Social Issue: Gender Parity in Indian Boardrooms

Gender diversity simply out is the equal treatment and representation given for both males and females in an organization/entity. Globally, calls for more gender diversity on corporate boards have gained momentum.

Article 16 of the Indian Constitution states: “there shall be equality of opportunity for all citizens in matters relating to employment or appointment to any office”. However, in reality, this has not manifested in Indian scenario. The situation is concerning from the analysis of India’s BSE 100 and BSE 500 firms. India has been ranked 26th globally for the presence of women in boardrooms. While the percentage of women in Indian boardrooms is only 6.91%, the percentage of women in developed companies like Norway is 40%. Even with respect to developing countries, the number of women in Indian boardrooms is lower than the average of developing countries.

An analysis conducted in India across seven sectors (software, real estate, private sector banking, household products, telecommunications services, pharmaceuticals, and the oil industry), has indicated that total percentage of women directors, both executive and non-executive, ranged from 6.12% to 18.75%.

India is following the mandatory approach to gender diversity. Section 149(1) of the Companies Act, 2013 makes it mandatory for certain classes of companies to have at least one woman director. Such class of companies are listed companies and other public companies having a paid-up share capital of Rs. 100 crore or more or a turnover of Rs. 300 crore or more. Woman Director can be either executive director or a nonexecutive director or independent director in the company.

According to Clause 49 of Securities and Exchange Board of India (SEBI) listing agreement: “The Board of Directors of the company shall have an optimum combination of executive and non-executive directors with at least one woman director and not less than fifty percent of the Board of Directors comprising non-executive directors”.

Need for gender parity

Research conducted on BSE 100 companies have revealed that those companies who had women on their boardrooms experienced double the level of returns on working capital. This is because women are capable of bringing a different perspective to leadership and are found to be more inclusive and collaborative in decision making. They also possess greater social sensitivity and are less willing to take impulsive risks.

India has one of the lowest percentages of women in its work force, around 26%. But, women in India make up a huge percentage of customer bases and have say in making purchasing decisions in family. Also, their spending power is getting increased with every passing day. So, it is highly illogical to leave behind female’s perspectives from the management team of companies. Diversity in boardrooms improves information provided by the board to managers due to special skill sets, experience and complementary knowledge held by diverse directors.

Presence of females in leadership teams is likely to be receptive to issues such as flexible working hours and maternity leave, which most often gets neglected by male-dominated organizations. Thus, diversity in boardrooms can send positive signals to the labor, product and financial markets.

Barriers to gender parity

  • Boards comprising predominantly of men will tend to hire men.
  • Corporate culture is not women friendly. Childcare costs and other policies make it women difficult to get considered for executive positions. Family responsibilities tends to fall on women and results in their career cut especially if the work involves extensive travelling or inflexible work arrangements.
  • There is a low awareness about the importance and benefits of gender diversity in boardrooms. Many companies rarely take a note of it.
  • Expectations of previous board experiences or experience in traditionally male dominated industries or functions like engineering, science, sales etc., further limits the opportunities available for women to join boards.

Issues in gender diversity: Meritocracy Vs. women card

Gender quotas have intention to give opportunity to women to serve as leaders. But these are often circumvented by corporations by allowing a same female director to serve on multiple boards. While the percentage of women in boards increased it is not usually reflecting a proportional increase in the number of female leaders. In this respect, some argue that companies must be allowed to appoint directors based on merits of the candidate as opposed to the gender quotas.

Way forward

The Companies Act, 2013 and the SEBI’s listing agreement also require the listed companies to have a woman director on the Board. With the above guidelines, India has taken some steps to address gender parity in Indian boardrooms. But, in ground reality it is often found that women occupying the position of executive director are most often family members of the founder. Most often these appointments are mere lip service to fulfil the mandatory requirements that needs to be fulfilled by the companies. Hence, gender diversity must be accepted in spirit not just for the sake of compliance. In this regard, some countries are making use of measures like moral persuasion and have introduced voluntary measures through corporate governance codes and guidelines. Some other countries have taken legislative action and imposed quotas. India can also follow countries like Norway, Spain, Germany and Canada where rules are stringent. The rules in these countries require at least 40% of boards to be female. In Israel, a law passed in 2013 mandates that 50% of board to be comprised of females. In India both these approaches can be followed but the ultimate aim should be to guard against tokenism.

Conclusion

In order to create gender diverse boardrooms, industry sectors needs to make a more conscious and genuine effort to make their boards more gender diverse. At the same time, the government and regulators need to act as responsible watchdogs by ensuring stricter enforcement.

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