Women as decision makers can boost corporates: A central banker explains

As Lagarde said, the world of business and finance would have been, probably, different had it 'Lehman Sisters' and not 'Lehman Brothers'

Dinesh Unnikrishnan February 11, 2015 16:34:10 IST
Women as decision makers can boost corporates: A central banker explains

Many a problems in the complex world of business and finance that the world has witnessed are evidently associated with the high-risk-taking nature of profit-hungry corporations. But, then risk taking is a necessary evil, because if you hesitate, you may be missing a chance to earn greater profit.

Women as decision makers can boost corporates A central banker explains

IMF chief, Christine Lagarde. AFP

Finding a middle path — an ideal balancing between the two — has been difficult even for the best management gurus in the world. But here's an viable solution to the problem: engage more women in the board rooms. And it came from a totally unexpected quarter — from a central banker.

While speaking at the national risk summit of Confederation of Indian Industries in Mumbai on Tuesday, HR Khan, RBI’s deputy governor, told corporates that one of the best ways to mitigate risks in the corporate world is to increase women's involvement in the decision making process. Reason? The body chemistry of men, by design, encourages them embrace high risks, inviting problems and creating crises, whereas that isn’t the case with women decision makers, Khan said citing some research in behavioural finance.

“We can even think of gender balance in decision making, the mostly ignored aspect of the “inclusiveness” discussions,” said Khan, who recalled a light comment from IMF chief Christine Lagarde, who said “had Lehman Brothers been Lehman Sisters today’s economic crisis would look quite different”.

“That might be a quip, but we have seen the success of Mohammed Younus who turned to women to make ‘micro finance’ what it is today,” said Khan.

Women empowerment could be a favourite topic of politicians. Prime Minister Narendra Modi and his rival Aam Admi Party chief Arvind Kejriwal (despite the obvious masculine twist in his party's name) are likely to agree on a thing or two about the issue. Even Congress vice-president Rahul Gandhi would not hesitate to support. But, Khan has proved he too has an opinion and a weighty one at that.

To put Khan's comments in perspective, Indian companies have a shoddy record of women's representation on their boards. Capital markets regulator Sebi has mandated that all listed companies should have at least one woman member on board by 1 April 2015. This report in The Times of India says that as of September, when Sebi extended the deadline for women representation on boards by six months to 1 April 2015, only 500 listed companies on NSE complied with the directive.

Despite six long decades after independence, things haven’t improved significantly for the working women in India.

According to a November 2014 finding of the Central Statistics Office, women constitute a little less than the half of the economically active population, but their contribution to overall economic activity is much lower low.

Going by 2011 Census, the workforce participation rate for females is 25.51 percent against 53.26 percent in the case of males. In contrast to urban areas, rural areas have a better female workforce participation rate of 30.02 percent, compared with 53.03 percent for males. In the urban segment, the participation rate of females trails at 15.44 percent against 53.76 percent for males

As Lagarde (jokingly) said, the world of business and finance would have been, probably, a much better place and some of the major crises could have been averted if more “Lehman Sisters” than ‘Lehman Brothers” existed in the world.

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