‘Women on Board’ An Analysis of Companies Act, 2013

With the enactment of Companies Act, 2013 and making it mandatory to have women Director on Board for certain class or class of Company, it has defiantly raised a bar, so the governance.

The increase in number of Women Director is 3-fold in last 3 years and around 17% of 500 fortune Companies are led by women. It is also to be noted that out of 500 fortune companies 475 Companies has Women Director on Board and

Women bring to the boardroom, a different set of perspectives, experiences, angles, and viewpoints than their male counterparts. Female directors are “more likely than their male counterparts to probe deeply into the issues at hand” by asking more questions, leading to more robust intra-board deliberations. They also make decisions taking the interests of multiple stakeholders into consideration so as to arrive at a fair and moral decision. More women on board does not only mean the mode to attract sales and production but also creates some public image. It does increase financial return as well rather than mere media attention.

Failure to address gender diversity would lead to serious economic consequences in future. Moreover, there are so many countries which leave women unrepresented. In a country like India where the scope for litigation is likely to be booming in the field of corporate and IP litigation where the future would rest, such legislation would bring in more clarity in specifying the rights of different genders and thereby avoiding unamicable issues. This improves corporate transparency.

CATALYST BOTTOM LINE REPORT

On Mar 01, 2011, Catalyst came out with a Report which stated that women in management helps the companies to achieve diversity and manage it well attain better financial results, on average, than other companies. In this report, Catalyst used three measures to examine financial performance:

1. Return on sales (ROS),

2. Return on invested capital (ROIC),

3. Return on equity (ROE).

Previous studies in the series found that there is a connection between gender diversity on corporate boards and financial performance. Among others, findings in this report include:

• Companies with the most women board directors outperform those with the least on ROS by 16 percent.
• Companies with the most women board directors outperform those with the least on ROIC by 26 percent.
• Companies with sustained high representation of women board directors, defined as those with three or more women board directors in at least four of five years, significantly outperformed those with sustained low representation by 84 percent on ROS, by 60 percent on ROIC, and by 46 percent on ROE.

This Report was used by many Committee to arrive at the conclusion to induct more and more woman directors in Board of Companies in India as it should impact of having woman directors in the Board of companies.

THE COMPANIES BILL, 2011

As there was no provision of Woman Directors ion the Companies Act, 1956 there was introduced by the Standing Committee on Finance the Companies Bill, 2011 to be referred to Parliamentary Standing Committee on Finance for examination and report. The Committee proposed “Appointment of at least one-woman director has been proposed to be mandated in such class of companies as may be prescribed. The class shall be prescribed through rules. This is likely to be in line with the policy of the Government for encouraging more and more women participation in decision making at various levels.”

Comments of Ministry with regards to such provision was “It is hoped that such indicative provisions will make the companies more alive to giving salience to the female gender in the realm of corporate governance. It is also in line with the Government policy to encourage women’s participation in decision making at every level in the society.” Which meant that the Government through introduction of this provision encouraged more and more companies to induct woman directors in their Board thereby reducing Gender Inequality in India and increasing gender diversity.

INITIAL DIFFICULTIES IN APPOINTMENT OF WOMAN DIRECTORS

• According to the 2014 Catalyst census, women accounted for merely 9.5 per cent of the total Board seats in 200 BSE companies.
• Of all the companies that made the appointments as per the rule, 278 companies made the appointment in March 2014, which shows that appointments were made solely to pose compliance without any change of heart.
• Most of the women, held non-independent directorships in the Companies.
• Around 82 directorship positions were held by women from the promoter group (were part of the family). To name a few, companies like Reliance Industries, Videocon Industries, JK Tyre and Industries, Bajaj Corp and TVS Motor Corp, Godfrey Phillips India etc.
• The companies that failed to appoint even a single woman on their board excused themselves, claiming that they couldn’t find qualified women with suitable experience.
• In 2013, the International Labour Organisation ranked India at 120^thposition out of 131 countries in female labour participation.

WOMAN DIRECTORS UNDER COMPANIES ACT, 2013

As per Section 149 of the Companies Act, 2013 read with Rule 3 of Companies (Appointment and Qualification of Directors) Rules, 2014, the following class of companies shall appoint at least one-woman director:

1. every listed company;

2. every other public company having

(a) paid–up share capital of one hundred crore rupees or more; or

(b) turnover of three hundred crore rupees or more.

In the case of vacancy in the post of women director, such vacancy has to be filled as early as possible and it should not be later than the next immediate board meeting or after three months from the date of vacancy, i.e., whichever is later.

NOTE: Paid up share capital or Turnover, referred above, shall be as on last date of latest audited financial statements.

QUALITIES BROUGHT BY WOMEN TO THE BOARD

• Women bring to the boardroom, a different set of perspectives, experiences, angles, and viewpoints than their male counterparts.
• Female directors are “more likely than their male counterparts to probe deeply into the issues at hand” by asking more questions, leading to more robust intra-board deliberations.
• Women as compared to men are better at conveying their expectations and ideas.
• More orderly and systematic board work.
• Women have more emotional intelligence.
• Women think about the people behind the numbers.

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This article is written by team Anupama Tripathi & Associates For the purpose of Education & Comment. For more kindly reach us at # 8800839633 or [email protected]