Women on Board: A shift in corporate mindset

DECCAN CHRONICLE.
Published Mar 24, 2018, 6:47 am IST
Updated Mar 24, 2018, 6:47 am IST
A global comparison reveals that European economies have demonstrated willingness to promote gender diversity.
Securities and Exchange Board of India (SEBI)
 Securities and Exchange Board of India (SEBI)

Prabhu Dev

The need for gender diversity through representation of women on corporate boards has been acknowledged by the business world and statutory bodies, within India and abroad. The Companies Act, 2013 makes the appointment of a woman director mandatory.  Similarly, the Securities and Exchange Board of India (SEBI) guidelines mandates all listed companies to have at least one woman on their boards -- either as an executive or a non-executive director -- before April 1, 2015.

 

Again in October 2017 the SEBI constituted the Uday Kotak Panel on Corporate Governance recommended the appointment of at least one independent woman director in all listed companies.  Such legal requirement helps to break traditional gender stereotypes and aims towards a gender balance to increase board-room effectiveness. This is a minimalist position in the country compared to much more stringent requirements in global economies.  Companies like Infosys have more than the stipulated number of women directors on their Board.

The advantage of having women on boards is that it lends a different perspective, intuitiveness and enhances a collaborative leadership style.  Among women of substance in the corporate world are Mary Barra, CEO, General Motors, Indira Nooyi, CEO, Pepsi Company, in the US, and within the country are high profile names include: Kiran Mazumdar-Shaw of  Biocon, Chanda Kochhar , MD and CEO of  ICICI and Kumud Srinivasan of Intel. With higher enrolment of women students into B-schools over the last couple of decades, there are more women in the corporate sector. Logically the career progression of these women, enabled by their professionalism, is the board room.     

Academic research/survey across the globe proves gender diversity is linked to financial performance. A 2016 IMF study indicates that companies with more women in senior positions have significantly higher Return on Assets.  There is no dearth of qualified women to become corporate directors. Their ability to coordinate well with board members cannot be questioned. Women contribute to board-room discussions and unlike men they are inclined get into finer details. This special ability enables them to achieve an integrative approach. They are more creative, confident, emotionally intelligent and focussed, excellent communicators with high determination levels.

According to a 2012 McKinsey study the participation of women enhances organizational performance.  The study Women Matter 2012: Making the breakthrough, examines the gender-diversity programs of 235 large European companies. The report investigates what initiatives companies are taking, what is working well or less well, and why.It found that most companies are now taking gender diversity issues extremely seriously, devoting real resources to redressing the gender imbalance.

Of the women directors in India, 60 % constitute independent directors, as on 31st March 2017. This only shows that eligible and qualified women directors are appointed and not necessarily from the family of promoters. This is in contrast to the concerns that companies will comply with the statutory requirement of minimum female directors by appointing relatives of incumbent board members/promoters. However, few companies with progressive outlooks appointed women directors to their boards even before the statutory requirement was introduced to this effect.

According to the PRIME database, out of the 1,716 listed companies within the country, the number individual directors constituted 10,792 men and women.  Of these women constituted 1,654, which amount to approximately 15 %, not very encouraging. However, it is heartening to note that certain sectors have fared well, like healthcare, IT and telecom industries. The data base on 'board' demography throws up a disappointing figure -- only three % of total chairpersons comprise women. And women constitute only seven percent of the executive directorship.  

Women's representation on Board Committees is highest on CSR Committees, followed by Audit Committees. This partly reflects a patriarchal mindsets as CSR Committee and Audit Committees are not considered mainstream work.  

A global comparison reveals that European economies have demonstrated willingness to promote gender diversity.  Norway was the first to set a high minimum threshold limit, with a legal stipulation that companies must have at least 40 per cent women board members.  Non-compliance attracts regulatory action. Countries like Germany, France and Italy also have adopted this. 

The Indian corporate world has made a promising start in gender diversity.  Though India is among the developing countries to promote women's representation on boards, it has a long way to go compared to developed economies. Considering that women have entered male bastions like aviation, astronautics and military, the presence of the fair sex in board rooms is justified too. Company managements in India are still to adjust their board composition to adhere to statutory requirements.  Now the time has come for companies in the country to transcend statutory requirements and reap the rich dividends of gender diversity.  This is possible only with a shift in the corporate mind set.                 

(Prabhu Dev is Professor of Finance, Institute of Management, Christ Deemed to be University, Bengaluru)

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Location: India, Karnataka, Bengaluru




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