TIME
FOR MORE WOMEN DIRECTORS ON COS’ BOARDS
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 we l l - k n ow n 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 m a n a g i n g d i re c t o r Naveen Jindal, was appointed additional director of Jindal Steel & Power in April-end.
GLOBAL TRENDS
Interestingly, even on the global front, especially in the US (which has yet to formulate specific gender diversity prescriptions for the boardroom), the hottest debate is how best to move forward
AUSTRALIA
No mandatory gender quota exists. However, as of January 2011, all listed companies in their annual reports have to comply with ‘diversity disclosure requirements’, which include disclosure of the proportion of women employed in senior executive positions and on the company’s board. In addition, companies have to set down measureable targets and disclose the progress made towards greater gender diversity
UNITED KINGDOM
There’s no mandatory gender quota. Lord Davies ushered the move towards gender diversity in February 2011. His report suggested that the FTSE 100 companies should aim for a minimum of 25% female representation by 2015. From October 1, 2012, the Financial Reporting Council requires companies to report on the steps taken to implement gender diversity policies
EU REGION
A mandatory quota regime is popular in this region. In 2004, Norway made it mandatory that at least 40% of the board should be women. Norwegian companies had to comply by 2008 or face severe consequences, which included dissolution of the company itself. In January 2011, France introduced a law that requires listed and large unlisted companies to reserve at least 20% of board seats for women by 2014 and 40% by 2017. Others, such as Italy, Netherlands, Belgium and Spain also provide for a quota regime .
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 we l l - k n ow n 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 m a n a g i n g d i re c t o r Naveen Jindal, was appointed additional director of Jindal Steel & Power in April-end.
GLOBAL TRENDS
Interestingly, even on the global front, especially in the US (which has yet to formulate specific gender diversity prescriptions for the boardroom), the hottest debate is how best to move forward
AUSTRALIA
No mandatory gender quota exists. However, as of January 2011, all listed companies in their annual reports have to comply with ‘diversity disclosure requirements’, which include disclosure of the proportion of women employed in senior executive positions and on the company’s board. In addition, companies have to set down measureable targets and disclose the progress made towards greater gender diversity
UNITED KINGDOM
There’s no mandatory gender quota. Lord Davies ushered the move towards gender diversity in February 2011. His report suggested that the FTSE 100 companies should aim for a minimum of 25% female representation by 2015. From October 1, 2012, the Financial Reporting Council requires companies to report on the steps taken to implement gender diversity policies
EU REGION
A mandatory quota regime is popular in this region. In 2004, Norway made it mandatory that at least 40% of the board should be women. Norwegian companies had to comply by 2008 or face severe consequences, which included dissolution of the company itself. In January 2011, France introduced a law that requires listed and large unlisted companies to reserve at least 20% of board seats for women by 2014 and 40% by 2017. Others, such as Italy, Netherlands, Belgium and Spain also provide for a quota regime .
Lubna
Kably |TOI120831
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