Article: The elephant in the boardroom: A diversity issue

Leadership

The elephant in the boardroom: A diversity issue

With organizations pushing for a diverse workforce, a recent study sheds light in the contrasting perception of Directors when it comes to having a gender balanced board of directors.
The elephant in the boardroom: A diversity issue
 

A small talent pool, an inability to retain women employees for top jobs and diversity not being a top priority in board recruitment are the most common arguments used to justify the lack of female board directors

 

The board of directors plays a huge role in the growth story of a company. Given the strategic role of a board, a closer look at its composition across sectors raises some serious questions on the accessibility of board positions to women. In a recent study done by a the global recruitment tendering platform, MyHiringClub.com put India in the 26th position globally in terms of having women members as part of company's board of directors. The total composition of women in the board of directors remains at 7 percent. This low proportion is something that India has been able to manage after statutory warnings from the SEBI last year. This is after the Companies Act of India of 2013 lay down explicit guidelines for qualifying companies to have mandatory appointments of women to the board of directors.  

SEBI had given all companies a deadline of 31st March 2015 to appoint at least one female person as a member of the board of directors, later extending the time limit to June 2015.  But out of the publicly listed companies only 1,470 women directorship positions out of the total 11,917 - or just 12.3% have been filled as yet. And out of the appointments made most are simply tokenistic in nature; last moment measures taken to avoid penalties. And the reasons remain the same. A small talent pool, an inability to retain women employees for top jobs and diversity not being a top priority in board recruitment are the most common arguments used to justify the lack of female board directors.

A small talent pipeline?

One of the most common reasons attributed to the lack of women leadership visible in our corporations today is the small pipeline of talented women leaders who ready to take up the top job. A joint study done by researchers from Harvard Business School in partnership with WomenCorporateDirectors Foundation and executive recruiting firm Spencer Stuart on the prevalent reasons behind the low representation of women on the board of directors mentions that the most common reason according to senior male directors was the lack of availability of quality female candidates for the job. But factors that lead to a small pipeline are more systemic than what they appear at first sight. 

In contrast to the opinions of their male counterparts,  most women directors interviewed in the report state that isn't the lack of quality talent which hampers the selection of women but rather that the traditional network of sourcing candidates tend to be male dominated. There are plenty of qualified women out there. The problem stems from the fact that many of the men who are doing the hiring don’t actually know any. This problem is further compounded when companies insist on hiring new employees through existing social networks, as this reduces the chances of the board to actually diversify. In order to tackle this inherent barrier of the sourcing mechanism, women are using the executive search and recruitment firms to be noticed. The report finds that although male directors have a higher chance of being appointed by a major shareholder, female directors have a higher chance of being selected through executive search firms.

But this case is for women who have been able to reach top leadership roles. Charting the journey of a female employee right from the entry level portfolio till the top leadership opportunity availed by women, one finds a significant drop in the total number of women who complete the journey. In a Quartz India report, Sashi Irde, Executive Director of Catalyst India pointed out how women are filling jobs at entry level but this percentage has had a sluggish growth when it comes to the number of women in leadership roles. According to Irde, even if women start as equals, a gender gap emerges over time and they end up lagging significantly behind their male counterparts. Such practices lead to a creation of a male dominated workforce, which further reinforces the notion of men being more productive, which is far from the ideal situation. Without structural enablers in place, organizations often end up losing a significant chunk of their good talent.

Diversity not a top priority in most companies 

Although most corporates have dedicated themselves towards increasing the gender parity within their companies, there still exist inherent biases when it comes to the appointment of women to the board of directors. About 69 percent of the total women directors between the age group of 56-60 interviewed for the WomenCorporateDirectors Foundation agreed to the organization not prioritizing diversity when it comes to the board composition while only 16 percent of their male counterparts shared a similar understanding. There also exists a divide in the preference of a fixed quota for women within the board of directors. About 49 percent of the total women directors interviewed said they were in favor of having a fixed quota of women directors in place to promote the appointment of women directors and to create a structured way of diversifying boards of organizations. In contrast to this, only 9 percent of the total male counterparts who were interviewed gave a positive response towards having a quota system to improve gender imbalances within the boardroom. This trend was best reflected in the tokenistic manner of the companies treating the recent SEBI guidelines of appointing at least one women director.  

This also is the result of having a male dominated top leadership that most companies face today.  Due to the biases present, both conscious and unconscious bias, the probability of objectively looking at a candidate goes down significantly. Explaining the concept to the Financial Times, Estelle James, director of recruiters Robert Half, says: “People may not realize they are hiring individuals who possess traits similar to their own – it is human nature. In so doing, however, they may be creating a homogeneous working environment of employees with similar profiles and personalities." It, therefore, becomes important to have structures and processes in place that helps leaders reduce the scope of subjective preference of the candidate.  If companies are to attract and retain the best talent, irrespective of their gender, they need processes and systems to ensure diversity. And senior leaders need to be held accountable for doing their part. 

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Topics: Leadership, Diversity, Culture

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