-Dr Honey Sharma
Introduction
In the evolving landscape of corporate social responsibility, businesses are extending beyond their profit-centric missions to embrace broader societal obligations. The enactment of Section 149(1) of the Companies Act 2013, alongside Rule 3 of the Companies (Appointment and Qualifications of Directors) Rules 2014 (hereinafter, ‘2014 Rules’), marks a pivotal move towards gender inclusivity. This legislation mandates the inclusion of at least one woman director in the boardrooms of listed companies and other public companies meeting specific financial criteria. Initially, this led to the nominal appointment of female directors, often from the families of existing board members, without ensuring their active engagement or expertise in corporate governance. This article examines these developments, analyses the subsequent regulatory adjustments by SEBI (Securities and Exchange Board of India) in 2019 and 2020, and proposes measures to address the remaining challenges.
Regulatory Evolution and Its Impact
The Indian law mandates the inclusion of women in the boardrooms of companies as a significant step toward promoting gender diversity and inclusivity in corporate governance. This requirement serves multiple purposes, beginning with enhancing gender diversity, which brings diverse perspectives, creativity, and innovation to the decision-making process.
Studies have demonstrated that companies with gender-diverse boards exhibit better financial performance, attributing this success to improved corporate governance and ethical standards. The mandate also aligns with broader societal goals of achieving gender equality, providing women equal opportunities to partake in leadership roles and thereby addressing gender disparities in the workplace. Enshrined in the Companies Act of 2013, alongside 2014 Rules, this legal stipulation underscores the importance of adhering to modern governance practices that mirror global standards. Furthermore, it aims to catalyze a cultural shift towards recognizing and valuing the contributions of women in leadership positions, challenging longstanding stereotypes and biases. Ultimately, this initiative not only fosters the economic empowerment of women but also contributes to the wider social and economic advancement, ensuring a more inclusive and prosperous corporate landscape in India.
Acknowledging the loopholes in initial implementations, SEBI and the Ministry of Corporate Affairs revised the regulations to strengthen the role of women in corporate leadership. By 2020, the mandate expanded to require the top 1000 listed companies to appoint at least one independent female director. The criteria for independence, as outlined in Section 149 of the Companies Act 2013, ensure that directors maintain no personal or financial affiliations with other board members. An E&Y report highlights a significant rise in female board representation from 6% to 18% over a decade, evidencing progress yet underscoring the need for further enhancement.
Analytical Overview of Women Directors in India’s Top Companies
Despite strides towards gender parity, the representation of women in the boardrooms of India’s premier companies remains disproportionately low. An analysis of the top 10 companies by market valuation reveals a stark imbalance, with Reliance Industries and others not achieving parity, often meeting legal requirements rather than fostering genuine inclusivity. This disparity is not reflective of the gender distribution in the population, indicating a significant gap in corporate governance. The same can be seen in the table below-
| S. No | Name of Company | Total no. of Directors | No. of Women Directors |
| 1 | Reliance Industries | 14 | 2 |
| 2 | TATA Consultancy Services (TCS) | 13 | 2 |
| 3 | HDFC Bank | 12 | 3 |
| 4 | ICICI Bank | 13 | 2 |
| 5 | Infosys | 9 | 2 |
| 6 | Bharti Airtel | 10 | 3 |
| 7 | State Bank of India | 13 | 1 |
| 8 | LIC India | 15 | 1 |
| 9 | Hindustan Unilever (HUL) | 10 | 1 |
| 10 | ITC | 16 | 3 |
Conclusion
From an Indian perspective, the increased presence of women in boardrooms marks a notable achievement. However, when viewed globally, it’s clear that considerable efforts are still required to achieve true gender neutrality. The current representation of women in top companies falls significantly short of parity, with a concentration of directorships among older women. To close this gap, it’s imperative for regulatory bodies, alongside societal and legal frameworks, to foster environments that encourage and support the involvement of women, especially younger generations, in corporate leadership roles. Implementing strategic amendments and promoting social acceptance are critical steps toward bridging the gender divide in Indian boardrooms, ensuring a balanced and inclusive corporate governance landscape.
Image source: https://thewire.in/women/despite-talk-of-diversity-women-still-a-minority-in-indian-boardrooms
The opinion/thoughts/ideas or any view of the author expressed and published on the VIPS Law Blog is not endorsed by the institution and the institution shall not be held responsible or accountable for the opinion expressed by the author on the VIPS Law Blog.
[deemed to be published on March 31, 2024]
[The author is an Assistant Professor at Vivekananda School of Law and Legal Studies, Vivekananda Institute of Professional Studies- Technical Campus]
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