New Manager

Why corporates need more women on board

Rekha Sethi | Updated on March 09, 2018 Published on April 08, 2014


Gender-diverse boards deliver higher returns on equity

In today’s world, women are seriously under-represented at the highest levels of management. Currently, only 16.9 per cent of Fortune 500 boards have women on them. The percentage of women directors in the Fortune 500 companies has remained flat – at 16.6 per cent in 2012 and 16.1 per cent in 2011). In the APAC region, a study by the Korn Ferry Institute found that there were no women on more than 70 per cent of corporate boards in six prominent economies – India, China, Hong Kong, Malaysia, Singapore and New Zealand.

Even tokenism helps

In a perfect world, gender diversity at the board level would happen naturally as women would move up corporate hierarchies, just like men, and graduate to board positions by their sheer knowledge and achievements. Since that has not happened, these ratios need to be forced into a new configuration at the workplace in the interest of the enterprise.

A number of countries have tried to devise remedies, from legislative implementation of quotas to regulatory agency reporting requirements to increase women’s representation on boards. Closer home too, the Indian Government has notified the rules related to Chapter 11 of the new Companies Act, guaranteeing minimum gender diversity on the boards of Indian companies.

Having at least one women director on the board may be considered tokenism by some, but it is a necessary and significant step to help organisations appreciate and realise what they have been missing in corporate vision and strategy.

It also impacts the way companies look at the talent pipeline and opens up new opportunities for women in the organisation. A recent study by the consulting firm Caliper found that women leaders have stronger interpersonal skills than their male counterparts. These skills are conducive to today's diverse workplace where information is shared freely and collaboration is vital.

Research in the US and Europe has shown that gender-diverse boards are integral for better financial performance and improved governance.

A Credit Suisse Research Institute study of 2,360 companies from 2005 to 2012 showed that companies with one or more women on their boards have delivered higher returns on equity, lower gearing, better growth and higher price-to-book value multiples. This indicates a gender-diverse board’s capacity for better risk management and value protection.

The Norway example

Quotas, despite the stigma attached to them, seem to be the way to force change quickly. Norway has proved that a quota for women on corporate boards can level the field quickly and irrevocably, provided the quota is combined with training programmes to prepare women for such roles.

Norway achieved 40 per cent women’s participation on boards within just five years, between 2003 and 2008. Importantly, the threat of quota prompted voluntary action in Norway’s neighbourhood.

In Sweden, for example, women’s presence on boards improved from a mere six per cent to 20 per cent during the same period. Now, such quotas are being considered among most EU countries. India can also learn from that experience.

However, as is visible now, Indian companies are struggling to find suitably qualified women to fill even the token quota. The problem actually lies in the lack of leadership opportunities for women at formative levels.

Barring exceptions, like ICICI Bank and a few others, Indian companies have not built the pipeline of women contenders for top jobs. Many talented and qualified women get herded into supporting functions, such as HR, PR and CSR.

There are some steps women can take themselves to avoid the bottlenecks holding them back from leadership positions.

More prominent business women need to come forward as role models and mentors and share their knowledge and experience with those seeking to mirror their success. To get more women on boards in a sustainable way, women – and employers - must eliminate limiting beliefs about women’s capability to do the top jobs.

Mentoring, skills and personal impact training can build confidence and minimise self-doubt. Furthermore, women network far less than men; to increase their level of exposure, women must treat both traditional and social media networking as an essential business activity, to build relationships and promote themselves.

Economic benefits

In the emerging knowledge economy, gender segregation at any level of work is not merely socially unjust but also a humongous waste of a vital economic resources.

According to Goldman Sachs, if the employment rates of men and women could be levelled, US GDP would grow by nine per cent and, EU’s economy by 13 per cent and Japan’s by 16 per cent.

Equal opportunity is not an option but a necessity. A country cannot hope to be competitive and prosperous by under-utilising it’s most important resource – its people.

The women’s quota on corporate boards in India is a small step that has the potential to break down gender stereotypes at the workplace and allow equal opportunities to all.

While old-school thinking will slowly phase out as board rooms open up, it is also up to us women to grab the opportunity and be the harbingers of change.

The writer is Director-General, All India Management Association.

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Published on April 08, 2014
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