Time for More Women Directors on Companies’ Boards: Report

Times of India Report

It has reported that, globally, the buzz about the need for gender diversity in the board rooms is getting louder and India is no exception. The Companies Bill, 2011, prescribes that ‘certain’ categories of companies must have at least one woman director on their boards. Perhaps, large listed companies will be required to comply with the new norm.

It appears that the woman director can be an executive full time working director, a non-executive director or even an independent director — which means meeting independence criteria. This rules out the appointment of promoter’s women relatives or professionals whose firm garners more than a specified amount of fees from the company.

Views are divided on the quota regime for women directors. To prevent misuse, further rules will need to be set regarding qualifications, experience, et al, goes one strong argument against the quota regime. While some countries have opted for recommendatory guidelines, EU countries have largely opted for mandatory quotas.

“Any change which is brought about voluntarily is more effective and long lasting. However, when such change is not forthcoming and glass ceilings act as an impediment, mandatory steps by legislation may become unavoidable.

While there is no real dearth of talent pool, India, comparatively , has significantly a very low percentage of women representation on boards. Thus, either a mandatory quota prescribed by the Companies Act, or a recommendatory provision in the Listing Agreement, even if for a certain number of years, will help foster a positive change. But, in a bid to achieve gender parity, there must be no compromise on quality,” says Preeti Mehta, partner of law firm Kanga & Co.

No one doubts the importance of diversity in boardrooms, especially in improving corporate governance. “Women lay a lot of emphasis on detail , integrity, their priorities are multi-dimensional , their focus is not restricted to merely the growth of the company’s bottomline as an end in itself. Consequently, their presence in the boardroom would lead to more effective overall performance,” explains Mehta.

Global statistics prove this point. Beth Brooke, global vice-chair, public policy, Ernst and Young, states: “There are proven financial and performance benefits from having more diverse perspectives on a board. In addition, the practical advantages of a diverse board room are stronger decision making, more innovation and better risk management.”

“With the changing demographics of the global workforce and the fact that women will control 75% of discretionary spending by 2028, globally companies cannot underestimate the importance of improving the gender balance on their boards,” adds Brooke. Study of BSE 30 Companies : A study by The Times Insight Group shows that close to 57% of the BSE-30 companies (17 companies in all) have at least one woman director on the board. The gender diversity ratio is best computed not by looking at the absolute number of women directors on board, but by computing their percentage in the total board. Here, Coal India led the pack with a high ratio of 23.5% (4 women in a board strength of 17). Following it was ICICI Bank, with a ratio of 16.7%. ONCG and Bharti Airtel held joint third place with a gender diversity ratio of 12.5%.

An industry-wise analysis of these 17 companies indicates that four are from the metal & mining sector (Coal India, Jindal Steel & Power, Tata Steel and Hindalco ). Financial services (represented by ICICI Bank, HDFC Bank and Housing Finance Development Corporation ) tied with the transport equipment sector (represented by Mahindra & Mahindra, Bajaj Auto and Maruti Suzuki). Stalwart women directors on boards of BSE-30 companies include Chanda Kochhar, CEO and MD of ICICI Bank and Renu Sud Karnad, MD of Housing Finance Development Corporation. Till lately, Zohra Chatterji did hold additional charge as CMD of Coal India. Some companies, such as Infosys and Bharti Airtel, have women directors on their boards who are overseas residents. Ann M. Fudge, a well-known American business personality and a Harvard University alumnus , is an independent director on the Infosys board.

Singapore-based finance professionals Chua Sock Koong and Yong Choo are non-executive directors of Bharti Airtel. Then there are professionals as independent directors, such as Homain Daurwalla, a chartered accountant and independent director of NTPC. She had retired as chairperson of Central Bank of India in 2008. There’s also high-profile advocate Pallavi Shroff on the board of Maruti Suzuki. ITC recently made a move towards gender diversity and appointed Meera Shankar, former ambassador to the US, as additional non-executive director in July-end . Her appointment will be effective as soon as she is allotted the director’s identification number by the corporate affairs ministry. Of course, there were female family members on boards too. Rajashree Birla is a director on the boards of several Aditya Birla group companies and Hindalco is no exception . Shallu Jindal, wife of chairperson and managing director Naveen Jindal, was appointed additional director of Jindal Steel & Power in April-end.

Gender diversity ranking of BSE 30 Companies

 Note regarding Methodology adopted by Times Insight Group:

For the purpose of the computation of the gender diversity ratio, information of the BOD composition that was publicly available as of August 20, 2012 has been considered. The information available on the Company’s website has been taken as the primary source. As a matter of cross reference, secondary information such press releases, intimation by the company to the stock exchange and broker’s reports have also been considered. For the purpose of the computation of the gender diversity ratio, all directors on the board have been included, including non-executive and independent directors.

(Times of India)