Amita V Joseph
Director, Business & Community Foundation
“Investors may see value in having women on the board as an indication of forward planning and future value in a globalising world”
The lack of access for women to corporate boardrooms is an international trend and the discussions on the need for balanced gender representation go back over a quarter century. Questions have not been asked about how men on boards have performed if corporate scams that have surfaced over the years are blamed on “governance issues and ethics” and the “black box of the boardroom”. “Where was Lehman’s Board?” screamed the headlines after the investment bank’s collapse. Closer home, scrutiny has turned to the composition of boards, the role of independent directors and so on. Some reflection should also be focused on what today’s complex business environment requires. A large number of stakeholders, including civil society, demand that their voices be heard.
Corporate boards have been meeting places where elite, societal and business interests of the “old boys’ network” are promoted. While the “invisible glass ceiling” hinders women from getting on to board and management positions across the world, a relatively high number of women directors are found in Norway and the UK. But their numbers are low in the Netherlands, Greece, Italy, Belgium, Portugal, India, China and West Asia. In 2002, a law was proposed by the Norwegian Parliament that boards of all ASA incorporated firms (the Norwegian term for a public limited company) should have a gender balance, with each gender having at least 40 per cent representation.
The enforcement began in 2008 but by then most firms had met the requirement. The law in Norway has achieved much when other initiatives have failed; the number of women on boards has increased tremendously from six per cent in 2002 to 40 per cent in 2008. Data from Norway also indicate a positive relationship between women directors and board tasks of a qualitative nature including strategy and CSR-oriented policies. In Spain, the equality law of 2007 specified that all firms with more than 250 employees must develop gender equality plans. Balanced representation means that, within eight years, the boards of directors should have 40 per cent of the least represented gender. However, we need to ask: who are the women who would be elected, what are their educational background and experience, what is the process of selection and who will they represent? Will class and gender stereotypes be reinforced, especially in India? Many professionally qualified women would not want to be selected as a gesture of tokenism. In most countries, the number of women in top management positions is lower than those on boards, though boardrooms can become recruiting grounds for CEO positions.
Three main factors emerge in this debate: the size of the firm, the industry and governance systems at work, the societal arguments and business case for having women directors. The societal case is about justice in society, democracy, participation, gender equality and so on. The main business case is on the issue of diversity, which is important for board effectiveness. However, this is influenced by the national and institutional context of the firm. Diversity certainly contributes to long-term shareholder value but is, in itself, not enough unless it influences board tasks.
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Investors may also see value in having women on the board as an indication of forward planning and future value in a globalising world where sensitivity to different outcomes is essential for long-term survival. Women are making decisions on purchases and women directors could add value to the board in their role as customers. However, if there is no critical mass, “the glass cliff” would make it difficult for a lone woman director to be taken seriously.
It is clear from a review of women directors across 43 countries, conducted by Siri Terjesen, Ruth Sealy and Val Singh, that women play an influential role in corporate boards, but there are barriers to their access to such posts. Where boards do include women, there is evidence that corporate governance improves. The independent director required could, in fact, be a woman! The non-profit sector in India has performed fairly well with regard to representation of women directors and CEOs, though this cannot be said of the boardrooms of the public and private sectors.
MD & CEO, Ma Foi Randstad
“Merely increasing the presence of women in the board is not enough to increase the effectiveness of women’s participation in decision-making”
The business case for having a diversified workforce and a diversified corporate board has become so strong today that companies voluntarily ask staffing agencies like us to look for more women to fill their entry, middle and senior management roles. It is also evident that the percentage of women candidates present in large private companies has been on the rise. In services sectors such as information technology, retail, hospitality and finance, at least one-third of the workforce, on average, is represented by women.
In its recent report titled, “Corporate Women: Close the Gender Gap and Dream Big”, the Associated Chambers of Commerce and Industry of India (Assocham) found that thanks to the opening up of the Indian economy, the increased role of the private sector and the growing presence of multinationals, there has been a rise in the number of women managers and entrepreneurs in the corporate sector. Over 10 per cent of India’s CEOs – again, mainly from the services sector – are women. Many companies in the banking and financial services sector, such as ICICI, Axis, JPMorgan Chase and HSBC, are represented by women at the top. This is the case in many other sectors too.
In my view, the voluntary promotion of women in the workforce and management is taking place because of a societal transformation in the country. Till the early 1980s, the number of women with a Bachelor’s degree in engineering was negligible — roughly less than one per cent to about 1.5 per cent through the seventies and early eighties. However, this percentage increased dramatically after the nineties, representing a hundredfold increase! Women now make up 42 per cent of India’s college graduates and account for 44 per cent of degrees in the sciences and 25 per cent in business administration, management or commerce.
So here is the business case for promoting women on corporate boards: companies can fill vacancies with untapped women talent. Also, a diversified board simply helps companies take more inclusive business decisions that also benefit the interests of external stakeholders. But in my opinion, stipulating a quota is certainly not the right way to promote women’s participation in senior levels in corporations. The introduction of such quotas may certainly increase the level of women’s participation in the boardroom, but it will also lead to malpractices. There is a danger that to meet the quota, boards will be filled with women purely by virtue of being either related or known to the promoters rather than through merit. Some notable examples that we have seen are of such women who are fostered for electoral candidature in certain states in our country. Norway has been widely celebrated for being the first country to introduce gender-based quotas for corporate boards in 2003. But a university study found that this stipulation forced companies to appoint inexperienced women to their boards, with the result that many of those companies ended up turning in poor financial performance.
Another aspect is that merely increasing the presence of women in corporate boards is not enough to increase the effectiveness of women’s participation in decision-making. Surveys show that only about 50 per cent of women graduates of top business schools are still in the workforce, and over 40 per cent of those who are in the workforce have taken breaks owing to many familial responsibilities. This shows that intervention should take place in the areas of income disparity and in introducing sensible maternity, paternity and parental leave policies, day-care support and prevention of gender-based discrimination at workplaces.
Such a wide-ranging approach to improving the participation of women in corporate boards can be best achieved by voluntary actions. And governments should only facilitate corporate initiatives to tackle boardroom gender imbalance by enacting or ensuring that the labour laws are gender-neutral in the spheres of human capital, labour markets and entrepreneurship. The country today has a vast talent pool of women, who are competitive and are reaching senior positions by virtue of their own merit. So such measures will ensure that deserving women reach top positions that are rightfully theirs.