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Flexible hours, political pressure may ease German bank gender problem

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Flexible hours, political pressure may ease German bank gender problem

A male-dominated financial sector, restrictive societal norms, unconscious bias — the barriers to women being appointed to bank boards in Germany are many and complex. Political pressure and quotas should be part of the solution, according to industry experts.

Though they make up more than half of Germany's financial sector workforce, women are few and far between on executive boards of major financial firms. Men held 85% of the seats on such boards in 2019, according to consultancy Oliver Wyman. This is part of a broader picture of poor gender diversity in corporate leadership across sectors, and a gender pay gap that is significantly worse than the EU average.

Gender stereotypes

Market observers point to deeply entrenched gender stereotypes in Europe's largest economy.

"Having a career is not in line with the still widely accepted role model of women in German society," Astrid Jäkel, a partner at Oliver Wyman, said in an interview. Viewed as homemakers rather than breadwinners, many German women face a mid-career conflict where the costs of advancing in their job outweigh the benefits, Oliver Wyman research shows.

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It will be hard for companies to change existing societal norms, but there are several important steps they can take, Jäkel said. They can try to accommodate the childcare needs of female employees, and increase transparency around the career prospects and pay for women after their return from maternity leave.

They should also try to change culture and remove unconscious bias. Sometimes male colleagues or managers try to lighten the workload of female teammates with children. "However well-minded that is, it creates an impression that women need help to get the job done, which ultimately makes it harder for [them] to progress in their careers," Jäkel said.

"Compared to many other countries, Germany is performing worse across all sectors when it comes to gender diversity," Katharina Wrohlich, head of the Gender Economics Research Group at the German Institute for Economic Research in Berlin, DIW Berlin, said in an interview.

Germany's gender pay gap is the fourth-highest in the EU, at 19.2%, compared to a 14.1% average for the bloc, according to Eurostat, part of the European Commission.

German statistics office Destatis says this is largely because women often work in low-pay sectors, and because of family obligations that drive many to choose part-time work. In 2019, 47% of German women aged 20 to 64 were in part-time employment, compared to 9% of men.

Banks perform badly

The long, inflexible working hours that are typically rewarded in the financial sector raise the bar further for career-minded women in German banking, according to DIW Berlin's research.

In an analysis of female board representation at 53 leading banks across Norway, Sweden, France, Denmark, Ireland, Finland, the U.K., the Netherlands, Italy, Belgium, Germany, Spain and Portugal in 2019, DBRS Morningstar found that Germany was the only country which scored below the 32% region sample average and also recorded a drop in the share of women on boards over the last five years.

Female representation on the boards of German banks is lower than in other sectors. In the fourth quarter of 2020, women accounted for 10.5% of the executive and 23.9% of the supervisory boards of the top 100 German banks, DIW Berlin data shows. If the current trajectory is maintained, it will take about 80 years to achieve gender equality on executive boards, DIW Berlin estimates.

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S&P Global Market Intelligence contacted senior women at Commerzbank AG, HSBC Trinkaus & Burkhardt AG, Landesbank Baden-Württemberg, Deutsche Bundesbank and Deutsches Aktieninstitut, an association representing listed companies in Germany, all of whom declined to comment on gender diversity. Deutsche Bank AG, the Association of German Banks and the German Savings Banks Association declined to comment on diversity and inclusion initiatives.

New quota, new hope

Of the three main types of German banks, public-sector savings banks, or Sparkassen, score lowest in terms of women on both executive and supervisory boards.

Of the 378 savings banks only 51, or 13.5% of the total, had any women on their executive boards in December 2020, data analytics company Barkow Consulting found.

These banks would not be included in the new quota for women on executive boards that was backed by the German government earlier in 2021.

The Second Executive Positions Act approved Jan. 6 will introduce a minimum quota of at least one woman on the executive board of large listed companies with three or more board members from 2022. This will encompass 70 companies, of which 31 currently do not have any women on the board.

Even if the quota is applied to savings banks, this would only increase the share of women on executive boards to 8.6% from 6% in 2020, because only 30 out of the 378 savings banks have three or more board members, according to Barkow Consulting.

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However, both Jäkel and Wrohlich said the new quota for executive boards could be a game-changer despite its limitations. Since its launch in 2016, the 30% quota for supervisory boards has led to greater gender diversity in those senior ranks, Wrohlich said.

"[T]he fact that female executive board members are no longer optional and 'nice-to-have' but a 'must-have' is expected to change the mindset of corporate leaders," Jäkel said, adding the latest quota should help Germany catch up to other European countries.

According to Barkow Consulting Managing Director Peter Barkow, political will for more action is key to a change in the savings banks pillar. This is an area where politicians can have an almost direct impact on the way boards are set up, as these public-sector banks are tied to local communities, he said in an interview. Therefore, more politicians should engage banks in a conversation about gender diversity, he said.

Legislation

The five European countries that scored best in Equileap's 2021 index — France, Spain, Sweden, the U.K. and Italy — have all put forward legislation to promote gender equality in one way or another, CEO Diana van Maasdijk said in an interview. Meanwhile in Germany, gender pay gap reporting is among the lowest in Europe, at 10%, compared to 82% in Spain, 78% in the U.K., 55% in Italy and 27% in France, the firm's data shows. Equileap is a Dutch gender equality data provider.

Although the way to gender equality on boards of banks is a distant goal, the quota is a milestone on the way to creating the opportunities for women who want to advance in their careers, according to Wrohlich.

"The important thing is to achieve equality in the chances men and women get rather than parity in numbers," she said.