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Tokenism on company boards

Tokenism on company boards
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First Published: Wed, Mar 09 2011. 01 15 AM IST
Updated: Fri, Oct 21 2011. 04 51 PM IST
Confusing means and ends is often a usual practice on days of symbolic importance. The corporate affairs ministry did something similar on the occasion of International Women’s Day. It announced that it would make it mandatory for companies with five or more independent directors to have at least one independent woman director.
It does not require any comment that companies are run to make profits. Their boards exist to plan and strategize towards this end, and also to ensure this is done in compliance with the laws of the land. Therefore, it does not matter if the board members are men or women so long as the work is done. The sole link between the job and who does it is the quality of performance.
So long as it is not established that having women as independent directors has a positive bearing on this link, it is not clear what purpose reservation for women on the board of a company will serve.
This, however, has not deterred noise about the poor representation of women at this level of corporate hierarchy in India. An Assocham study found that out of 1,112 directorships of 100 companies listed on the Bombay Stock Exchange, there were only 59 women occupying that position. This compares unfavourably with companies in Canada, the US and Britain.
Presumably, it is such sentiments that have led the ministry to think about putting this provision in the Companies Bill 2009, which may be tabled in Parliament soon. Corporate affairs minister Murli Deora said on Tuesday that “the proposed provision in the Companies Bill will give rightful due to our women in the corporate world”, and that “this step is in the direction to achieve the cherished objective of women participation in decision making and giving them rightful place in the society”.
This confuses representation with corporate governance. As mentioned above, there is little, if any, connection between the two. For example, there is a good chance that to comply with the minister’s prescription, the promoters of firms may decide to have friends or relatives on board as independent directors. There are many ways to induct women members on the board of a company and yet defeat it in spirit.
Corporate governance and independent women directors: is there any link? Tell us at views@livemint.com
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First Published: Wed, Mar 09 2011. 01 15 AM IST