying suitable candidates for management positions. Critical mass is reached at a quota of 30%. It’s the point at which minority groups are heard and valued and can have an impact on the decision-making dynamics of management levels. The aim of the initiative is to put pressure on companies to promote gender diversity, while companies in a pioneering role should be positively emphasised.

These targets are far more ambitious than required by law. According to the Second Management Positions Act (FüPoG II), at least one man and at least one woman must be appointed to management boards with more than three members. But this regulation doesn’t apply to all DAX40 and MDAX companies.

Companies can benefit from gender diversity on their boards. Independent research suggests companies that foster a corporate culture focussing on gender diversity and have a correspondingly diverse board are more productive and innovative. Companies for which gender diversity is merely a regulatory requirement do not appear to benefit from it.

In a study published in October 2022, the European Central Bank found that banks with greater gender diversity on their boards lend less to companies with high carbon footprints. Banking regulators across the EU require institutions to have effective diversity policies and gender-neutral remuneration systems.

Overall, the topic of gender diversity – and sustainable corporate governance – will not lose relevance. On the contrary, investors will continue to adapt their offerings and portfolios to the needs and wishes of their clients, for whom the topic – with other ESG criteria – is becoming increasingly important.

To secure future investments from institutional investors, companies will have to adapt their structures and strategies to achieve true gender diversity. The pressure from investors to do so will continue to increase.