Women on the Board of a Company – Empowerment

The Need for Women Directors

The imperative need for women as a director in the Board was felt by the regulators such as Ministry of Corporate Affairs (MCA) and Securities and Exchange Board of India (SEBI), and accordingly relevant provisions for the same were introduced in the Act and Regulations.

Section 149 read with Rule No. 3 of Chapter XI of the Companies Act, 2013, requires the following class of companies to appoint at least One Women Director:

i) Every listed company

ii) 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:

However, a company, which has been incorporated under the Act and is covered under provisions of second proviso to sub- section (1) of section 149 shall comply with such provisions within a period of six months from the date of its incorporation.

Furthermore, any intermittent vacancy of a woman director shall be filled up by the Board at the earliest but not later than immediate next Board meeting or three months from the date of such vacancy whichever is later

Studies

• 2019 McKinsey study mentions that there is a positive correlation between a more diverse leadership team and financial outperformance. It further states that Companies with greater gender diversity on executive teams were 21% more likely to outperform on profitability and 27% more likely to have superior value creation. 2020 McKinsey report further states that in the COVID-19 crisis, inclusion, and diversity matter more than ever.
• A study by Peterson Institute for International Economics, an independent organization, states that Firms with women in executive officer and director positions post higher annual profit margins than those without female leaders. Between 1997 and 2017, firms with at least one female director or executive officer consistently reported larger profit margins. Among profitable companies, a move from 0 to 30% women leaders was observed to have increased net revenue margin by 30 %.

Empowering Women

• Requirement of at least 1 woman director on the board has opened a window of opportunity for women professionals to take active and considerable part in the functioning of an organization.
• Though a Woman director has to play the role like any other director, she brings with her the compassion, practicality and intuitiveness exclusive to her. Women directors serve as role models, and therefore improve female employees performance and boost companies’ image.
• Empowering the women we seek to advance, and we will ensure to achieve the same (as for men) for sustainable development, prosperity, balanced growth, and security.

Corporate Governance

• Effectiveness of a system of corporate governance cannot be legislated by law nor can any system of corporate governance be static. Rather, in a dynamic environment, systems of corporate governance need to continually evolve.
• There are several corporate governance structures available in the developed world, but no “one size fits all” structure for corporate governance.
• Its fundamental objective is not mere fulfillment of the requirements of law, but in ensuring commitment of the Board in managing the company in transparent manner for maximizing long-term shareholder value.
• The recommendations of the various committees, constituted by the Regulatory Authorities of India, from time to time, formed the base for further evolution of the structure of corporate governance in consonance with the rapidly changing economic and industrial environment of the country.
• Good Corporate Governance is the manifestation of beliefs, values and actions to ensure maximum value creation to the stakeholders. The objective of corporate governance is to enhance shareholder value keeping in view the interest of other stakeholders.
• Factors like Globalization, Global Competitiveness, Technology, Regulatory Changes and Shareholders Activism etc. have considerably expanded the role and duties of Directors whether its Executive/ Non-executive/ Independent.
• The decision making and governance at the highest level in any company vests with its Board of Directors (The Board).
• The concept of Board or directors was evolved because of the need for a group of trustworthy and respectable people to look after the interests of the shareholders (sometimes very large in numbers) who are not directly involved in the management of the company.

Plus Points of an Independent Woman Director

1. Prudence – A woman, by her very nature, has certain inherent qualities, whereby presence of even one woman changes the Board dynamics. She is more inclusive, detail driven, patient and prudent in their reviews. She normally possesses better Communication skills.

2. Focused – With different perspectives and style of conduct, she remains more holistic, think more broadly and be more attuned to environmental and social concerns.

3. Easy to talk to – Being more inquisitive, she has less difficulty in asking questions. Being less risk averse, her presence leads to better procedures and policies for crosschecks, double-checks, second opinions and consultations which result in perfection.

4. Better Judgement – A woman is normally more careful and conscientious in supervision and scrutiny. She is better equipped to handle decisions regarding HR policies, CSR policies, Marketing Strategies for Consumer goods, Advertising and PR and now increasingly on Compliance related issues.

5. Co-ordination – Being more inclusive, she can voice issues relating to implications of company strategies on their employees, consumers and other stakeholders, environment and society at large. Women see themselves as more in tune with relationships with various stakeholders while men perceive themselves as more independent focusing more on Company Strategy and Performance.

6. Empowerment – A woman director, being highly educated and experienced, is perceived as cultural change agents and role model by other women stakeholders. Her presence encourages women at all levels to challenge their situations and empower them to grow in their chosen field. She can groom future directors from within.

The list is illustrative only and not exhaustive.