Why women need greater representation in corporate boardroom
‘Women in the Boardroom: A Global Perspective’ a survey conducted by The Deloitte Global Centre for Corporate Governance, categorically notes that support for boardroom gender diversity is spreading in many regions, although support has come more from governments and regulators rather than from shareholders. The much awaited Companies Bill 2012, which got its nod from the Rajya Sabha on August 8, 2013 in a few of its provisions resonates what the study has found. The Bill divided into 29 chapters, 470 clauses and 7 schedules; in one of its clauses makes it mandatory for company boards to have a woman representative, something that will give a greater representation to women in corporate decision-making. Unquestionably, the move is more in sync with the requirements of the corporate world in a globalised environment.
A look at the state of representation of women in corporate boardroom makes all the more sense. Industry body Assocham in a study titled 'Corporate Women: Close the Gender Gap and Dream Big' has noted that out of 1,112 directorships of 100 companies listed on the Bombay Stock Exchange, only 59 positions -- or 5.3 per cent -- are held by women. Further, Deloitte’s November 2011 report, ‘Women in the Boardroom: A Global Perspective’ too has a similar observation. Well, India’s biggest competitor, China at 8.5 per cent had more women in the boardroom.A study, ‘Board Diversity in India’ conducted by Hyderabad-based The Institute of Public Enterprise makes an interesting observation – none of the boards of Sensex companies is led by a woman. The study further notes that, of the women directors 50% are independent directors. This makes India 38th in the world in terms of women representation on boards.
As per McKinsey & Co’s report titled, ‘Women Matters’ companies in Asia’s leading economies have ‘strikingly’ few women in senior jobs, thereby missing out on a vital pool of talent to fuel the regions’ growth. According to the report in India women’s representation on boards and executive committees are 5 per cent and 3 per cent respectively (lower than that of China which has the representation at 8% and 9%). However, despite low women representation at senior level, gender diversity is not yet high on the strategic agenda for most companies. While over 500 companies have signed on to the global WEPs (Women’s Empowerment Principles) across the world, in India, only six of an estimated nine lakh-registered companies have committed to the WEP principles. It will be interesting to note that the new Companies Bill making provisions for appointing women to top positions by setting targets and benchmark will actually make any difference in the mindsets of corporate in the years to come. For records, women now hold 17.1% of the boardroom seats of the Fortune 500, according to the latest 2020 Women on Boards Gender Diversity Index released in October 2012.
A recent research from the Credit Suisse Research Institute indicates that companies with more women on their boards outperform those with fewer or no female directors. For instance, Credit Suisse found that net income growth over the past six years averaged 14% for companies with women directors compared to 10% for those with no female board members. Reasons enough that India Inc makes for the opportunity cost.
Is availability of talent a problem? Perhaps not, there are several qualified women out there. The problem perhaps lies in the process of identifying and grooming potential women directors; it is not a structured or formal one. It is cliché that the talent management process must work toward developing the required skills and competencies and create a pipeline of potential women directors – but somehow there has been a failure to identify talent pool and prepare them for serving on boards.
Can this be tackled, and if so how?Will not the government’s mandatory norm be counterproductive, in the sense that entry standards would have to be lowered?
The nomination committee needs to take lead in answering these set of questions. It can do so by either spending money and advertising or seeking the services of executive search firms to systematically create a database from which to choose. A more structured and formal search process coupled with the government’s norm would certainly see more women representation on corporate boards without jeopardizing the entry standards.