There are qualified women spread across sectors who should be given a chance to show their mettle instead of restricting the corporate boardrooms to an all-boys’ club. Here's why

Why are women missing from the boardroom

Not too long ago, former SEBI chairman M Damodaran wryly observed that Indian companies were “very, very lazy” when it came to inducting women on their boards. His reasoning: for a country with over a billion people, finding a few hundred capable women should not be too difficult – and yet, the Indian corporate sector comes up drastically short in this area.

Women have had to struggle for equal representation in most fields, and definitely in the workplace, where gender inequalities are most glaringly visible. Even in the seemingly progressive corporate sector, women have been given the short shrift more often than not – be it equal consideration during promotions or performance reviews, equal pay for the same job, or equal criteria for designations. 

So much so, that women have had to make adjustments to their business attire to blend in: apparently, a sari-clad woman is less professional than one in a formal suit, the man’s work attire of choice. In short, men almost always get preference over women.

Little wonder then that the Indian boardroom mostly tends to be an all-boys’ club – though the government is pressing for more inclusiveness. This lack of representation is a pity; a research of 2400 companies worldwide by Credit Suisse Research Institute shows that between 2006 and 2012, large-cap companies with at least one woman on the board outperformed their peer group with no women on the board by 26%.

Women on board

However, things could be looking up in India, if gradually, thanks mainly to a proactive government push. Following the promulgation of the Companies Act of 2013, which stipulated that companies of a certain category have at least one woman director, market regulator SEBI made it compulsory for such entities to comply with the Act, and set March 31, 2015, as the compliance deadline. 

The Act also stated that any intermittent vacancy of a woman director be filled within three months of that vacancy opening up, or at the company’s next board meeting, whichever was earlier. Last October, SEBI suggested that all listed companies have at least one independent woman director. 

All this brought an immediate change in the boardrooms – and an increase in the pace at which the Indian corporate sector is appointing women to boards, according to a Deloitte study released in November 2017. 

Before the new stipulations were specified in the Companies Act in 2013, only 4% of the directors of publicly listed Indian companies were women. Today, as per the Deloitte study, this has risen sharply to 12.7%. In fact, the report pointed out, this figure actually represented a 4.7%point jump (from 7.7%) in just two years since the 2015 March-end deadline. 

The report also observed that the Indian government’s initiative had “helped India close its gap with the global average, which stands at roughly 15%.” It also pointed out that 3.2% of board chairs in India were accounted for by women in 2016, up by 0.5% points over 2014. 

But the most reassuring news to come from the report is that India is doing very well compared with a host of other Asian countries, including Taiwan and South Korea, both in terms of absolute inclusion and percentage increase. Looking to better its performance, the government has now set a target of 20% representation of women on corporate boards by 2020.

Performance worries

At the same time, what cannot be discounted is that a 12.7% representation is not really a great deal in terms of progress in inclusiveness. This is especially so as the Deloitte study shows that Asian countries such as Vietnam and Malaysia outperformed India in this respect, with women there holding 17.6% and 13.7% of board seats respectively. 

Moreover, the comparison with Asian countries is not a real measure of our progress; the Deloitte data shows that in Asia, women represent only 7.8% of directors, whereas Europe boasted more diversity in the boardrooms at 22.6%. But what is notable is that the European Union is pushing for a 40% women’s representation, which trumps India’s targeted 20%. 

The Institute of Company Secretaries of India had some interesting observations to make on the problem with Indian companies. In the March 2016 issue of its magazine Chartered Secretary, it observed that while India joined many other countries to bring out legislation to push for more diversification on boards, there is still a “huge gap” with what is desirable. It then took a look at the previous year’s Indian Boards Database of the National Stock 

Why are women missing from board rooms?

“We observed that women are taken as tokenism and their impact in decision-making is still minimal,” the magazine observed. “The major sources of directorships of women are public sector employment, family ties, and private sector banks.”

And then, noting “the existence of glass ceiling” and the paucity of women in senior, impactful positions of companies, it added: “Mere introduction of legislation is not sufficient for empowerment of women; companies should understand the benefits of gender diversity on their boards.” 

Benefits of diversity

It is here that the biggest problem lies with Indian companies: any ‘improvement’ they make in their board composition in terms of gender diversification seems to be cosmetic and perfunctory; most of them are prone to take the legislation as another compliance matter without actually appreciating that it adds value to their overall performance, or that it should be treated as an opportunity to find qualified directors, even if they are female.

Various reports suggest that having women in top positions works well for a company. For instance, a Catalyst report titled ‘The Bottom Line: Corporate Performance and Women’s Representation on Boards’, shows that Fortune 500 companies that boasted of a high percentage of women directors were successful in achieving significantly higher financial performance, compared to companies that had the lowest levels of diversification in their boards.

The Catalyst study compared the performance of companies with the highest and lowest representations of women on their boards. The three critical financial parameters it looked at were:

  • Return on equity;
  • Return on sales, and 
  • Return on invested capital.

The conclusion of the study: financial measures excel where women serve on corporate boards. In a statement, Catalyst president Ilene Lang said the study demonstrated the “very strong correlation” between corporate financial performance and gender diversity. “We know that diversity, if well-managed, produces better results. And smart companies appreciate that diversifying their boards with women can lead to more independence, innovation, and good governance, and maximise their company’s performance,” she said.

The Catalyst findings are similar to that of the Credit Suisse study mentioned earlier, which in fact went on to say that the impact of women directors was most visible in the post-2008 scenario, marked by deterioration in the macro environment. “Stocks with women on the board have strongly outperformed those without any woman on the board,” it said. 

Credit Suisse identifies seven key reasons why greater gender diversity could be correlated with stronger corporate performance: 

  • It’s a sign of a better company;
  • Shows greater effort across the board;
  • Ensures a better mix of leadership skills;
  • Brings about access to a wider talent pool;
  • Is a better reflection of the consumer decision-maker;
  • Reflects improved corporate governance; and
  • The company is risk-averse.

Last words

The 2013 legislation by the Government of India is a good start for women empowerment in the corporate world; there’s an abundance of talented women in the workplace, not all of them in the corporate sector. Deserving and qualified women are spread across sectors, and should be brought on board and given a chance to show their mettle. 

As Damodaran is reported to have advised corporations, “Look around, look at universities, look at professors; why must you look at just 10-15 women who have had exceptionally good careers?” Why indeed?


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