Women Directors: Role in Attaining Gender Diversity and Corporate Governance

Introduction:

“Gender diversity on corporate boards is a growing necessity for companies to thrive and   grow in today’s environment.”

Gender diversity in the corporate world is the most disputed topic in India. Women have been facing artificial barriers which are preventing them from promoting their careers all around the world. All across the world, there is an inadequate representation of women in the highest positions in the corporate world. The traditional Indian society continuously ceased women from entering the public realm and they were also given an inferior position in the society. In the 20th century, the women contribution has been detected in the workplace. The Parliament, after a critical consideration and consultations enacted the women Independent Directors concept under the Companies Act, 2013 which has provided a priority to the corporate governance. Various laws are been enacted for the presence of women in the corporate board in India.

Provisions Regarding Women Director as per Companies Act, 2013

According to Section 149(1) of Companies Act, 2013, every Company shall have a Board of Directors consisting of individuals as directors and shall have:

• In the case of Public Company, a minimum number of three directors.
• In the case of Private Company, a minimum number of two directors
• In the case of One Person Company, one director[1]

Further, it is provided that a company may appoint more than fifteen directors after passing the special resolution in the General Meeting.

Rule 3 of the Companies (Appointment & Qualification of Director) Rules, 2014, that came into force on 1st April 2014 states that the class of companies which shall appoint at least one woman director for, every listed company and every other public company having:

• Paid-up share capital of hundred crore rupees or more
• Turnover of three hundred crore rupees or more, as on the last date of the latest audited financial statements.[2]

In addition, any company which is incorporated under the new Companies Act, 2013 shall fulfil the above-mentioned conditions in six months compulsorily as soon as the company has been incorporated. However, any company which has been incorporated under the old Companies Act, 1956 shall follow such conditions within one year from the date of its incorporation.

 If there is an unoccupied position for the post of women director, then such vacancy has to be filled as soon as possible and it should be in the first board meeting after the vacancy or after three months from the date of the position being vacant, whichever is earlier.

Why is there a Need for a Women Director?

“It has been a valuable intervention to accelerate the process as demonstrated by increase in women directors on boards.” – Arun Duggal, chairman, ICRA.[3]

Securities and Exchange Board of India and Companies Act, 2013 directed and mandated the listed companies in India to appoint at least one executive or independent director on board for the representation of women in the corporate world. Uday Kotak Committee with 21 members which was constituted by SEBI recommended a need that the board of the listed companies must consist of independent directors and at least one women director on board. It was made mandatory for 637 companies out of 1,670 companies which were listed under NSE (National Stock Exchange) to appoint one women director as per the committee.

There is a need of women directors because of the following reasons:

• Women are likely to address better the grievances of the customers, shareholders, employees and other shareholders in the company.
• Experts observed and believed that companies with women directors deal more effectively with risk.
• Women directors are likely to be more in tune with women’s needs, which helps to develop successful products and services because women drive 70 % of purchases.
• Studies show that the presence of at least three women is necessary to change boardroom dynamics.[4]
• The financial performance of the company will improve in three broad aspects which are: return on equity, sales and invested cap.

Research proves that the women director on board helps in increasing the production and sales and also magnifies the Corporate Social Responsibility of companies.

Gender Diversity and Gender Equality

Because the issue of gender diversity in corporate became prevailing, governments and consultancy institutions have recommended companies to diversify their boards. Gender equality includes protection from sexual harassment and the right to work with dignity, which is a universally recognized basic human right. The Essar Group and Mahindra & Mahindra Limited appointed women director to add value and innovative ideas to the company. Gender diversification cannot be combined with only appointing women as a director to company boards. Gender diversification includes the responsibility of dismantling unintended, subtle discriminatory practices and creating an environment for equal opportunity, participation and collaboration.[5]

The empirical studies and statement shared by the women in corporate world disclose that indirect prejudice, historical understandings of gender roles, favouritism, stereotypes and status group politics, subtle discriminatory policies hinder the executive advancement of women in the higher positions of leadership. In India there is a shortage of experienced and qualified women at executive positions is mostly one of the main reasons for male dominance in the corporate world. Women facing different social hindrances to start a career reveals why the possibility of having a truly diverse board has never before appeared too reasonable.

Gender equality that provides protection of women from sexual harassment and the right to work with all dignity, which is a universally recognized basic right of a human. In the Vishaka Case, [6] the Supreme Court issued guidelines as the Sexual Harassment of Women (Prevention, Prohibition and Redressal) Act, 2013 was came into force in order to protect women from any kind of sexual harassment at their workplace. The Act makes it mandatory to constitute a Complaint Committee, which should be headed by a senior-level woman employee and at least half of the members of such a committee should be women. The presence of a woman on the board would certainly hinder the creation of an unfriendly environment in the company. It is a specific type of gender inequality which results in unseen and artificial barriers to the advancement of women which reflects bias or discrimination regarding those who prosper and those left behind.

Barriers to Women Leadership

After the enactment of the provisions regarding the female director, women still face barriers that make it difficult for them in the corporate world. The barriers are:

• The ILO Women in Business and Management report ranks family responsibilities, gender stereotypes and masculine corporate cultures as the top three barriers to women’s leadership.[7]
• However, the aspects of a male-dominated corporate culture those are hostile to women Advancement.
• There is inconsistency  in the distribution of high-quality job assignments,
• Recruitment and hiring practices that create entry barriers for women.

Conclusion

The fact remains that women representation on boards of India Inc is still inaccurate. Although, now the presence of gender diversity can be seen increasing. The research shows the companies reaction to the regulation pressure is to reach board gender diversity rather than appointing women on board as their contribution to the governance of the company. Women as a director are not only needed as per law to put a better company image in terms of good governance but are also needed to build up the board participation in various activities. Hence, the need for women as a director in the Indian corporate sector has become inevitable. The Companies Act 2013 has made an attempt in not only building up the role of women on board but in society as well. The company in India must fulfil with gender diversity provisions in the spirit of the law.

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References:

1. Companies Act, 2013
2. Amudha Murthy, The need for women directors in Indian companies, LEGAL SERVICE INDIA, http://www.legalservicesindia.com/article/1774/The-need-for-women-directors-in-Indian-companies.html
3. Rica Bhattacharyya, Gender diversity on boards improves, but more ground needs to be covered: Experts, THE ECONOMICS TIMES, (Feb 19, 2018, 10:40 PM), https://economictimes.indiatimes.com/news/company/corporate-trends/gender-diversity-on-boards-improves-but-more-ground-needs-to-be-covered-experts
4. Ruchita Dang & Nishant Sharma, Women Director: A move towards Woman Empowerment in Corporate world, INTERNATIONAL JOURNAL OF RESEARCH IN HUMANITIES & SOCIAL, (March 3, 2015), http://www.raijmr.com/ijrhs/wp-content/uploads/2017/11/IJRHS_2015_vol03_issue_03_10.pdf
5. Srujana Bej, Getting on Board – Gender Diversity in Company Board of Directors, FACTLY, (Jan 20, 2017), https://factly.in/getting-board-gender-diversity-company-board-directors/
6. Vishaka & Ors. v. State of Rajasthan & Ors., A.I.R. 1997 S.C. 3011, 3016
7. Women on boards, INTERNATIONAL LABOUR ORGANISATION, https://www.ilo.org/wcmsp5/groups/public/—dgreports/—gender/documents/briefingnote/wcms_410200.pdf