On International Women’s Day each year, the usual suspects issue their press releases, noting the disadvantages that women face in the work place and how female quotas for company boards can be the magic medicine to deliver improved performance.
Corporate Affairs Minister Murli Deora obviously didn’t want to be left behind this year, and announced that companies with five or more members on their boards must have at least one woman director. The minister is dead serious; the provision will be incorporated in the new Companies Bill, expected to be tabled in Parliament next week.
However, the response from the constituency that Mr Deora sought to address wasn’t charitable. “Is feminism about the equal treatment of men and women, or the elimination of merit-based appointments?” was the response of the woman CEO of one of India’s largest financial services firm.
Her counterpart in a leading management consultancy said women’s appointments in such senior positions should not be seen as filling a quota rather than being made on the basis of merit. “Having female directors can’t be part of corporate social responsibility; we can do without such charity,” said another.
The consensus among senior women executives seems to be that while companies must identify and remove any barriers to female participation in senior roles, the government has no business telling companies how many women should sit on their boards because that extends way beyond any sensible boundary of corporate regulation.
Supporters of Mr Deora’s move say the move to improve gender diversity in Indian companies is in keeping with Europe-wide action on the issue. France and Spain have followed Norway in introducing quotas. German Chancellor Angela Merkel said last month that the country’s male dominated boardrooms were a “scandal”. Last month, a committee appointed by the British government gave the country’s 100 biggest companies five years to double the number of women on their boards from the current average level of 12.5 per cent to a quarter, or face mandatory quotas.
Mr Deora’s backers also say a legislation was long overdue as India Inc has been unfair giving women access in boardrooms. Only 5 per cent of board positions are held by women in India’s top 100 companies. Even this doesn’t give the true picture since most women CEOs (35 per cent) are from promoter families. If they are taken out of the equation, the number would drop drastically. This, a study by industry body Assocham showed, is far less than 15 per cent in Canada, 14.5 per cent in the US, 12 per cent in the UK, and 9 per cent in Hong Kong.
Quota supporters also say investing in women must be taken out of the realm of ideology and into the executive suite. But will a knife of quotas at your throat help in achieving this? The answer is “highly unlikely”.
There are many reasons for this. First, the assertion that companies with more female directors perform better than those with few or none is a mere perception. The truth is that no research worth its salt has been able to establish the truth of these assertions. For example, Norway was the first country to have a mandatory quota for women directors. But no one has ventured to claim that Norwegian companies have increased their profitability after five years of such quotas.
Also, a report by Egon Zehnder shows that Norway has no female executive board members (most of the positions filled by women in Norwegian companies are non-executive positions), compared with 6 per cent in the UK where no such quota exists as of now.
So, the worry is that even in India, board positions will be allocated to meet the quota, rather than to hire the best business talent available. Or, as another female CEO says, a quota will force an appointments committee to opt for candidates who are just seat-warmers.
Plus, availability of competent directors, irrespective of their sex, is a critical issue in India in any case, and a quota will only make things worse. The reason for fewer women directors has nothing to do with the absence of a mandatory quota and is more a social and cultural issue.
In his book Why Men Earn More author Warren Farrell says women make sacrifices at work in exchange for greater happiness in their lives as a whole. His book offers 25 reasons for a pay gap between men and women: Women work fewer hours, for example, and they don’t stay at jobs as long as men do. Whether it’s nature or socialisation driving their decisions, women tend to choose lives that allow them to spend more time with their families, Farrell contends.
Another view is that instead of wasting his time on quota in boardrooms, Mr Deora would do well to look at the broader problem. For example, an estimate by the US Population Division said India’s women labour participation rate is only higher than Fiji’s in a list of 14 Asia-Pacific nations. To put things in perspective, even countries like Bangladesh are far ahead of India.
