Frauenquote - or women’s quotas - to be signed into law next month with firms required to implement the rule by 2016

Large German companies face a major shake-up after the government ordered that at least a third of executive positions be filled by women.

The agreement, which was reached by the ruling coalition after months of heated debate, will involve the Frauenquote – or women’s quotas – being signed into law in December. Companies will have to start implementing the law by 2016.

The decision will have a major impact on 108 of Germany’s largest firms, many of which have resisted the legislation. Several firms, including some major car manufacturers, have threatened to move their production abroad if the law was passed.

An estimated 3,500 smaller businesses will be obliged to introduce gender-equality goals and to publish these over the coming years.

Businesses will not be allowed to claim that they cannot find enough suitable women candidates. Any that do will have to leave positions vacant under what has been termed the “empty chair sanction”.

The women’s affairs minister, Manuela Schwesig of the Social Democrats, said she hoped the law would also promote change further down the pecking order of companies, whether those listed on the stock exchange or the smaller mittelstand firms.

“This law is an important step for equality because it will initiate cultural change in the workplace,” she told German radio.

Chancellor Angela Merkel, who initially opposed the reform, told the Bundestag on Wednesday: “It has been decided on and it is coming. We cannot afford to do without the skills of women.”

But Ulrich Grillo of the German Industries Federation, at the same time as insisting that companies wanted more women in leadership roles, dismissed the law as counterproductive, insisting that voluntary solutions were preferable.

Justice minister Heiko Maas said the agreement was historic and would make Germany a more modern country.

Some business leaders had said the law was not necessary because equality between the sexes is anchored in the German constitution. But Schwesig said equality was “far from being true in real life”. The effects of the law, she said, had the potential to go beyond the boardroom and would ultimately contribute to a change in society.

In contrast to Britain and the US, Germany has a two-tier board system comprising both non-executive supervisory boards, consisting of outside advisers, and full-time executive boards, which manage the company on a daily basis.

Supervisory boards are currently made up of about 22% of women, yet they hold only 12% of executive board posts.

Writing in the Süddeutsche Zeitung, commentator Heribert Prantl said the introduction of a frauenquote was simply bringing an end to the fact that “for ever and a day in top positions in business there have been male quotas of almost 100%. So the frauenquote are not the introduction of quotas, rather they are breaking through existing quotas … they are a tool to establish sensible standards. Just as children learn to swim with armbands, so the women’s quotas are the armbands of society.”