Why companies should be more digital, younger and more female at the top

How should listed companies in Germany prepare for the future? In the current crisis, they are obviously relying on experience and the tried and tested: while the management boards of the more than 100 HDAX companies were still around 51 years old in 2005, they are currently over 53 years old; the youngest member of the management board at that time was 45 years old, today he is 49 years old. This is shown by the "Management Board Radar", which analyses the HDAX management boards since 2005. The study was carried out by DSW, strategy consultants Advyce & Perlitz and Witten/Herdecke University.

It also shows that more than 90 per cent of the board members have a degree; 15 per cent also have an MBA. Even if German board members are not getting any younger, they are at least more international today. In 2005, 18 per cent had obtained a degree from a foreign university; currently the figure is 25 per cent.

Management training centres in Aachen, Munich and Cologne

If you want to make it to the top, you should continue to focus on economics - currently the subject of choice for 56 per cent of HDAX board members - the rate has never been below 50 per cent in the past 16 years. Engineers are the second most common subject at the top levels, followed by natural scientists and, at the end of the scale, lawyers.

The HDAX companies' management centres are located in North Rhine-Westphalia and the south of Germany: RWTH Aachen University has currently trained 18 board members, LMU Munich 16 and the University of Cologne 14.

Too few women

If you look at the proportion of women, the management boards are clearly lagging behind their supervisory boards - keyword quota. In 2005, there were still one per cent female board members in the HDAX, whereas the figure is currently twelve per cent and 19 per cent in the DAX40. In an international comparison, Germany does not exactly stand out: The 40 largest US stock exchange companies have 31 per cent female board members, and the proportion of women is also significantly higher in the UK and Sweden. In 74 MDAX and SDAX companies, there is still not a single woman on the reporting date!

In the HDAX, the survey shows twelve female CFOs, but only three CEOs. Every fourth new woman on the Executive Board became CFO - a position that is predestined for the next step as CEO.

"Experience seems to be the mantra of top German companies. In our view, this should also be viewed critically, given the immense challenges that German companies are facing, particularly in terms of digital transformation. The same applies to the educational background, which does not reflect the technical implications with regard to new (digital) business models. Diversity does not really seem to have arrived as a guiding principle for the composition of the HDAX board," says Marc Tüngler, Managing Director of DSW.

The personnel carousel is spinning faster

Companies are becoming more agile when you look at how long board members stay on the board. In what has been a difficult environment for several years, board committees are becoming smaller overall. In 2008/09, there was an average of five people on the Management Board, whereas now there are only four. The length of time a Management Board team works together is also decreasing. In 2017, the average duration of collaboration was 6.7 years; it has now fallen to 5.8 years. Before the Covid pandemic, we also saw a record length of CEO tenure of 6.4 years in 2017; this is currently down to 4.2 years. The CFO has an even hotter seat, with the length of stay falling from 4.6 years to 3.6 years.

"Even if German companies are currently successful despite multiple crises: The next few years will be difficult in the existing structures and constellations. Diversity must be taken more seriously if the (digital) global challenges are to be met. The expansion of the DAX to 40 companies is the right signal. Around half of the new DAX members have at least one international board member; Delivery Hero even manages without a German top manager," says Burkhard Wagner, Managing Director of Advyce & Perlitz.

Taken at their word: Top performer and forecast champion Hugo Boss

The example of Hugo Boss shows that new heads can be good for management boards and the business of companies. The Management Board Radar also analysed who performs best and who manages their forecasts in the best possible way, both quantitatively and qualitatively. Hugo Boss AG came out on top, followed by Deutsche Börse AG and SMA Solar Technology together with Münchner Rückversicherungsgesellschaft in joint third place in the ranking according to stock market performance and forecast quality.

Hugo Boss was 100 per cent accurate in its forecasts, while the HDAX average was 58 per cent accurate. Hugo Boss's forecast horizon extends 342 days into the future, compared to 259 days for the HDAX average. "Our forecast champion Hugo Boss communicates accurately, precisely and with foresight. Investors therefore not only get a serious look into the future at the beginning of the year, but can also rely on the forecast figures being achieved. Others have a lot of catching up to do. These include established players such as Rheinmetall or Allianz, but also younger companies such as Scout24 or Hello Fresh. Against the backdrop of constantly increasing volatility in the business environment, apparent quantification and accuracy are not acceptable and should be supplemented by qualitative predictions and a forecast of ranges," says Professor Erik Strauß from Witten/Herdecke University.

"Overall, the group of our 'best-in-class' performers has the largest, but also the oldest boards in terms of returns. The opposite picture can be seen among our 'laggards', with the youngest and smallest board members. Breadth of opinion, but also experience, seems to be paying off, at least at the moment."