Economy

Why boardrooms badly need more women power

Updated : March 07, 2019 11:47 PM IST

Women tend to do their homework for board meetings more thoroughly than men and do not hesitate to ask tough questions.

In 2017, women held only 15 percent of board director seats worldwide, a small increase from 12 percent in 2015.

Our boardrooms have traditionally been full of men. There is no dearth of qualified women to enter the boardrooms. Only that there is no demand for them.

In 2017, women held only 15 percent of board director seats worldwide, a small increase from 12 percent in 2015. Less than a quarter (22 percent) of board directors in the Standard & Poor’s 500 were women in 2017.

India’s Companies Act, enacted in 2013, required at least one woman on the board of all listed companies. It was inspired by the ambitious quotas put in place by some European countries such as Finland, France, Germany, Italy, the Netherlands, and Norway which have quotas for women on boards of public companies. Gender diversity on boards remains high on the regulators' agenda.

Regulator Steps In

In October 2017, a Securities and Exchange Board of India (Sebi) panel recommended inclusion of at least one “independent” woman director in all listed companies. Last year Sebi asked top 500 companies to appoint at least one woman independent director by April 1, 2019. But as of December 31, 2018, according to corporate governance reports filed by companies, 118 of the top 500 NSE-listed companies did not have any independent female member on their boards. The list includes at least 16 companies that are in the top 100.

Even in companies which have female board directors, the purpose of the law stands defeated as nearly 25 percent of the women appointees on boards are family members of the owners. They fulfil the only criterion of being a woman but hardly add any value in terms of creative thinking or help in the organisation’s problem-solving capabilities. And they certainly are not independent.

Companies for reasons known to them shy away from appointing fresh faces to the board. Even second-rung women executive who has undergone training for board positions through various programmes find it tough to get a berth on top company boards. Top companies either opt for women from among family and friends or prefer well-known names.

Historically, the subjugation of women or the second-class treatment meted out to them has been primarily because they were considered to be weaker of the two gender in terms of physicality. Earlier, men were considered to be superior while carrying out occupation like agriculture and as a labour force, on the basis of sheer physical strength. It was not a level playing platform for women.

With the advent of the knowledge era, women were able to educate themselves to be at par with men. Focused and determined, they broke the glass ceiling that prevented them from entering the boardrooms.

Here we are not arguing about one gender being better than the other. It’s the result that counts. We can’t ignore the fact that women form half the population and contribute to purchasing decisions in equal number.

A Good Case

Various research studies point out to a strong link between gender diversity in boardrooms and shareholder value. It also leads to good corporate governance, better decision-making and a positive corporate image.

Women tend to do their homework for board meetings more thoroughly than men and do not hesitate to ask tough questions. Research by Credit Suisse pointed out that companies with women on boards tended to be a little more risk-averse and had on average, less debt.

It was observed that such companies were also able to reduce debt faster after the economic debacle of 2008! Perhaps this prompted the old boys’ club, which didn’t like confident women talking directly to them, to take notice of women.

Recently, a study had been undertaken to understand the trends on female representation on boards and the efficacy of the new regulations. Jointly prepared by Institutional Investor Advisory Services (IiAS), Women on Corporate Boards Mentorship Programme (WCB) and Prime Database, the study has brought to light some interesting facts. It reveals that the average tenure on boards for women directors has been 4.6 years, compared to a much higher tenure of 9 years for male directors – this can be attributed to a large number of women directors being appointed only after Companies Act, 2013 came into effect.

Also, the telecom, information technology, healthcare, utilities and industrial sectors have a higher than average proportion of women directors while the energy sector is at the lowest with 8.9 percent. Barring the energy sector, there is no large variance in the proportion of women directors across sectors. This shows that there are no specific large-scale industry related factors influencing the number of women on boards.

Credibly creating and cultivating an active pipeline of female candidates is arguably the single most important element of a successful board-inclusion effort. This news is heartening.

Women have overcome many obstacles to stand equal to men in the world of entrepreneurship. From dealing with the masculine mentality to being educationally and financially disadvantaged, they indeed have come a long way.

But India still is far behind in independent representation – only 16 percent of independent directors in India are women as compared to 34 percent in the STOXX Europe 600 Index.

Lack of diversity at the highest of corporate governance is worrying. It’s time for men to get used to having women around the top table. Gender diversity in the boardroom has to make a priority. There has to be much more than just discussions. Management, the board of directors, policymakers, shareholder community and government have to act to make things happen.

“A woman with a voice is by definition a strong woman. But the search to find that voice can be remarkably difficult,” Melinda Gates.

Rituparna Chakraborty is co-Founder & EVP, TeamLease Services Ltd.