In search of a woman on board
52 out of the BSE 100 companies did not have women representatives on the board as of 31 May
Mumbai/New Delhi: On 28 May, the board of India’s leading two-wheeler maker Hero MotoCorp Ltd met to approve financial results for the March quarter. But the directors ended up spending most of the time discussing a process to induct women on the board, a director said on condition of anonymity.
It’s not a concern limited to Hero MotoCorp alone. Dozens of companies are discussing the same topic and have begun to search for female board members.
A stipulation in the new Companies Act, which was approved last year and came into effect from 1 April, says that every listed company or public company with a minimum paid up capital of Rs.100 crore or a minimum turnover of Rs.300 crore needs to appoint at least one woman on its board.
Further, according to new corporate governance norms finalized by the Securities and Exchange Board of India (Sebi) in February, all listed companies must have at least one woman director on the board. One person cannot be a director on the boards of more than seven listed companies, Sebi said.
These guidelines come into effect from 1 October.
“The stipulation in the Companies Bill will make a difference,” said Vinita Bali, former managing director, Britannia Industries Ltd. “Scandinavian countries introduced similar stipulations several years back and now there is 30-40% women representation on the boards of these companies.”
Companies may have a lot to gain from having women on board, say women who have led large corporations.
“Women are forthright, ask pertinent questions, are not silent spectators; they want to be heard, they want to be relevant,” said Kiran Mazumdar-Shaw, chairperson and managing director of Bangalore-based pharma company Biocon Ltd, who is one of the most sought after women on company boards.
But boards have to be very clear that when they are getting women, they are seeking value in that, added Bali. “If there is tokenism, it will make no difference,” she said.
Having personally mentored a few women directors on how to deal with the board role and to be effective in the function, Harsh Goenka, chairman of RPG Group, said that apart from adding diversity, women board members will also add value. “...I believe the women directors can bring a different perspective and freshness of ideas to the board. It is a very welcome move and I am sure it will pay dividends,” said Goenka.
Meanwhile, women leaders are seeing this as an opportunity for career growth. “It helps develop understanding of multiple sectors, and brings a new perspective to our own businesses,” said Meena Ganesh, co-founder and chief executive of Portea Medical (a provider of in-home healthcare services) and former CEO of Tesco India.
The problem that companies and headhunters are facing is the caution with which women are approaching board memberships. Women directors like Bali, Ganesh, Manisha Girotra (CEO of the Indian unit of investment bank Moelis) and Punita Lal, former chief executive of NourishCo Beverages Ltd, a joint venture between Tata Global Beverages Ltd and PepsiCo India, have received multiple offers to take up board positions, but accepted few.
Of the four conditions Bali has to evaluate a board role, three are on the board’s competence. “Typically, one’s criteria for joining a board would be: Can I make a contribution? Is this a board I respect? What is the track record of the company and the board members? Can I remain independent?,” said Bali, who is already part of six boards.
Lal, who is in talks with a couple of firms for board positions, believes in doing her groundwork before taking up a board role. “The composition of the board speaks a lot about how the company is run.” She believes a mix of non-executive members along with executive members in a board is important in determining how independent the board is, and whether it has the ability to challenge current practice.
Besides, there is a problem of availability.
“The demand for women board members has shot up as one can’t be on the board of more than seven companies and all of them are now looking to fill that void, but the question is would you compromise on the qualifications of that board member?,” a senior non-executive of a leading automobile firm said, indicating the scarcity of qualified women in corporate world. “Some of us will be forced to look beyond the corporate world but will that make any sense? How would somebody from the field of art or sports add value to business proceedings of a company?” the person added, requesting anonymity.
As such, most corporations are approaching the few women in corporate and banking circles who have established a sound reputation. But many of them just don’t have the time to commit. “My issue while considering an appointment really is bandwidth. I do not have time. Most boards have their board meetings at the same time,” said Mazumdar-Shaw, who is already on seven boards and has had to turn down at least five offers.
Girotra, who is already part of three boards, said though she gets offers, she cannot accept any more. “I have a day job too, and I can’t make a proper commitment by being a part of many boards.”
The scarcity of talent has meant that executive search firms like Egon Zehnder, Heidrick and Struggles, Spencer Stuart and RGF Executive Search are now being forced to look beyond the obvious candidates like Mazumdar-Shaw, Bali and ICICI Bank managing director Chanda Kochhar.
According to R. Suresh, managing director of RGF Executive Search, there is no dearth of talent if a company is willing to go beyond the obvious names in the corporate sector.
“Eighty percent of our candidate pool are first-time directors and mostly they are women in senior executive roles,” added Gauri Padmanabhan, a partner in Heidrick and Struggles.
Government agencies, academic and research institutions, non-profit organizations, and audit firms are some of the non-traditional hiring grounds that search firms are now tapping to meet the increased demand for women directors. But there are challenges there too, as companies and headhunters have to spent considerable time preparing first-time directors for their new roles.
“A board role is very different from an executive role. Companies need to invest time in on-boarding directors and first-time board directors need to go through an orientation on the responsibilities and how to be effective,” said Pallavi Kathuria, co-lead (diversity and inclusion practice) at Egon Zehnder.
The other question companies are asking is: what kind of value will someone from a non-business background bring?
“Companies typically look for a similar skill-set as men when it comes to women. Having said that, there is some flexibility in terms of the knowledge of the industry due to the shortage of talent. However, it is not compromise-hiring,” said Sunil Goel, managing director of recruitment firm GlobalHunt.
Some companies, especially promoter-backed companies, are taking the easy way out and appointing women members from the promoters’ family on boards. Mukesh Ambani-owned Reliance Industries Ltd in June appointed his wife Nita Ambani as a director. Similarly K.K Modi-owned Godfrey Phillips India Ltd appointed his wife, Bina Modi, to its board, in April.
That, says Biocon’s Mazumdar-Shaw, is not the way to do it. “You don’t invite someone on a board just because she is a woman. I’m not in favour of family members joining boards, just to make compliance,” she says.
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