Going beyond the Companies Act in women’s representation will help corporates meet both business and CSR goals

The new Companies Act has made it mandatory to appoint women directors. As a result the search is on for experienced candidates with domain or functional skills and cultural compatibility to sit on the boards of companies. According to the Ministry of Company Affairs, there were 4,83,103 women directors in 2013 — comprising a dismal 7 per cent of the total number of board seats. Compare this with the top 25 countries where the share ranges from 8 to 36 per cent. India has not come up to even half the US’ proportion.

With the glass ceiling effect being a barrier to the advancement of women in our country, they have only recently made an entry into senior management posts. The objective of the Companies Act 2013 is enhanced corporate governance, and women directors are expected to contribute as catalysts in this process. For example, women demonstrate a democratic leadership style which boosts motivation and helps increase cooperation from the management.

Women also believe in a collaborative approach and by being good listeners they encourage participative decision-making and problem-solving. Women are considered to be proactive in anticipating risks and issues that could arise, and thereby help strengthen risk management practices.

Women directors are able to effectively oversee implementation of policies and processes, as they tend to closely follow up on deviations, be tough on exceptions, and ensure timely adherence to the right process.

Patience pays

In the area of corporate social responsibility, women directors can contribute significantly to their organisations, right from initiating CSR initiatives, setting priorities and choosing projects to organising the work plan, deploying management personnel and monitoring progress against targeted achievements. Women are known for their patience and perseverance, which is a prerequisite for these initiatives as they are sometimes challenging and demand long-drawn action to reach the required milestones and make the desired impact.

A study conducted by Catalyst and Harvard Business School states that companies with more women corporate officers donated significantly more funds, and for each percentage point increase in women corporate officers, yearly donations increased by $5.7 million -- which proves that more women leaders means a higher level of corporate social responsibility contribution.

The role of women directors in implementing the national voluntary guidelines on the social, environmental and economical eesponsibility of business is phenomenal. Managing ethics in the workplace, overseeing the sustainability reporting mechanism and initiatives on consumer awareness by companies could also be useful areas of supervision by women directors.

Women directors can also review recruitment and human resource policies to ensure gender diversity, better work-life balance, and the creation of a special and harassment-free workplace for women. They can lead their companies to develop strong human-focussed operating plans that would contribute to the sustainability of all business operations and the health and welfare of their employees.

They are better placed to supervise mechanisms in respect of assessing and managing human rights and developing avenues for the differently-abled. Likewise, they can review and assess the adequacy of grievances to address customer concerns and feedback on products from service by companies.

Various survey results have proved that boards and managements with gender diversity have experienced enhanced corporate performance, higher return on equity, return on sales and return on capital employed.

This regulation is only an initial push but the actual implementation would depend on the whole-hearted acceptance of the role of women directors by promoters and shareholders in general. This should not be seen as compliance, but necessity.

The writer is a partner at Deloitte Haskins & Sells

(This article was published on March 17, 2014)
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