First-time women directors will bring diversity and a fresh point of view to India Inc, argues Hiroo Mirchandani
The Companies Act, 2013, mandates that there must be at least one woman director at every company listed in India and also every public company with a paid-up share capital of ₹1 billion (US$16 million) and above or minimum turnover of ₹3 billion. This is intended to improve the representation of women on corporate boards in India, which currently stands at less than 6%.
Research has shown that companies with more women directors produce stronger business performance. Fortune 500 companies with more women directors have outperformed others on financial measures such as return on equity, sales and capital. It would be interesting to study if companies with more women directors listed on India’s leading stock exchanges outperform others too.
[ihc-hide-content ihc_mb_type=”show” ihc_mb_who=”3″ ihc_mb_template=”2″ ]
There is little denying that diverse views and perspectives lead to more balanced decision-making in any organization. Discussion and sometimes dissent lead to innovation and breakthrough solutions. While men and women can together leverage their inherent differences to deliver high standards of corporate governance, the increasing participation of women in the workforce can mean that women board members will highlight issues that may otherwise go unnoticed. Women are key consumers for many categories and the consumer insights they bring to decision-making can be valuable to boards too.
While the business case for women on boards is clear, one big question is how the demand for women directors will be met.
Many countries have used the strategy of patience in their efforts to make the boardroom more diverse. They have chosen to wait for women to be board-ready. Yet research by Catalyst, a non-profit organization that seeks to create more inclusive workplaces, shows there has been virtually no increase in women’s representation on corporate boards globally since 2007.
Hence the importance of the “Q” word: quotas. Norway, Belgium, France, Iceland, Italy, Spain, the Netherlands and several other countries have enacted legislation to set quotas for women on boards. Norway has mandated that 40% of board seats should be occupied by women and Sweden and Finland have set 30%. So, India’s recent legislation to require one woman on the board of a listed company may be considered inadequate and tokenism by some. But it is a good beginning.
Of the 50 companies that comprise the Nifty index of India’s National Stock Exchange (NSE), 32 have women directors though some of the big companies by market value have yet to appoint a woman board director. Axis Bank and Bharti Airtel have three women directors and the NSE itself has two including its CEO. But two-thirds of the 1,456 NSE-listed companies will need to appoint a woman director by October.
That there are few existing women directors and too many board positions to fill is a common refrain. Women directors with prior board experience are few (NSE-listed companies have less than 500) and the new SEBI rules regarding the number of board directorships allowed further restricts supply. To fulfil the requirement of women directors on boards, some companies will have to turn to talent pools of first-time directors.
With the 1 October deadline fast approaching, companies have started the search for woman directors. The prime targets will be women who currently hold board positions. Simultaneously, databases of potential women directors are being scanned and in some cases executive search firms are being engaged. There have also been industry initiatives like Women on Corporate Boards in India to groom potential women directors. But chances are that family and friends of a company’s promoters or existing board members will be tapped.
For some boards it may be about ticking the box, for others this is a great opportunity to augment their skill and knowledge gaps. Professional boards will seek specific skills, functional and domain knowledge along with cultural compatibility in the new directors they appoint.
A board position that I recently interviewed for had a clear articulation of the strengths it currently had on its board and the need gap that it proposed to fill through the new woman director appointment. This is encouraging.
A marriage of experience and freshness is necessary for boards to keep up with the requirements of a changing and volatile world. The financial and economic crisis, regulatory interventions, increased media, NGO and shareholder activism and technological changes especially in the digital world require solutions blending the best of the old with the new.
First-time women directors will bring the dual advantages of gender and relative youth to boards. Their fresh ideas and recent experiences will represent young India and its aspirations. So additional diversity in lieu of prior board experience could prove to be an advantage.
[/ihc-hide-content]
Hiroo Mirchandani has 30 years of experience in customer facing roles primarily in consumer goods and healthcare. She was a business unit director at Pfizer and held sales and marketing positions at Dabur, the World Gold Council and Asian Paints. She currently consults independently.
