Why the law to make women board members mandatory could flop

Among the many reformative amendments of the new Companies Act is the requirement that all publicly listed companies have at least one woman board member. A noble intention, for sure, but it doesn't seem to be working out exactly as planned, Quartz reports.

FP Staff June 20, 2014 18:11:15 IST
Why the law to make women board members mandatory could flop

This article was first published in Firstbiz. 

Among the many reformative amendments of the new Companies Act is the requirement that all publicly listed companies have at least one woman board member. A noble intention, for sure, but it doesn't seem to be working out exactly as planned, Quartz reports.

While the idea behind the move was to increase diversity and help provide women with a slightly more level playing field, several promoters may be using this provision to increase their family presence on boards by nominating and appointing female relatives.

According to an AFP report, since the new law was passed, many well-known companies have been turning to female relatives to fill boardroom positions, include the fabric and fashion retailer Raymond Group, cigarettes-to-soap conglomerate Modi Group and Century Textiles and Industries.

Why the law to make women board members mandatory could flop

Representational image. Courtesy: Thinkstock

The Washington Post quotes Pranav Haldea, managing director of Prime Database, a capital market data firm, who said that at least 16 women have been made board directors in their family-owned firms since February. He said that 78 women have filled 84 board positions during the same period.

The practice hasn't gone unnoticed.

Ranjana Agarwal, India chair of the Women Corporate Directors, a global community of women directors and former president of the Ficci Ladies Organisation, told Quartz that the move helps corporates minimise dissent and keep the board as "an old boys' club."

In general, the boards of family-owned companies comprise of members of the clan - regardless of their gender.

As per the World Economic Forum Gender Gap Index, only 5 percent of working women in India make it to senior leadership positions. In comparison, the global average is 20 percent. India’s ranking in the index that covers 135 countries is a sorry 113.

A shortage of qualified and experienced women at executive levels is often given as one of the main reasons for male-heavy boards. Add to that several social hindrances that Indian women have to overcome to even begin working and the prospect of having a truly diverse boardroom any time soon doesn't seem too plausible.

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