Proper steps need to be taken to ensure that the human capital of women is recognised and they are not absent from corporate boardrooms or being used as tokens when they are present there
Worldwide, gender diversity in the boardrooms is on the rise, as appointing women in leadership roles has tangible and intangible gains for businesses. These benefits can be categorised into four sections: Financial performance; leveraging talent; reflecting the marketplace and building reputation; increasing innovation and group performance.
Women evaluate information differently, have a capability to deal with risk effectively and have different insights into consumer behaviour when compared to men. This is particularly true of industries where women are the primary purchasing agents and their perspective leads to improved decision-making.
After all, women drive 70-80 per cent of all consumer purchases through their buying power and influence. In addition, women exhibit higher levels of trustworthiness and cooperation. Not only do they better address the concerns of customers, employees, shareholders and the local community, they also tend to focus on long-term priorities, thus improving boardroom dynamics. Having at least one women director on board makes a significant contribution to corporate governance, with several studies showing increase in attendance at meetings and improvement in Corporate Social Responsibility ratings.
Apart from this, women directors serve as role models and therefore, improve female employees’ performance and boost the firms’ image and reputation. Several rating agencies and investment funds use the extent of gender diversity as one of their investment criteria. A study by Boston Consulting Group and Technical University of Munich also found that presence of women in management teams can increase innovation significantly.
Finally, from the standpoint of public policy, gender diversity is an important social value and one that is consistent with equality. Notwithstanding these benefits, women still find it hard to reach the top. Globally, one-third of businesses still do not have women in senior management roles. At this pace, women will not reach parity with men until 2060.
In its most literal form, diversity is defined as “differences” and it becomes a purposeful, strategic direction once these differences are valued. On boards, diversity brings together individuals with different backgrounds and a number of benefits, including new ideas, better communication, debate and corporate governance processes. Studies have shown that compared to homogeneous groups, diverse groups exhibit increased information search and a greater range of perspectives. Further, they generate more alternative solutions to problems.
Understanding the importance and relevance of promoting gender diversity in the true sense in Indian corporate boards, it is critical to evaluate what it takes to reach the board, that is, the human and social capital that help women reach apex positions. Gender diversity in the boardroom is an issue that has received increased attention both in academia and in the popular Press during the last decade. Studies concerning the practice have been conducted in a number of countries, including the United States (US), Canada, the United Kingdom (UK), France, New Zealand, Australia, Spain, Jordan, Tunisia, Denmark, Iceland and Norway.
From a resource perspective, the board members’ contributions are typically based on their human capital which can be defined as a combination of human resources, i.e. the knowledge and skills embodied in people, acquired over a number of years and the outcomes of the development of these human resources, through career experience, learning and specialisation. Each director brings a unique set of human capital resources to the board. Research on top management teams shows that managers’ pre-existing knowledge systems and repertoire of skills are derived from prior professional experiences, which help explain and predict managerial inclinations, strategic choices, biases, and accomplishments.
Here are some of the variables: Director education and experience: Human capital investment in education and particularly advanced education is a starting point for development of independent thinking, a key facet of role requirements for non-executive directors. It is evident that minority groups can gain public and objective credentials through education, particularly postgraduate qualifications, thereby levelling the playing field and compensating for the effects of any discrimination and subjective bias in selection and promotion. Educational qualifications are valued by the public and employers can then benefit from the expertise and credibility of the educational human capital of their staff and directors.
Reputation: Reputation is associated with human capital derived from investments in education and other visible individual attributes that stand as proxies for the actual capabilities of the person. Individuals gaining directorships are likely to have acquired reputational capital that signals competence and reduced risk to the beholders who use their social networks to select and appoint new directors. A noticeable factor in the profile of women directors in the Financial Times Stock Exchange 100 since the 1980s is that significantly more women than men, have titles, whether academic, aristocratic, civic or political. There is also a preference in the US for “branded women” directors, including those with a degree from Ivy League universities, which signals upper-class status to senior managers. The same could be said for the reputational capital value of degrees from Oxford and Cambridge universities in the UK, which are well-represented in the higher echelons of business and Government. Another facet of reputational capital is the extent to which directors appear in the Press and in directories of well-known people. As role models, these high-profile women often make speeches or are featured in the Press, so their names are likely to be picked up by internet search engines such as Google.
Previous experience: Previously, women were more likely to work part-time or to settle for lower paid but convenient jobs, and hence would be less likely to participate in on-the-job training for more senior roles, as neither they nor their employers would gain a reasonable return on the investment in training. But in recent times, women have invested in education, and adopted a lifetime work pattern similar to that of men. So today’s women workers are acquiring more senior-level experience than did previous generations and inequalities such as the gender pay gap are reducing, albeit slowly.
Hence all directors are expected to have successful and relevant career experiences in their sectors and professions before their appointment. However, given that women are often more attracted to public and not-for-profit sector careers, it is also expected that women directors’ work experience human capital would be biased in favour of those sectors, in contrast to their male peers. The human capital of women directors could also be different from their male peers in terms of professional background, with more male directors with career experience in traditional “masculine” sectors where men comprise the majority of those employed, such as engineering and science.
International work experience: Given recent trends in globalisation and the increasing numbers of cross-national mergers and acquisitions of many large corporations, it is expected that international experience will play an increasingly important role as directors are being asked to monitor, govern and advise on corporate activities and opportunities across a range of countries and different national and business cultures.
International experience is regarded as highly developmental as it builds on and integrates other related human capital management experience acquired in the home environment. However, it may be more difficult or less attractive for women to acquire this form of human capital as traditionally men are more internationally geographically mobile than women.
Human capital theory leads us to expect that directors’ appointments are based, in part, on the human capital (knowledge, skills, experience) they can provide to the firms. Women have been present in the full-time workforce for many years now. Hence, proper steps need to be taken to ensure that women are not absent from corporate boardrooms and are not being used as tokens when they are present there. We need to question ourselves to examine if women have failed to accumulate sufficient relevant human capital? If not, then what steps are being taken to encourage their growth and development in an organisation and make them acquire relevant experience to be on boards and contribute meaningfully?
(The writer is Assistant Professor, Amity University)
