As per data from Hunt Partners India Board Report, the percentage of directorships held by women remains well under 20% globally, in India the number is much smaller at around 5%, a remarkably low level, considering that women comprise almost 40% of the workforce. And when we look at the number of boards chaired by women, it is a miniscule percentage, a disparity beyond acceptance. Even globally women chair boards in only 4% of developed market companies.
If we consider the importance of women in the Indian economy, the facts cannot be ignored:
- Women constitute almost an equal percentage of the population
- Women make up nearly 40% of the workforce
- Women earn more college degrees than men
- Majority of the consumer decisions are made by women
Women form a significant percentage our customers, employees, owners, and community, and yet they are incredibly under-represented in the institution designed to guide the decisions that impact those very constituencies — the corporate board. However things have started to change as we can witness here in India as well as across the world.
While the new Companies Act 2013 has been a very proactive step in India mandating the quota to increase female representation on corporate boards, it is yet to be proven if it will keep pushing the percentage to a level where it is more equitable while talking about gender equality on the board. The associated risk with the regulatory mandate is that corporate governance experts are divided on whether quotas lead to tokenism and diminish the overall value of board diversity, or whether quotas have made a positive difference because they have elevated the urgency of addressing glaring gender disparities and force companies to act. In either case, a lot also depends on the business culture and environment of the market, country and the economy.
Globally several countries have taken initiatives to augment the Board representation for women, one such program is the International Women Directors project, to identify and place women in board positions, by building robust databases filled with suitable female candidates that companies can access as they search for new directors.
Other groups, such as Women Corporate Directors, a global membership organisation of female board members with 70 local chapters in more than 30 countries, are building broader networks, creating new communities of women who serve on boards. They are also gathering cohorts of female professionals, who are board-ready. Similarly 30% Club was launched in the UK with a goal of achieving a minimum of 30% women on FTSE-100 boards.
The most quoted refrain about women Directors is the restricted supply of potential women candidates. Boards often list out the requirement for candidates who have served on other boards and who are sitting CEOs of public companies. It becomes a "chicken and egg" issue since so few women are CEOs and hence they find it difficult to qualify for the Board positions, thus remain significantly under-represented on boards. Interestingly the situation looks different if you look at the senior leadership inside organizations.
If one considers the characteristics and skills needed for board positions, there really should not be a supply issue. These are common leadership characteristics and are possessed by a great many women who are CEOs of smaller public and private companies; roles such as CFOs; General Counsels; Audit partners; consulting and law partners; small-medium business owners; non-profit, academic, and public sector executives; risk management, compliance, and governance officers; and investment bankers, money managers, and other senior C-suite members.
While efforts have to be made at a regulatory level, more difficult to overcome than the supply challenge is the culture change required to cast a wider net beyond the familiar and the known while looking for Directors. This requires fighting age old traditions entrenched in the mindset in the society to accept women leaders.
The efforts also need to be supplemented by training. The research study by India Board Report has shown that women directors can benefit from Board training, working on enhancing their skills such as how to ensure that their voices are heard, in addition to gender-neutral training on the practical aspects of directorship, such as board operations, roles and responsibilities and relations with senior management. Board training for high potential women is a relatively new phenomenon where Companies are providing their nominee directors in-depth training so they are prepared for the job, the positive returns make up for this investment in no time.
In terms of other initiatives, there are many being taken up. One interesting program is to encourage corporations to replace every other retiring board director with a woman. Another innovative thought being proposed is the view that there should be least two women directors on a corporate board. Of the two, one should be an independent director. As having a single woman on the board puts a lot of unfair pressure on the individual, one more person will reduce that unnecessary pressure. Mr. Arun Duggal, a senior Independent Director puts it very clearly, “Being an individual from a different background isolates the person from the rest of the group. That issue of singling out goes away if there is more than one woman on board."
At the policy level, board diversity has moved to the forefront as well. The Organisation for Economic Development recently revised its Principles of Corporate Governance to include, for the first time, a reference to director diversity.
While it is true that female board candidates with CEO experience are relatively scarce, Boards should consider CXO level executives who run large businesses —a group that includes far more women. Someone who runs a big division of Hindustan Unilever or HDFC, will be not only as knowledgeable as a CEO but also more eager to take the Board assignment more seriously.
Research shows that diverse boards function better, maybe because they are a better representative of the customer demographics. As per a recent report by Academy of Management Journal, boards with Women Directors fared better on Corporate Governance and Board Effectiveness metrics.
Companies willing to introduce diversity on their boards, including gender diversity, should look beyond the small inner circle of friends and acquaintances in their personal network and instead consider equal or more competent women leaders who can bring in a fresh perspective, diverse thought and better understanding of the customer. To conclude, the lack of diversity on Boards isn’t so much about supply, as it is about the mindset that needs to be changed, it is more about demand!