A Securities and Exchange Board of India panel last week recommended inclusion of at least one “independent” woman director at all listed companies.
MUMBAI: Nearly 40% of the companies listed on the National Stock Exchange will have to appoint a woman independent director if the recommendations of the Uday Kotak-led Sebi panel on corporate governance were to be implemented. Data from PrimeDatabase show that among the 1,670 companies listed on the NSE, as many as 637 do not have a woman independent director on their board.
ASecurities and Exchange Board of India panel last week recommended inclusion of at least one “independent” woman director at all listed companies. Earlier, the Companies Act of 2013 mandated a certain class of companies to have at least one woman director on board. Sebi, in compliance with the Companies Act 2013, made it compulsory to have at least one woman on a board from October 2014.
Many companies inducted a woman member from their promoter families to the board to meet the requirement. Ever since, there has been a view to specifically mention the word “independent” while mandating gender diversity, so that woman directors get appointed beyond the promoter family and it does not turn into a tick-box exercise. Corporate governance experts said it is a common misconception that there is a dearth of independent woman talent for boards. They view the recommendation as a positive step in ensuring independence in gender diversity.
“The pool of woman independent directors has been growing to be quite broad and availability of high quality woman directors is not an issue,” said Arun Duggal, co-founder of Women on Corporate Boards mentorship programme and chairman of ICRANSE -3.61 %.
Sebi chairman Ajay Tyagi said in May that the market regulator would examine whether the requirement for Indian companies to have at least one woman on board should specify that it should be an independent director. Independence of directors is a serious issue, he had said, speaking at the NSE auditorium. “It is a very difficult issue and various other regulators including the government have to be brought in. We are committed to dig deeper into this issue,” he had said.
Interestingly, the ministry of corporate affairs has opposed some of the recommendations made by the Sebi committee last week, including the one on independent woman director, on the grounds that they concern matters already covered by the Companies Act. The more than 600 vacant positions might not find all well-known board-experienced and board-ready women, but there are enough women in corporate echelons who can be given first-time opportunity to join boards and that is how the pool can be widened, said experts. “They have to be given a chance.
Board decorum is not rocket science,” said Pranav Haldea, managing director at the PRIME Database Group. “There are enough capable women who could easily join boards of several Indian companies. What is needed is intent of the promoters to get women as independent directors on board. Now, companies will have to comply and have a woman independent director, which would be good for corporate governance in Indian companies,” said Rajesh Narain Gupta, managing partner, SNG & Partner.
Several women in second-rung executive roles coached for board positions through various programmes find it tough to get a berth on top company boards. Top companies either opt for women from among family and friends or prefer well-known names — the likes of Ireena Vittal, Manisha Girotra of Moelis, Kalpana Morparia of JP Morgan and Falguni Nayar of Nykaa.com. “Most companies do not support fresh faces on board.
It is a real tragedy in corporate India where there is an old women’s club when it comes to board,” said Poonam Barua, CEO of The Forum for Women in Leadership (WILL Forum), which has certified 300 women for boards through its board capability programme in the last two years. Female representation in the NIFTY 500, which was at 5% as on March 31, 2012, has increased to 13% as on March 31, 2017, according to a recent study by the Women on Corporate Boards Mentorship Program, Institutional Investor Advisory Services and PRIME Database.
However, at 13%, women are still underrepresented in board roles despite constituting a significant portion of the talent pool in corporate India. This is much lower than countries like Norway (39%), France (34%), the UK (23%) and the US (21%).
Only 26 boards among the NIFTY 500 companies had three or more woman directors on March 31, 2017. As many as 15 companies had no female representation on their boards among Nifty 500, compared with only six companies in the S&P 500 index on March 31, 2017, the study showed. “It’s more than just compliance as several studies have shown that having women on the board not only helps with diversity but also has a positive impact on the culture and dynamics in the boardroom,” said Sai Venkateshwaran, head-accounting advisory services, KPMG in India. It’s also seen that the role of these directors is much more effective when there are two or more women on a board, he said.