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Resolve now to have women on boards
International Women's Day on March 8 this year has initiated extensive discussion and debate on the role of women in public institutions in India.
The passage of the women's reservation Bill in the Rajya Sabha is a land mark development. The decision by the Supreme Court regarding the status of women in the armed forces is another major step in getting fair treatment for women. It's about time that Corporate India also introspects on the role women directors can and should play in the governance of companies in India.
At a Downing Street breakfast meeting with leading female executives on the International Women's Day , Prime Minister Gordon Brown said, “It is completely unacceptable that some of our top 100 public companies have not a single woman on their boards and that none at all have a majority of women on their board” . Reports show that one in four FTSE companies still have an exclusively male board and only four have female chief executives.
In India, it is estimated that majority of the corporate boards do not have a woman independent director and only 5% of directors are women. Out of these women directors, only the large companies have professional independent directors and majority of women directors are from the promoter families. In China also around 5% of board seats are with women, but most of them are professional women. In the US roughly 15% of the board members of the Fortune 500 companies are women as reported by Nicola Clark in her recent article in the New York Times. In the EU nearly 10% of the board members are women.
But the most advanced country in this area is Norway, which in 2003 passed a law requiring that 40% of all company board members be women. It has been very successfully implemented not only in public companies but even privatelyheld companies voluntarily have significant number of women directors. Spain and Netherlands have passed similar laws and France, Britain, Germany, etc., are discussing such law. On the other end of the spectrum are countries such as Japan and South Korea with very few women directors.
In India, the boards are generally homogenous , most of them ‘Old Boys Clubs' with men over 55 years of age coming from similar educational, socioeconomic , professional or business backgrounds . This is not conducive to having a rich discussion in the board room which requires diverse points of views to be presented and debated before taking important decisions. A range of opinions, lateral and out-of-the-box thinking, different insights and views on future opportunities are missed out in such boards’ deliberations putting the companies at a long-term disadvantage.
Having woman directors, it is believed , will improve board's effectiveness and quality of its decisions. It will help the boards become more sensitive to issues faced by women employees including unequal opportunities, working conditions, safety and sexual harassment . Boards will be able to take advantage of additional opportunities due to better customer insights and intuitions of women directors. It will reduce the risk of the enterprise by having different points of view at the board level. Because of women's greater association with children, schools, healthcare, and community issues, it is likely that corporate social responsibility performance will improve. The basic proposition is that the diversity achieved by having more women directors is in the longterm interest of any company, its employees and customers and creates superior shareholder value.
The next most important question is ‘how should it be implemented' . Should there be a law, regulation or a quota? It is completely unnecessary. Once the business leaders, company promoters, chairmen of boards become convinced that having women on the board is in the long-term interest of the company, they would act voluntarily. No legislation or regulation will be required . However, a discussion on this important subject should be promoted by industry associations like CII, Ficci, Assocham, Nasscom, IBA, etc., to bring this issue into focus. It is an idea whose time has come and the enlightened business leaders will make it happen.
(2010-03-25 / The Economic Times)
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