Gender diversity in boardrooms is picking up, though at a slower pace, with women accounting for nearly 18 per cent of the directorships in the top 500 NSE-listed companies at the end of March this year
Top 500 NSE-listed cos have 18 pc women directors in 2022 India
Gender diversity in boardrooms is picking up, though at a slower pace, with women accounting for nearly 18 per cent of the directorships in the top 500 NSE-listed companies at the end of March this year, according to a study.
In the study titled Corporate India Women on boards, proxy advisory firm Institutional Investor Advisory Services IiAS on Tuesday said that at a global level, boardroom diversity continues to improve with an average of almost 24 per cent female representation in corporate boardrooms.
Gender diversity in boardrooms is picking up, though at a slower pace, with women accounting for nearly 18 per cent of the directorships in the top 500 NSE-listed companies at the end of March this year, according to a study.
In the study titled ‘Corporate India: Women on boards’, proxy advisory firm Institutional Investor Advisory Services (IiAS) on Tuesday said that at a global level, boardroom diversity continues to improve with an average of almost 24 per cent female representation in corporate boardrooms. ”India also has progressed in appointing women on company boards; from 6 per cent in 2014 to 14 per cent five years ago. Women now account for 17.6 per cent of directorships of the Nifty-500 companies.
”Although the number of women directorships is increasing, the pace of new appointments has faltered with just an aggregate 1 per cent increase over the last three years. Based on these current rates, India will take till 2058 to achieve 30 per cent gender diversity on boards,” it said.
At the end of March this year, the Nifty-500 companies had 4,694 directorships, out of which 827 or 17.6 per cent were held by women.
According to the study — for which IiAS partnered with the Netherlands’ pension provider APG — Europe and North America sit above the global average, with women making up 34.4 per cent and 28.6 per cent of company boards, respectively. Country-wise, France leads the pack at 44.5 per cent women representation on boards in 2021.
”On 31 March 2022, 48.6 per cent of the Nifty-500 companies had two or more women directors on their boards. This is a rise from 45 per cent on 31 March 2021 and 44 per cent on 31 March 2020,” the study said.
As many as 159 companies had women representation in excess of 20 per cent of board composition, while this number was at 146 at the end of March 2021. The average age for women is 58.7 years (56 years in 2020) and that of their male colleagues is 62.3 years (61 years in 2020), showing that this age gap is slowly narrowing, the study noted.
As per the findings, women chair the boards of 22 Nifty-500 companies, while 25 women are CEOs and another 62-hold executive directorships.
”In aggregate, the Nifty-500 companies have 2,960 committees, for an average of 5.9 committees for each entity. 442 (14.9 per cent) of these are chaired by women and the remainder 2,518 by men,” it said.
Further, the study said that PSUs (public sector undertakings) continue to fare poorly on gender diversity, given that several of them do not comply with board composition norms prescribed by regulations.
Gender equality is one of the 17 Sustainable Development Goals (SDGs) set by the United Nations and the Securities and Exchange Board of India (Sebi) has also mandated the appointment of at least one independent woman director for the country’s top 1,000-listed companies by market capitalisation.
IiAS Managing Director Amit Tandon said, ”the approaching 2024 board refresh marking the end of the grandfathering of independent directors’ previous tenure, provides a unique opportunity to reset the pace of change, by appointing 30 per cent women on boards. ”Corporate India must take the opportunity to refresh the board and build in stronger gender diversity. For this, boards need to change their lens away from mere regulatory compliance, to think about women as a share of the aggregate board size. The target must be, at the very least, 30 per cent,” he said.
Need of Women Director
Every company needs to have minimum directors as specified by the Companies Act, 2013 (‘Act’). The directors play a crucial role in the management of the company. The Act introduced the concept of the appointment of two new directors, i.e. women directors and independent directors, to the Board of Directors (‘Board’) of a certain class of companies.
Section 149 of the Companies Act, 2013 and the Companies (Appointment and Qualifications of Directors) Rules, 2014 (‘Rules’) deal with the provisions relating to women and independent directors of a company.
Applicability of Woman Director
The second provision of Section 149(1) of the Act provides that a certain class of companies (as specified in the Rules) should at least have one woman director on its board. Rule 3 of Rules provides that the following certain class of companies must appoint at least one woman director on its board:
Every listed company.
Every other public company having:
Paid-up share capital of Rs.100 crore or more, or
Turnover of Rs.300 crore or more.
When a company fulfils the above two conditions, it must appoint a woman director to its board within six months of the condition fulfilment date. The paid-up share capital or turnover shall be considered as of the last date of the latest audited financial statements.
