Capability in Diversity
As more and more
women family members take up directorship at standalone family firms, they face
the ‘competence versus kinship’ challenge to prove themselves qualified
Standalone family business boards are increasingly
seeing more involvement from the women of the family. Recent government
stipulations have focused on corporate gender parity, especially in
directorship. While industry watchers, analysts and companies are at odds over
the efficacy of such appointments, the qualification debate remains open.
Take Catherine Rosenberg, for instance, who is
sister-in-law of Biocon managing director Kiran Mazumdar-Shaw. Rosenberg is on
the board of Syngene, a Biocon subsidiary. “I don’t think Catherine is on the
board because she is a family member,” says Mazumdar-Shaw. “Bring in such women
to the board who are qualified, understand the business and contribute to the
board. One should guard against the tick-box approach, which is short-lived.”
No doubt, with a doctorate in science from the
Universite de Paris, Professor Rosenberg of Waterloo University, Canada clearly
knows how boards operate, especially at science-based corporations.
According to a recent report by the Indian School of
Business shared exclusively with ET,
standalone family firms (SFF) have a higher proportion of women directors
compared with family business group affiliated firms (FBGFs). Also, SFFs have a
higher proportion of women directors from within the family.
Arokiaswamy Velumani, first generation promoter of
Thyrocare Technologies, too, has brought on board his 27-year-old daughter
Amruta, a postgraduate in biotechnology. Asked if Amruta was not a tad too
young, her father says it’s not easy to find people who understand board management
and corporate governance. Amruta has now been a part of the business for 15
years. Velumani has told his children to be prepared to take over, but also be
ready to sit aside and help others run the organisation if need be.
The other woman board member at Thyrocare is
pathologist Indumati Gopinathan, who is one of the leading commentators on
telepathology. As the company founder stresses, “Whether you appoint a woman,
or any director, on the board, qualification and years of experience play a
very important role. A PhD may not know how a share buyback happens, or an MD
in pathology may not have the understanding of how a dividend is declared.”
“My children have exposure to the business, with
several private equity people coming in and the company going through an IPO,”
says Velumani.
RISE AND SHINE
FBGFs are a part of a group of companies owned and
controlled by a family. SFFs are typically smaller firms, focused on one
industry and the only listed company owned and controlled by the family.
The ISB study, ‘Standalone family firms lead the path
to gender parity in family firms’ boards,’ by Nupur Pavan Bang, Anierudh
Vishwanathan, Ravee Chittoor and Kavil Ramachandran says the number of female
directors in FBGF has grown from 4.6% in 2013 to 13.7% in 2017.
In comparison, the SFF has seen female directors grow
from 5.4% to 15.2 % in the same period. Female directors from among family
members have grown from 4.9% in 2013 to 14.4 % in 2017. In the same period, the
number of non-family (female directors) has grown from 5% to 13.9%.
However, some have voiced their reservations.
Governance in family firms often comes under the scanner and is considered to
be a black box by many analysts and investors. Independent directors are said
to be ceremonial.
Given this perception, a study of 1,284 NSE-listed
firms was conducted for 2015-17 on the specifics of women directors being
appointed by family firms.
It was noticed the percentage of women directors at
NSE-listed firms went up from 5.5% in 2014 to 12.6% in 2015 and 14.3% in 2017.
Surprisingly, the study found that contrary to their image, family firms were
quick to meet the requirements of the Companies Act and Sebi stipulations,
albeit through appointing a family member.
Mita Dixit, head, research & consultancy, Centre
for Family Managed Business (FMB) at SP Jain Institute of Management and
Research (SPJIMR) agrees that more women family members are joining standalone
firms.
The challenge, feels Dixit, is that while the
Companies Act makes one women director compulsory, it does not mandate her
education qualification. Many SFFs are thus taking a shortcut by appointing a
women from the family, who may not have the knowledge or experience to be on
board.
However, she is hopeful as an increasing number of
women family members on SFF boards are trying to hone their skills, many at
SPJIMR.
Research suggests that gender diverse firms are more
sensitive to their stock performance, resulting in better shareholder value.
However, Shriram Subramanian, founder of proxy
advisory firm InGovern, points out, “Companies should leverage the different
exposure and thinking that women bring to the board. With standalone family
businesses appointing more women family members to the board, these benefits
are unlikely to be extracted and companies lose out on having enriching
discussions in boardrooms.”
DOES GENDER MATTER?
TVS’ Suresh Krishna, for one, disagrees. “The TVS
family has appointed several women directors, mainly from the fourth
generation. All are well-educated and have put in many years of service in the
company at junior positions before assuming executive roles as directors. All
have done well in their positions, substantially contributing to company
growth. I fail to understand how the presence of an independent woman director will,
in any way, contribute more to the efficacy of such a board,” he says.
In fact, the ISB report reveals that women board
members’ proximity to company operations at SFFs gives them more opportunities
to observe and influence the process of strategy implementation. Thereby, they
are likely to be in more substantial roles, such as an executive director, when
the opportunity arises.
For the chairman of TVS Group, one of India’s most
respected conglomerates with a combined turnover of $7.2 billion, the whole
question of women as directors is an overplayed one for. “What is important is
that the directors are engaged in protecting the interests of the stakeholders,
and that the highest standards of business ethics are followed,” Krishna
emphasises. “The gender of the director is highly irrelevant. What is important
is whether the director is qualified to discharge his/her duties.”
Vikram Kirloskar, chairman of Kirloskar Systems and
vice-chairman of Toyota Kirloskar Motor, also underscores a wider base for
competencies. “Businesses are getting diverse. Markets are getting complex.
It’s a matter of survival for most companies. Boards need qualified members
with diverse knowledge.”
Lijee Philip & Rica
Bhattacharyya
ET26JUN18
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