It was first introduced 70 years ago: Many in the German economy are particularly proud of participation. As a rule, the supervisory boards of large traditional companies have been and still have equal representation, i.e. representatives of the shareholders and employees each send the same number of members; in the event of a stalemate on the supervisory board, the vote of the chairman of the committee decides. This means that the employees sit at the table and are involved in the major corporate policy decisions – which is often good for the much-cited “operational peace” and increases acceptance for tough corporate policy decisions.
But this model of participation is on the decline. The influence of employees on the supervisory boards of DAX companies is continuously decreasing. From September 2021 onwards, a quarter of the DAX supervisory boards could be without employee representatives, says Russell Reynolds, one of the world’s leading recruitment consultancies, in a study. While all 30 supervisory boards of the DAX companies were co-determined in 2015, there are currently only 26. In September the DAX is expected to be increased to 40 members. If the currently traded candidates for the new Dax-40 are also included in the index, there would no longer be any employee representatives on ten supervisory boards, i.e. a quarter of the Dax companies, according to the analysis by Russell-Reynolds.
There are several reasons why supervisory boards do not have equal representation. Companies that are based abroad are not subject to German co-determination, this is currently in the Dax Linde, in the case of the Dax 40 candidates it is Airbus and Qiagen. Companies that operate as a European stock corporation SE and were not subject to co-determination when they were founded can continue to do so in the event of later changes, such as the size of the company. This currently applies to Vonovia and Deutsche Wohnen, and to Dax 40 aspirants to Brenntag and Hellofresh. Two DAX companies are considered subgroups of co-determined parent companies and are therefore not subject to equal co-determination, currently Fresenius Medical Care and Siemens Healthineers. According to the study, there are also exceptions to parity co-determination for financial holdings such as Porsche SE. The two candidates for promotion, Zalando and Hannover Re, are only obliged to participate in one third of the decisions, while only three of the nine supervisory boards of the online retailer are employees.
In the M-Dax, the development for the employee representatives is even more dramatic. According to the analysis, in 2016 there were twelve of the then 50 M-Dax companies without employee representatives, this number in the M-Dax has risen from 2021 (with now 60 members) to 26, which is more than 40 percent. “It must be questioned whether this is slowly undermining the very successful German model of co-determination,” says Russell Reynolds representative Thomas Tomkos, who oversaw the analysis. This applies all the more since the legislature often creates regulations exclusively for companies with equal co-determination. The law on the introduction of a quota for women on executive boards, for example, only applies to companies that are listed on the stock exchange and have equal participation.
According to the study, the proportion of women on the shareholder representative side increased further in 2021 and is currently one third. For the entire Supervisory Board, including employee representatives, the average proportion of women remains unchanged at 36 percent. With one exception (Linde), all Dax companies would now be above the required mark of 30 percent women on the supervisory board. Two DAX companies, namely Covestro and Infineon, achieved parity with 50 percent. However, there was once again no progress in terms of the proportion of women chairing the supervisory board or committees.