247 NSE firms miss Sebi deadline for appointing women directors
Corporate governance traps hidden in the way the new norm is being implemented will pan out in the days to come
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Mumbai: At least 247 of the 1,498 companies listed on the National Stock Exchange (NSE) will have missed the 31 March deadline set by the Securities and Exchange Board of India (Sebi) for listed firms to appoint at least one woman director on their boards, according to an early estimate by Prime Database.
The Sebi directive was first announced in 2014 with an October deadline that was later extended to March.
What was intended to be an exercise to promote gender diversity on boards is now becoming a ‘tick-the-box’ exercise, with many companies appointing family members of promoters or well-known personalities.
“Over a year has now passed since the Sebi board meeting on 13 February 2014, when this stipulation was announced. From then till 30 March 2015, 711 women have been appointed to 794 directorship positions in 758 companies. Of these 758 companies, 40 companies already had a woman on the board before the Sebi guideline was announced (and appointed a second woman director on their board), implying that 718 companies have since complied with the requirement,” according to Prime Database.
“There is no dearth of talented women who can make excellent directors”, said Pranav Haldea, managing director of Prime Database.
“It is not that the talent pool is small, but that companies have not looked in the right places for this talent,” said Pallavi Kathuria, co-lead (diversity and inclusion practice) at Egon Zehnder, a leadership advisory and board consulting firm. “People are not looking at non-traditional areas such as academia, social sector and bureaucracy.”
Part of the problem of what experts and headhunters call a ‘leaky pipeline’ of talent, is social and cultural issues in a country where women take bigger domestic responsibilities, and support systems such as child care, elder care and domestic help remain unprofessional.
But part of the problem also lies in a supercharged work environment in many Indian companies where promoters push for fast growth, fostering a culture of overwork and aggressive competition, which leads to women dropping out of the workforce at junior and middle levels.
“Women are reticent and do not push themselves as aggressively as men,” said Arun Duggal, chairman of the Federation of Indian Chambers of Commerce and Industry’s centre for corporate governance, an advocate of greater female participation in boardrooms who would like to push for 25% representation of women in company boards.
There are corporate governance traps hidden in the way the new norm is being implemented and will pan out in the days to come, which may not give firms the full benefit of having a woman’s voice at board meetings.
The dangers of having on board popular and busy personalities may lie in poor attendance or preparation on their part. On the other hand, the dangers of having bureaucrats may lie in a conflict of interest between their policymaking role and directorship. Equally, there are dangers in appointing promoters’ family members as young and inexperienced people could get appointed to boards simply because of their family name.
The delay in the enforcement of the new rule, brought out in 2014, is itself a corporate governance matter as companies are defaulting on the deadline or campaigning for an extension of the deadline.
“Companies have been lackadaisical, especially as enough time was given to them,” said Shriram Subramanian, promoter of Ingovern, a corporate governance monitor. “And if companies really want to put promoters’ relatives, they can bring them in as invitees to board meetings where they get groomed as future directors and also help in succession planning.”
Firms go to great lengths when it comes to training entry-level workforce, but picking and training senior level executives such as chief executive officers for directorship is unheard of in India. “There is a need for an effective director assessment process. Mid-career women with high potential should be identified at the firm-level, and adequate exposure and grooming need to be provided for such identified directors,” says a recent research paper by Indian Institute of Management, Bangalore professors Vasanthi Srinivasan and Rejie George Pallathitta.
And yet, experts are unanimously lauding the baby steps the Companies Act has taken even if it means the same set of women are in circulation as directors, as they believe it has sensitized many firms to look to the benefits of the system that will evolve and improve in time.
“The first step that we had taken for corporate governance was years ago when companies set out to find independent directors. There had to be a cadre of people who had to undergo training and it took the companies about five years to get the full numbers. I feel the same process is happening now,” said Gita Piramal, business historian and author of Business Maharajas and Managing Radical Change.
“Twenty years ago very few females were accepted in the family business. That has changed in the last decade and now we see many capable young women. I am confident that in a couple of years there could be some amazing women directors too,” added Piramal.
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