Germany moves to close the gender gap by requiring companies to put women on executive boards

• On Friday, the German coalition government agreed to a new rule that companies with more than three board members must ensure one of those members is a woman.
• The rule also states companies in which the German government has a stake will require 30% of its board to be female.
• The rule reverses a voluntary system established in 2015 that some said failed to achieve gender equality.
• Franziska Giffey, Germany's federal minister for women called the move "historic."

Germany's government is rolling out a new standard that will require companies listed on the stock market to have a certain number of women on their boards. Companies with three board members must have one of them be a woman. And companies in which the federal government has a stake will require 30% of executive boards to be female.

The rule was agreed upon on Friday by Angela Merkel's Christian Democrats and the Social Democrats. It's similar to a system the country established in 2015 that called on companies to voluntarily increase boardroom diversity. But progressives argued, that because the system was voluntary it failed to achieve gender equality.

This new mandatory quota will boost diversity in Germany's corporate sector, and might even encourage lawmakers in other countries to follow suit. A number of countries have similar quotas, including France, Norway, Israel, Austria, India, and Italy. Research from management consulting company EgonZehnder found that countries with quotas were more likely to have significant boardroom diversity than countries without quotas.

Researchers at McKinsey & Co. found that companies with more gender and ethnic diversity among top executives were up to 33% more likely to see above average profits.

Women make up about 13% of the management boards of the 30 largest German companies listed on the Dax index, per a September survey by the independent nonprofit AllBright foundation that was reported on in the Guardian.

That's compared to 28.6% in the US, 24.5% in the UK and 22.2% in France, the study showed.

In a statement, Franziska Giffey, Germany's federal minister for women, said: "This one breakthrough is historic. We are putting an end to women-free boardrooms in large companies. We are setting an example for a sustainable, modern society."