Background:
- Across the world, women are underrepresented in the highest positions of leadership in corporate world despite being a significant proportion of the corporate talent pool in the middle and lower rungs.
- The corporate world generally maintains that there is no systemic exclusion of women – however, empirical studies and testimonies shared by women in corporate world reveal that implicit bias, stereotypes of gender and subtle discriminatory policies impede the professional advancement of women in the highest positions of leadership.
Need for Gender Diversity
- Gender diversification has been shown to increase profits, improve strategic organization, boost goodwill, reduce group think and increase innovation and creativity by exposing company boards to multiple worldviews and perspectives.
- The diversity in input thus created leads companies to produce diverse products that cater to a wider consumer base and thereby increase market share.
Legal provisions
- To encourage gender diversification in the corporate sector in India, Section 149 of the Companies Act, 2013 mandates that every Listed Company and every other public company either having a paid up share capital of at least Rs 100 crores or having a turnover of at least Rs 300 crores must appoint at least one woman director.
- The Act also provides for the imposition of fines when companies do not comply.
- Additionally, Clause 49 of the Listing Agreement was amended by SEBI to ensure that the board of directors of listed companies had at least one-woman director.
Note
- The Ministry of Corporate Affairs reported that notwithstanding the fact that it was September 2016, 169 National Stock Exchange listed companies, 15 Central Public Sector Enterprises and 1106 Bombay Stock Exchange listed companies had failed to comply with the provisions.
- In India, the number of women appointed to company boards remains abysmal. The 2016 World Economic Forum Global Gender Gap report indicates that the female-to-male ratio of boards of publicly traded companies is 0.11.
Criticism
- The Indian minimum mandatory quota of one female director appears merely tokenistic and does not match up to global standards – e.g. Norway, Finland, France and Spain require 40% whereas Belgium, Kenya and Italy require 33% women on boards.
- The reforms also have a superficial understanding of gender diversification, as they primarily suggest that gender diversity is merely about appointing women to company boards and do not extend thought on creating equal opportunities to work and advance in careers.
- It was reported that to comply with the provisions companies have appointed female directors in a shoddy, undesirable and last-minute manner. In many instances the female directors appointed are relatives of important office-holders in the corporations. This raises serious questions over the qualifications and independence of such female directors appointed and defeats the intended purpose of shattering the glass ceiling for experienced women candidates in the company’s talent pool who are excluded.
Note
- Gender diversification cannot be conflated with merely appointing women to company boards – it includes the responsibility of dismantling unintended, subtle discriminatory practices and creating an environment for equal opportunity, participation and collaboration.
- Only then does gender diversification truly fulfil its purpose, enable companies to capture maximum benefits and utilize the capabilities of the population of States.
Way forward
- Apart from mandatory quota laws, there exist multiple ways by which States around the world can urge companies to prioritise gender diversification such as:
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- Voluntary pledge programs – by this method companies are urged to take voluntary pledges to address the issue of gender diversification and proportionate appointment of women to company boards. Typically, NGOs monitor the pledges made by companies e.g. EU requested large public companies to voluntarily pledge to achieve 30% representation of women on company boards by 2015. However, very few companies made pledges and the program was deemed a failure. The success of the Voluntary Pledge program entirely depends on the corporate world’s initiatives and is therefore unlikely to succeed in our country.
- Comply or Explain provisions – this is a soft law approach whereby governments recommend that company boards achieve a minimum proportion of women directors on company boards. If companies fail to meet this recommendation, they are required by law to explain their failure. This approach creates some accountability with respect to company appointments and company culture but the lack of a penalty system may jeopardise the goal of achieving gender diversification. However, the implementation of this approach in the UK and Australia has resulted in positive progress towards achieving gender diversification.
- Mandatory Diversity Disclosure Reports – this approach holds companies accountable by legally requiring companies to disclose gender diversity ratios in the organizational structure, the process and criteria of hiring and promotion, the attempts made by companies to create equal opportunity and inclusive practices and the long term strategy to realise gender diversification.
Conclusion
- The issue of gender diversification is one of fairness and equity for women in the corporate sector.
- Indian companies must comply with gender diversification provisions in the spirit of the law.
- However, to effectuate real change in the corporate culture a wide variety of measures need to be implemented – mentorship programs, annual diversity reports, expansion of the discourse on leadership qualities, diversity training programs, reconstruction of internal operations etc.