Appointment of Woman Director
The process to appoint a woman director is as follows:
The proposed woman director has to submit her consent to act as a director in the company in the prescribed Form DIR-2 and file intimation about her disqualification in Form DIR-8 to the company.
The company should conduct a general meeting and obtain the shareholders’ approval for the appointment of the woman director through a resolution.
In the case of listed companies, it must disclose the general meeting proceedings to the stock exchange before 24 hours from the general meeting conclusion and also post it on its website within two working days.
After the appointment of the woman director by passing a resolution in the general meeting, the company should file the following forms with the ROC:
Form MGT-14 within 30 days of passing the resolution of appointment in the general meeting.
Form DIR-12 regarding the particulars of the appointment of a woman director within 30 days of such appointment.
The company should make the required entries in the director and key managerial personnel register and the register of contracts in which the woman director is interested in the Form MBP-4.
The company board should fill up any intermittent vacancy of a woman director before three months from the date of vacancy or the next board meeting, whichever is earlier. A woman director can be a non-executive director or an executive director.
Tenure of Woman Directors
The tenure of the appointment of a woman director is till the next Annual General Meeting (AGM) from the date of appointment. She is entitled to a re-appointment at the general meeting. However, the tenure of a woman director is liable to retirement by rotation as per Section 152(6) of the Act as applicable to other directors. She can also resign at any time by giving notice to the company.
Penalty for Non-Compliance of Appointment of Woman Director
No specific penalty is prescribed under the Act for the non-appointment of a woman director. Thus, the penalty under Section 172 of the Act applies in case of non-compliance regarding the appointment of a woman director. Section 172 of the Act lays down that the company and every officer in default will be punished with a fine that shall not be less than Rs.50,000 but may extend up to Rs.5,00,000.
Applicability of Independent Directors
Section 149(6) of the Act introduces the concept of independent directors. Rule 4(1) of the Rules states that the following companies should have at least two directors as independent directors:
Every public company having:
Turnover of more than Rs.100 crore, or
Paid-up share capital of more than Rs.10 crore, or
In aggregate, outstanding borrowings, loans, debentures or deposits exceed Rs.50 crore or more.
When a company is required to appoint a higher number of independent directors because of the composition of its audit committee, then such a higher number of independent directors will be applicable. The turnover, paid-up share capital, or outstanding debentures, loans and deposits shall be considered as of the last date of the latest audited financial statements.
Appointment of Independent Directors
The procedure of appointment of the independent directors are as follows:
The company must issue a notice of the general meeting to all shareholders with an explanatory statement annexed to the general meeting notice to consider the appointment and indicate the justification for choosing the person to be appointed as an independent director.
The company must conduct a general meeting and pass a resolution for the appointment of independent directors.
In the case of listed companies, it must disclose the general meeting proceedings to the stock exchange before 24 hours from the general meeting conclusion and also post it on its website within two working days.
After the appointment of the independent directors by passing a resolution in the general meeting, the company should file the following forms with the ROC:
Form MGT-14 within 30 days of passing the resolution of appointment in the general meeting.
Form DIR-12 regarding the particulars of the appointment of an independent director within 30 days of such appointment.
The board should fill any intermittent vacancy of an independent director before three months from the date of vacancy or the next board meeting, whichever is earlier.
Exemption For Appointment of Independent Directors
Rule 4(2) of the Rules exempts certain unlisted public companies from appointing an independent director that has fulfilled the criteria mentioned in Rule 4(1) of the Rules. The following classes of unlisted public companies need not appoint independent directors:
A joint venture.
A wholly-owned subsidiary.
Dormant company defined under Section 455 of the Act.
Tenure of Independent Directors
As per Section 149(10) and 149(11) of the Act, an independent director can be appointed for a term of five years. An independent director can also be re-appointed for another five-year term after passing a special resolution in the general meeting. However, such re-appointment can happen only after the entire board does the performance evaluation.
An independent director cannot hold the director’s office for more than two consecutive terms. However, an independent director can be re-appointed in the same company after three years of completing two consecutive terms. An independent director can also be appointed for a term of less than five years. But, any appointment of five or less than five years will be regarded as one term.
Penalty for Non–Compliance of Appointment of Independent Directors
No specific penalty is prescribed under the Act for the non-appointment of an independent director. Thus, the penalty under Section 172 of the Act applies in case of non-compliance regarding the appointment of an independent director. Section 172 of the Act lays down that the company and every officer in default will be punished with a fine that shall not be less than Rs.50,000 but may extend up to Rs.5,00,000.
Disclaimer: The materials provided herein are solely for information purposes. No attorney-client relationship is created when you access or use the site or the materials. The information presented on this site does not constitute legal or professional advice and should not be relied upon for such purposes or used as a substitute for legal advice from an attorney licensed in your state.
