Gender diversity on Indian boards: 20% by 2020

This is an achievable goal. Now, corporate India should build on the progress that has been made

Gender diversity remains high on the agenda of regulators across the globe, yet its merits are constantly being debated. The case for more women on boards rests on the principles of equality of treatment. Its advocates argue that they are not seeking equality for the sake of equality, but that female representation brings a different perspective to boardroom discussions. A woman’s intuition and her more collaborative style are just what are needed in corporate boardrooms. Their arguments are bolstered by a growing body of academic evidence linking gender diversity and financial performance —although there is an equally long body of research asserting that this is just not true.

Despite India Inc’s initial hostility — and I don’t think this word is misplaced — India adopted legislation to promote diversity at the board level, through the enactment of the Companies Act, 2013. The Act mandated that companies have at least one woman director in the boardroom and three years in which to take stock regarding its progress. 

The legislative push seems to be working. Data according to a recent report (“Corporate India: Women on Boards”) released this month by Ajay Tyagi, chairman of Securities and Exchange Board of India, finds female representation in the NIFTY 500, which was at five per cent on March 31, 2012, and six per cent on March 31, 2014 (around the time when the legislation was enacted), has more than doubled to 13 per cent by March 31, 2017.

Three other data points need to be highlighted:
 

Only 15 of the 500 companies did not have a woman director on the board on March 31, 2017, showing high levels of compliance. As with most capital market regulations, here, too, public sector undertakings trail the private sector, as 11 of the 15 non-compliant companies are from the public sector. These companies cited that the appointment process is delayed/stalled due to pending approvals from the relevant ministry.

One hundred and seven companies have more than one woman director on their boards, with four companies (UltraTech Cement Limited, Cipla Limited, Apollo Hospitals Enterprise Limited and Idea Cellular Limited) having four women directors on their board on March 31, 2017. If companies and groups as socially conservative as Cipla and the Aditya Birla Group can have four women directors, it augurs well for the future of this legislation. 

The report finds that 60 per cent of women directors are independent. This should correct a popular perception that has gained ground, namely that most of the women directors appointed are from the promoter family and have been brought in to comply with the regulations. This does not seem to be the case. 

Having achieved all this, how do we build from here?

The report offers two suggestions, but calls for a debate on both of them. The first one is that one woman director should make way for at least one independent woman director; the second, that by 2020, women directors should comprise 20 per cent of board members.

Having a woman director on a board’s appointment and remuneration committee is a good starting point. For one thing, it will widen the pool from which directors are appointed. The 20 per cent requirement is not a tough ask, given the maths. If corporate India has at least one independent director, it will bring the number of women directors to 18 per cent. From here, to reach 20 per cent is manageable.

The pushback to achieving the above goals is likely to be that it is impossible to find women directors. This is the hole that Women on Corporate Boards  Mentorship Program has been formed to fill. Founded by Arun Duggal and Anjali Bansal in 2013, the programme is under the aegis of FICCI and at present is being chaired by Sudha Pillai, former member secretary, Planning Commission. 

The programme aims to enhance gender balance on corporate boards through capacity building. Under this programme, experienced directors, corporate leaders and senior professionals coach and mentor qualified women to take up board positions. Applicants have diverse backgrounds — lawyers, accountants, management practitioners — and go through a meticulous screening process. This programme is currently in its fourth year and its participants currently serve on 150 boards, some of them as committee chairs. 

I caught up with Duggal to talk about the programme. The most important part of the mentorship programme he says “is the interaction in four to six sessions of 60 to 90 minutes each between the mentor and the mentee. 

In these sessions the knowledge, experience and wisdom of the mentor in board functioning and corporate governance are shared with the mentee. 

It is like a discussion between a professor and a PhD candidate under a doctoral programme”. 

India is the first country to have mandated having a woman director on the board. For the most part, companies  had to be pushed into complying with the law, but as with board evaluation and corporate social responsibility — which I have written about earlier — they have put their heads down and adopted this, some of them wholeheartedly. The two recommendations: 20 per cent of women on boards by 2020 and at least one independent woman director are achievable medium-term goals. Corporate India now needs to build on the progress already made, and commit itself to these.

The author is founder and managing director, Institutional Investor Advisory Service India Limited. Twitter: @amittandon_in