Women directors support quotas for board diversity
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Bengaluru: The debate continues on whether quotas are the right way to ensure diversity on company boards, but women directors largely seem to agree with that approach.
A 2016 April Global Board of Directors study by executive search firm Spencer Stuart and Women Corporate Directors Foundation surveyed about 4,000 male and female directors from 60 countries and found that 49% of female directors supported diversity quotas; only 9% of male directors were in favour.
This could be because women directors still believe diversity is not a priority in board recruiting and that traditional networks tend to be male-dominated, said the global study.
“I support a quota on boards for women, because in the natural course of how the nomination committee operates, chances of women popping up in their list are lower,” said Rama Bijapurkar, a market strategy consultant who has served on boards of 11 large listed firms including Axis Bank Ltd and Infosys Ltd among others.
Norway, which has the highest number of women on company boards, also took a quota-based approach. In 2003, it mandated that 40% of all board seats should be occupied by women. And by 2014, 35.5% of board seats were occupied by women. France, which has a target to have 40% women on boards by 2017, has reached the 29.7% mark by 2014, according to the 2014 Catalyst Census on Women Board Directors.
India, too, has shown huge improvement after the Companies’ Act 2013 mandate, which said boards should have at least one woman director. Before the mandate was enforced in 2014, only 5.1% of directors were women. And now, two years later, with nearly all firms having complied with the clause, 13% of all directorship positions are occupied by women, said Pranav Haldea, managing director at Prime Database, a research firm.
Bijapurkar said, “In my experience, after reservations, when boards are forced to hunt for women talent, we begin to see a lot of first rate resumes of women.”
“You need quotas because it is difficult for it (board diversity) to happen naturally. But this is only a short-term measure,” said Rohit Kale, managing director of Spencer Stuart India.
There are about 1,530 firms on National Stock Exchange, and if all companies were to have one women director on its board, women will still occupy only about 10% of directorship positions, said Haldea. (Now 13% directors are women because 205 firms have more than one women director on its board).
For India to get to levels of Norway, firms voluntarily need to focus on diversity. But only a few mature ones have done that.
Executive search firms such as Spencer Stuart and Egon Zehnder witnessed a spurt in demand for placing women directors in 2015. But now, they are getting fewer mandates asking specifically for women directors.
“In fiscal 2016, there was around 60% drop in demand, and we see that demand drop continuing this year,” said Pallavi Kathuria, a consultant with Egon Zehnder. “Companies that already have a woman director are not prioritizing diversity while searching for board candidates as they have already met the requirement.”
But that is understandable, said Kale. “When a company has a woman director in place, we may not see a specific demand from them for another five years,” he says. Companies now need to focus on widening the talent pool of women in leadership roles and also focus on mentoring of women directors for them to be effective in their role, he said.
Currently, most board appointments happen through word of mouth. When positions get vacant, male directors are more likely to have been appointed by a major shareholder, or known to the board or another director, or recruited by a search firm, finds the report. “Building up networks and getting known is something that women directors are engaging in actively now,” the report said.
Now it’s up to the women on boards to make sure the process of searching for directors doesn’t exclude women, Bijapurkar said.