By now, board diversity is recognized as a need after having established that men and women bring various discrete strengths to the table. Ensuring that different communities are represented is not just for aesthetic aspects or appearances. The collusion of different voices coming together to discuss the most significant aspects that affect a company creates fairness and representation for all. All the voices heard in cohesion, clarifying stances and being empathetic to one another, is an excellent example to have at the very top of each organization.
What is board diversity?
The board of directors is chosen and nominated by shareholders through an established pattern. The representation of skill sets, experience, genders, values, and faculties should be proportionate and forward-thinking to achieve diversity in the boardroom.
Does convention hinder board diversity?
What with the political challenges of choosing leaders for the board of directors, board diversity becomes a challenge even when organizations know for a fact that diversity in the boardroom is a good thing.
Against the grain of fewer educated women compared to men, and fewer women entering (and staying in) the system of organized employment, India Inc. has documented board diversity as a genuine and safe innovation only in the last decade. KPMG’s March 2017 report declares that since 2013, real numbers show that women’s board representation is low even for the number of educated and working women India does have. Where women are hired into board positions, it’s mostly done for the sake of pegging an organization as progressive, or as a mere figurehead. It’s a common refrain among male leaders that enough qualified women are not available for promotion into higher echelons. The point is not to assign blame but to look for ways through which greater female participation in the boardroom can rise gradually from gender equality in the workplace even if it takes several years.
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Here are some of the roadblocks that board diversity cannot be programed into the system:
- The greatest reason working against a gender-balanced boardroom is that these positions do not fall open through several decades.
- Board members (both men and women) serving for only a few years and then making the way for someone else can work against the company’s best interests. It is better to have directors growing with the company steadily.
- Surveys point out that the diversity of skills is also at a low on boards in general. Audit, accounting, and finance representatives are much higher than those from marketing, human resources, diplomacy and international relations, or operations management. This is another area in which board diversity needs a better spread.
- There are not enough rewards for having women on the board of directors. The revenue metrics like shareholder value are not improved greatly by the presence of women at the top.
- Succession planning, properly done, takes several years, perhaps even a decade or more.
The above reasons are as seen from a corporate governance perspective. But other rewards have come to light only as of 2019-20. They show that other significant aspects of human capital management and women empowerment are reached by the evolution of gender-balanced boardrooms.
- Shepherding gender parity from the bottom to top ensures that employees, especially new entrants and young employees, feel more reassured about the ethos at play
- Women in leadership are known to bring a more balanced risk appetite to the business concern. Consequently, they are perceived as less risky.
- The strengths generally perceived to lie with women – such a view of the big picture, environmental-friendliness, and corporate social responsibility – translate into the boardroom.
For these reasons, the addition of women on the board of directors, or at least as independent directors, has been growing. The regulation that made all this possible is the mandate first by the Companies Act, 2013, and then by the Securities and Exchange Board of India (SEBI) that at least one woman director had to be on the boards of the top 500 companies in the country by market capitalization. As of last year, the number of women directors on the boards of Indian companies has more than doubled. Out of 628 listed companies, 55% have women directors, with several top ones such as Godrej Consumer Products, India Cements, and Apollo Hospitals having five or more women directors on their boards.
SEBI makes the unequivocal and categorical point that diversity contributes to effectiveness in the board by doing away with similarity of opinions. Being independent in thought and broad in their experience, board diversity has the same effect as diversity and inclusion at the workplace have in general. Opinions are freely challenged and the bane of ‘yes-men’ is replaced by decisions that are voted in or out purely on the basis of their merit.
Women are quick to realize the non-monetary advantages of alliances with stakeholders and can uphold them without effort. The sensitivity and panoramic view that comes with women’s natural tendency balances the shrewd concentration of their male counterparts on the economic aspects of decision-making.
Board diversity in the post-pandemic world
More than a year after the first COVID-19 case rocked the sustenance of economies in every nation, and the interdependence of economies to grow at massive scales, it is only natural that mental wellness, well-paced and well-balanced personal and professional lives are in the focus more than ever. Such balance can only be enhanced by a well-represented group of leaders at the top. They would care for aspects of long-term efficacy and business continuity by focusing on more aspects than revenue alone.
Long-term sustenance relies on a culture of balanced relationships and people from all communities and genders feeling safe in their job circumstances. This can mean anything from employees being treated fairly and equally in the day-to-day to inculcating transparency and integrity in the way the representatives of people are chosen.
Transparency denotes making the code for all department heads, senior managers, and rules of appointment public. All levels of the organization should have a visibility of the way things are managed at the top, and all stakeholders should be treated fairly and equally. These values should gradually become the norm before they claim a ring-side seat at the corporate governance policies of the company.
This starts with board diversity in which every faction and community find a voice. Gender equality in the workplace and diversity in skill sets and domain expertise are all areas that should find representation. It ensures that no one becomes alone at the top. Board diversity ensures democratic and sustainable stewardship of a going concern.
References:
- Corporate Governance and Board Diversity in Indian Companies | IndiaCSR.in | Rusen Kumar | July 26, 2020
- Towards Gender Balanced Boards | KPMG | March 2017
- India’s Boardrooms Have Only 14% Women. 4 Reasons Why That Must Change | Ungender | Karan Arora | September 16, 2020
- Regulatory nudge brings in gender diversity in boardrooms: IiAS | Mint | Jayshree P. Upadhyay | 25 May 2020
- India ranked 12th in women member presence on companies’ board globally | Live Mint | 08 Mar 2020
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