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Diversity in boardrooms

The focus should be on more women at middle management levels

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Shyamal Majumdar
4 min read Last Updated : May 28 2020 | 10:15 PM IST
A report by Institutional In­vestor Advisory Services (IiAS) earlier this week bro­ught in some good news on diversity in Indian boardrooms. For example, the overall representation of women in company boards has in­creased to 17 per cent year-on-year, from just 6 per cent in March 2014. The report also demolished the conventional no­tion that women directors from the fa­mily are a popular choice for promoter businesses, and that while this is a good outcome for mothers, wives or daughters, it doesn’t improve board governance. 

Data provided by the proxy advisory firm show there are only 98 promoter women directors (16 per cent) in the Nifty 500 companies. Half of them are executive and are driving the company in a leadership capacity. This implies that a bulk of the women getting appointed to boards have professional experience and expertise.

The diversity move makes eminent business sense, too. A recent IMF study has found that firms with a larger share of women in senior positions have significantly higher return on assets (ROAs), and replacing one man by a woman in senior management or on the corporate board is associated with 8-13 basis points higher ROAs. In fact, companies in the MSCI World Index with strong female leadership (at least three women directors or female representation higher than country average) generated a return on equity (ROE) of 10.1 per cent versus 7.4 per cent for those without.

This is encouraging news for women professionals. But several challenges still exist — a key reason why only 16 per cent of independent directors in India are women compared to 34 per cent in the STOXX Europe 600 Index.  

One of the problems is the old boys’ club mindset that makes women directors feel shut out and stifled during board meetings. Routinely, women are still not thought of first as candidates unless a board is looking for gender diversity specifically. It is also a fact that women often have to be more qualified than men to be considered for directorships and seem to pay a higher personal price to become board members than men do.

Many say this problem isn’t restricted to India alone. Research in several countries indicate that the rise to the top is still daunting for women. The difficulties faced by the women directors are more complex than those of a generation ago. One is their skewed business experience. Women are prominent in top staff jobs, such as head of human resources, but still scarce in the line, or core-business, positions essential to the resume of any would-be CEO or board seat occupant.

One of the other key challenges is the pipeline: Since there are just not enough women professionals at middle management levels, the road to the top becomes that much more restricted. Studies have shown that India sees the maximum drop in women representation from junior to middle-level positions.

There are many reasons for this — a lot of women drop out of higher studies or their professional career because of marriage or motherhood. That’s the reason many women in their late twenties and early-thirties leave their careers since they find it difficult to do justice to both the roles — a factor that is cited by managements of many Indian companies to say that they don’t have any control over women’s decision to exit/re-enter the workforce. Flexible work policies or extended leave can, at best, be a minor enabler for those who possess career aspirations.

They have a point, but it’s equally true that women still face double standards and dead ends at the workplace. In senior positions, the unstated glass ceiling and warped mindset still exist across companies. How many times do women face sexist comments such as “what are you ladies gossiping about?” or “complaining about men again?”

In their ground-breaking book, What Works for Women at Work, Joan C Wi­lliams and Rachel Dempsey have divided modern-day gender-based roablocks into four categories: prove-it-again (men get the benefit of the doubt, while women have to keep confirming their expertise); the tightrope (the challenge of striking just the right balance between femininity and masculinity); the maternal wall (mothers are marginalised in the workplace); and the tug-of-war (competition among women over the best way to behave). There is thus no doubt that women still need to accomplish twice as much to get half as far as their male colleagues.

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Topics :women directorsIndian companies

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