India is nowhere close to inclusion of women in the corporate world. Though progress has been made, companies have marred the very spirit of the effort by taking the ‘family route’ up
The corporate landscape in India has long been dominated and characterised by men and is still skewed in their favour. In 2013, the archaic Companies Act 1956 underwent some much-needed amendments, which infused critical measures of gender equality into todays corporate scenario. Riding on these changes, the presence of women on corporate boards improved considerably from 4.9 per cent in 2013 to 13.7 per cent in 2017, which is a whopping 180 per cent increase. But the good news ends here. This spectacular progress of women power in corporate domain does not translate in absolute terms as it is still lower than the global average of 15 per cent and pales in front of the global successes achieved by developed nations.
Worldwide, gender diversity in boardrooms continues on an upward trajectory, although at different paces. According to the Credit Suisse analysis, Norway was the first country to introduce at least 40 per cent composition of women directors on boards in 2003 and has the highest percentage of women representation at 46.7 per cent in 2017. France, Sweden and the UK follow this closely at 34 per cent, 33.6 per cent and 20.3 per cent each. The biggest improvement in board diversity can be seen in western Europe, with an increase from eight per cent in women directors in 2004 to 26 per cent in 2016. Gender diversity in boards is relatively stunted in the US at 17 per cent, when compared to the European nations. Women presence in the corporate boardrooms sees a downward trend in Asian countries with China having eight per cent women presence, followed by Singapore at 7.9 per cent and Indonesia at six per cent. Male domination is acute with some of the biggest Asian businesses like Samsung, Softbank, Baidu and Hynix having all-male boards.
Appointing more women on boards have both tangible and intangible benefits for organisations and can be categorised into four sections: Financial performance; leveraging talent; reflecting marketplace and building reputation; and increasing innovation and group performance. Although previous studies have not given any conclusive evidence of better financial performance of firms with more women on board, a recent study by Morgan Stanley Capital International shows that having three women on a corporate board represents a “tipping point” in terms of influence, which is reflected in financial performance. US companies studied over a period of over five years from 2011-2016 showed median gains in Return on Equity (ROE) of 10 per cent and Earnings Per Share (EPS) of 37 per cent. In contrast, companies that began the period with no female directors experienced median changes of one percentage point in ROE and eight per cent in EPS over the study period. Another study in 2016 by researchers at Peterson Institute of International Economics also found a 15 per cent increase in the net revenue margin of companies where women constituted 30 per cent of the board size.
Greater women participation reduces collective or homogenous thinking, encourages diverse views and perspectives, and in the process enhances board independence. Women evaluate information differently, they have a capability to deal with risk effectively and have different insights into consumer behaviour when compared to men, particularly in industries where women are the primary purchasing agents and lead to improved decision-making.
After all, women drive 70-80 per cent of all consumers purchasing, through a combination of their buying power and influence. Additionally, women exhibit higher levels of trustworthiness and cooperation. Not only do they better address the concerns of customers, employees, shareholders, and the local community, but also, they tend to focus on long-term priorities, thus improving boardroom dynamics. Having at least one women director on board also has a significant contribution to corporate governance, with several studies showing increase in attendance to board meetings and improvement in corporate social responsibility ratings.
Women directors serve as role models and, therefore, improve female employees’ performance and boost the companies’ image and reputation. Several rating agencies and investment funds use the extent of gender diversity as one of their investment criteria. A study by BCG and Technical University of Munich found that the presence of women in management teams could increase innovation significantly.
Moreover, from the standpoint of public policy, gender diversity is an important social value and one that is consistent with equality. Not withstanding these benefits, women still find it hard to break the strong and invisible glass ceiling and 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. Closer home, nearly half of Indian women leave the workforce between junior and middle management levels due to lack of women-friendly corporate policies.
According to the Press Information Bureau, India has a large population of 30.5 crore (Census 2011), in the school going age of 6-18, which is more than 25 per cent of the total population. However, this is not getting translated to higher education for women with only 19.8 lakh ending up enrolling for postgraduate studies. Women who pursue a career are further filtered and only a handful of them reach the top. According to the database of National Stock Exchange, there are about 2,500 women directors, including 843 in independent roles. The need of the hour is an integrated effort by the Government and the private sector to increase the pool of women in workforce. The present Government is working at the grass root level to make sure that more young girls form a part of formal education system with proposed schools every five km and setting up departments at village level that will be responsible for maintaining the record of girls who attend school and the issues they face. lack of quality teachers is also a major concern that needs to be tackled to improve the pool of talent.
Once the pool is enlarged, the industry needs to take over and apply a dual strategy to achieve greater gender diversity. First, the top management must have a clear vision and change of mindsets to increase women participation on boards, not only in letter but also in spirit, with voluntary diversity targets and a crucial alignment between board composition and strategy.
Second, having established an enabling environment, competent and qualified women must be coached to take up leadership roles and rise up the corporate ladder. Corporates need to actively promote and engage in creating women leadership positions. lessons can be drawn from Sweden, which has produced the highest percentages of women CEOs and CFOs, both at 17 per cent. This will be possible by creating strong and sustainable leadership development programmes for women in middle and senior executive ranks to develop them for C-suite positions.
Meanwhile in India, in an impulsive reaction to the amendment of Companies Act 1956 in 2013 and just in the nick of the time before the expiry of deadline set by the Government, majority of business houses appointed women directors from their families. Although one cannot deny that these women are competent, understand their businesses threadbare and their incorporation into the board was long overdue, it still undermines the very spirit of the regulation to bring diversity to the board. Inclusion of women on boards should become an integrated strategy of business worldwide and in India, in particular and companies should focus on nurturing and developing women leaders from its own ranks. With the rich cultural heritage that we have, let the power of women or ‘Shakti’ contribute to making Indian businesses best in the world.
(The writer is Assistant Professor, Amity University)