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New rules for stock-listed companies which obligations apply based on which headcount, such as for a fixed quota of women?

Stock-listed companies are continuously forced to deal with new obligations under capital market law. Dealing with obligations of this kind often depends on how many employees companies have on staff and how this number of employees can be specifically determined. In this regard, issuers currently have to deal with a significant amount of confusion due to an online publication from the German Federal Ministries for Family Affairs, Senior Citizens, Women and Youth and for Justice and Consumer Protection relating to the question of the “Women’s Quota” introduced in supervisory boards in 2015, in particular also with regard to the manner in which the ministries are approaching issuers. 1. In March 2016, the Ministry for Justice and Consumer Protection in the ministers’ bill it presented on Corporate Social Responsibility (CSR) - Guidelines, which will introduce new and extensive “non-financial reporting obligations” for stock-listed companies, attached these obligations to the requirement that the company employs more than 500 employees, consolidated based on an annual average, thus also accounting for the number of employees in consolidated foreign subsidiaries. This number can be found in the management report of a company’s annual report ( The ministers’ bill will create legal regulations based on EU specifications, and so the Ministry for Justice and Consumer Protection will be at will to redefine these criteria and consider the corporation’s employees in foreign subsidiaries as well.

2. Subsequent to the law for equal participation of women and men in executive positions that was introduced in 2015, a fixed gender quota of 30 percent applies since January 1, 2016 for new seats to be filled on supervisory boards in stock-listed companies which are also fully co-determined. These two criteria that a company must meet at the same time so that the so-called “fixed women’s quota” applies within the company are in fact quite clear: the company must be both stock-listed and also be co-determined as understood within the German Co-determination Act. The ministry itself, however, now apparently feels that this can be defined quite flexibly.

2.1. In the online publication of the Ministry for Family Affairs, Senior Citizens, Women and Youth that was published in early July 2016 ( a list of names of stock-listed companies can be found with the latest number of their seats on the supervisory board and the female members of the supervisory board. The Ministry for Family Affairs, Senior Citizens, Women and Youth presents the list as a list of those companies which are listed on the stock exchange and fully co-determined for which, as of the beginning of 2016, a fixed quota of 30 percent applies for their supervisory boards as pertains to new appointees, as a means to demonstrate,

(i) which companies are affected by the “fixed women’s quota” since the beginning of 2016, and

(ii) how they have implemented this requirement to date.

2.2. For many of the issuers listed, in particular for smaller stock-listed companies, the fact that they are named will be quite surprising, because based on the number of supervisory board seats alone, what becomes immediately obvious is that at least not all of the supervisory boards mentioned in the list are compiled according to the specifications of the Co-determination Act at this time. This is because based on the Co-determination Act, a fully co-determined supervisory board has at least 12 members.

2.3. Why these not fully co-determined companies are mentioned nonetheless is also fairly obvious: the list is using exactly the same criteria (but inaccurate for the “fixed women’s quota”) as in the ministers’ bill for the CSR Guidelines, thus increasing the number of companies affected to 151 as compared to the legislative procedure, during which the assumption was still based on 100 companies. This way, the most recently named companies are being subjected publicly to political pressure to make them deal with this topic and to potentially introduce the 30% gender quota voluntarily and independently of the legal situation.

2.4. In fact, when drafting this list, Ministry officials were obviously fully aware that this approach was doubtful at a minimum, because the online publication states

“The interactive graphic shows the proportion of women and men in supervisory boards of companies listed on the stock exchange and subject to co-determination, for which currently the fixed quota of 30 percent applies to all new appointments to the supervisory board.”,

yet immediately following, it addresses issuers expressly mentioned in the list as follows: “The current overview is based on the submitted data from management reports. Therefore, it cannot be excluded that companies are also listed here that were not equally co-determined or that are no longer listed on the stock exchange. Companies, which believe that they are currently no longer subject to stock exchange listing or to equal co-determination may submit notification to”

2.5. The fact that the number of employees listed in the companies’ relevant management reports does not only include the number of employees in Germany, but reflects the total of employees in Germany and in consolidated foreign subsidiaries is also known within the Ministry. Apparently, the officials only researched the management reports of the companies, and then comprised the list entries based on the criterion of whether the relevant company has more than 2,000 employees according to their management reports - no matter where they were employed. They justify this with the fact that there are currently tendencies in case law for which according to the Co-determination Act, the relevant number of employees within a corporation is no longer differentiated between German and foreign group companies, and thus that the 2,000 employees necessary according to the Co-determination Act might also be employed by the foreign subsidiaries.

2.6. The decisions of Frankfurt Regional Court in the status procedure against the German Stock Exchange (3-16 O 1/14) and the Berlin Chamber Court in the status procedure against TUI (14 W, 89/15) being referred to here are neither legally established to date nor are they a reasonable comparison.

Even though neither the Frankfurt Regional Court / the Frankfurt Higher Regional Court (21 W, 91/15) in the appeals process against the decision by Frankfurt Regional Court, nor the Chamber Court finally rule out that based on a supposedly European-compliant interpretation, employees of foreign group companies would also need to be counted when applying the Co-determination Act and thus the mandatory equal co-determination would no longer depend on whether a German company employs more than 2,000 employees, in some cases by adding employees from domestic, i.e., German group companies. The CJEU that has now been appealed to issue a ruling has not yet come to a decision, however, and, in any event, will also have to consider the question, whether this interpretation that is supposedly compliant with European law may also be applied to employees of group companies outside of the European Union. The point of view in the past, which the introduction of the criteria “stock exchange listing” and “equal co-determination” in the law for equal participation of women and men in executive positions was and is based on, is generally that the Co-determination Act only applies to German companies employing more than 2,000, in some cases while adding employees of German group companies. Therefore, the list completely misses these legal stipulations for many companies in its criteria (and knowingly, as can be seen based on the question posed to issuers).

3. Meanwhile, companies that realize that they are unjustly listed and are currently not equally co-determined, thus all companies listed with less than 12 seats on their supervisory boards, at the very least if they do not maintain the 30% gender quota (which in that case they are not required to maintain), should deal with this list and its implications. On the one hand, from the point of view of the company’s employees side, the unjust listing may trigger demands to introduce equal co-determination, which undoubtedly was non-existent in the past, by way of a status procedure. On the other hand, it may create the impression among international business partners that the company is not meeting the compliance criteria stock-listed companies are facing in Germany. As such, the challenge is to take steps to actively and quickly correct this image.

What is especially irritating is the manner in which the Ministry is presenting itself to the issuers:

As the saying mockingly goes, reading educates.

In this case, Ministry officials have read quite a few management reports in particular. Now, they are obviously expecting that issuers will read the list. It is the issuers’ responsibility to make sure where and based on which criteria they are either correctly or even mistakenly being listed.

Issuers are now saying ‘THANKS A LOT’ for this additional capital market obligation that was introduced in roundabout ways.


Tatjana Schroeder

Dr. Tatjana Schroeder

Partner (Of Counsel)

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