Women managers: India lags major regional peers, ESG scores risk impact

Other countries also have higher gender diversity on company boards, says BofA Securities report

There are fewer women in decision-making roles in Indian companies than seen in other countries from the Asia-Pacific region.

This can have a bearing on key financials as well as environmental, social and governance (ESG) scores, suggested a report. Indian companies had 11 per cent representation of women in management roles, and 18 per cent representation on their boards, according to data from financial services major BofA Securities. The numbers are part of the March 4 ‘ESG Matters-Global’ report authored by a team including research analyst Kay Hope, quant strategist Girish Nair and others; ahead of international women’s day on March 8.

“Women in management has increased more slowly than women on boards, by 22 per cent in just over a decade. The figure has stalled at about 25 per cent since 2018; the fastest progress was in 2014-2018,” it said.

The report added that safety concerns and lack of transportation facilities can make it harder for women to join the urban workforce in India.

A separate BofA Securities report which dealt specifically with the Asia Pacific region (ESG Matters – Asia Pacific) noted that more diversity can improve company performance.

“In Asia, higher female representation in management provides the most meaningful results, positively impacting profitability, efficiency and innovation. Since 2010, stocks with higher female representation in management have outperformed stocks with lesser representation by 26 per cent on a 3-year basis. On average, these stocks have a higher ROE (13 per cent vs 11 per cent), incur a lower cost of capital (7 per cent vs 9 per cent), invest 50 per cent more in R&D, and have relatively attractive ESG ratings,” said the March 7 report authored by quant strategist Girish Nair, research analyst Matty Zhao, and equity and quant strategist Savita Subramanian.

Stocks with more women employees have outperformed those with poorer representation by around 8 per cent on average on a 3-year basis, according to the report. They enjoyed 2.5 per cent lower cost of capital over the last ten years and a higher ESG rating, according to the report.

India’s board representation had been lower before the stock market regulator required companies to have more women on their boards.

“...board of directors shall have an optimum combination of executive and non-executive directors with at least one woman director...” according to the Securities and Exchange Board of India’s listing regulations discussed in a board meeting in 2014.

The proportion of women who are part of the labour force in India has been dropping. Around 32 per cent of the female population who were 15 or more years old were economically active in 2005, according to World Bank data. This dropped 19 per cent in 2020.

The International Labour Organisation (ILO) had in an earlier report noted that there were multiple reasons for lower participation of women in India. There are more opportunities for women in terms of access to education. But economic growth didn’t necessarily result in large-scale job creation for sectors that could readily absorb women employees, especially in rural areas. There is also the fact that many women drop out as household income increases with women’s working no longer seen to be necessary if the male members of the household are seen to earn enough to meet the family’s financial requirements.  

A July 19, 2021 ILO note mentioned that the Covid-19 pandemic had further affected women’s participation in the workforce.

“...women have suffered disproportionate job and income losses because of their over-representation in the hardest-hit sectors, such as accommodation and food services, and the manufacturing sector....Globally, between 2019 and 2020, women’s employment declined by 4.2 per cent, representing a drop of 54 million jobs, while men’s employment declined by 3 per cent, or 60 million jobs,” it said.

The report noted that there will be 13 million fewer women employed in 2021 compared to 2019, even as employment among men will have recovered to 2019 levels.