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Women Directors on Indian Companies’ Board
26 Nov 2018

Need for appointment of women as director in Indian companies

The Indian constitution provides the right of equality and non discrimination on the basis of gender. But in Indian corporate sectors women’s are not treated at par with men and their involvement in the process of decision making is always neglected.

Based on comparison with the data available the countries outside Europe shows slow progress for the representation of women on corporate boards.

In order to remove this practice and to address the gender diversity the companies act, 2013 and SEBI regulations makes it compulsory for certain class of companies to appoint women directors.

Appointment of women director

As per section 149(3) of Companies Act, 2013 the following class of companies shall appoint at least one women director:-

1.      Every listed company

2.      Every other public company having

                     i           Paid up share capital of one hundred crore rupees or more

                   ii           Turnover of three hundred crore rupees or more

Provided that any intermittent vacancy of a women director shall be filled up by the Board at the earliest but not later than immediate next Board Meeting or three months from the date of such vacancy whichever is later.

Role of Securities Exchange Board of India (SEBI)

Regulation 17 of SEBI (Listing Obligation and disclosure) regulations also mandates the appointment of at least one women director on the board of listed companies.

Women on boards make more return

More women on board create a public image of the organization. It does increase financial return as well as media attention. The study reveals that the board of companies run by professionals with a mix of both men and women helped to raise the return for the organization.

Effect of appointment

About 12 per cent of board seats in listed Indian companies are now held by women,reflecting their rising sway in the corporate world. The numbers have risen from just 4 per cent three years ago, following a SEBI directive to have atleast one woman director.

However,The inclusion of women directors on boards has not found its full value, simply because even today, many appointees are family members of the owners, whose one qualification of being a woman does not really add value to the organization’s problem solving capabilities or creative thinking.

Further steps taken

In October 2017, a Securities and Exchange Board of India (SEBI) panel recommended inclusion of at least one “independent” woman director at all listed companies. 

Nearly 25% of the companies listed on the National Stock Exchange will have to appoint a woman independent director after the recommendations of Uday Kotak-led SEBI panel on corporate governance.

Data from Prime-Database show that among the 1,723 companies listed on the NSE, as many as 425 don’t have a women independent director on their board.

Uday Kodak Committee on gender diversity and their suggestions

Gender Diversity on the Board Current regulatory provisions:

 

The Companies Act and the rules prescribed there under require at least one woman director on the board of directors of every listed entity. The SEBI (LODR) Regulations also currently require at least one woman director on the board of a listed entity.

 

Recommendation and rationale:

 

Diversity,including gender diversity, is often seen to have a positive impact on the decision making processes of corporate boards. The Companies Act and SEBI (LODR) Regulations took a progressive step in requiring at least one woman director to be on the board of directors of listed entities. This was done asunder-representation of women on boards was a significant concern in India. Although India lags behind global markets in women participation on corporate boards,the broad reaction of corporate India on having to include at least one woman on every board has been largely positive.

Women representation on the boards of NIFTY 500 companies, which was at 5% as on March 31, 2012, increased to 13% as on March 31, 2017.

 

To further improve gender diversity on corporate boards, the Committee recommends that every

listed entity have at least one independent woman director on its board of directors.

Proposed amendments to SEBI LODR Regulations (w.e.f. October 1, 2018):

Current provisions in SEBI LODR Regulations

Proposed amended provision in SEBI LODR Regulations

Reg 17. Board of Directors

(1) The composition of board of directors of the listed entity shall be as follows:

(a) board of directors shall have an optimum

combination of executive and non-executive directors with at least one woman director and not less than fifty percent of the board of directors shall comprise of non-executive directors;

Reg 17. Board of Directors

(1) The composition of board of directors of the listed entity shall be as follows:

(a) board of directors shall have an optimum

combination of executive and non-executive directors with at least one woman as an independent director and not less than fifty percent of the board of directors shall comprise of non-executive directors;

 

Conclusion:

Women just hold 12 per cent board seats in India which is slightly lower than the global average of 15 per cent, lot more actions still to be taken to address this issue of gender diversity. It is also argued there aren’t enough women to go around and there is a dearth of women talent for boards.

However some experts believe there are enough qualified women who to join boards This is partly because everyone wants a CEO or a woman who is on another board. We forget that guys too started with their first board somewhere. There are enough qualified women available and willing to join boards.

For any query please ask to Mr. Hemant Paliwal, Managing Partner at: hemant@hpacs.com

 

DEEPAK PATHAK

ASSISTANT COMPANY SECRETARY

HPACS TEAM