Private sector affirmative action

Written by YRK Reddy | Updated: Jul 21 2007, 10:34am hrs
The Chairman of the National Commission for Scheduled Castes has reportedly told media that assurances of voluntary affirmative action by India Inc may be a farce. He supported the idea of compulsive legislation. Earlier, industry bodies have informed the PMO that they have already adopted affirmative action on a voluntary basis and have good results to show. Voluntary action is more sustainable, they assert. Several leading companies have reported employment of Dalits in larger numbers than any law would have required. Software leaders such as Infosys have taken up special programmes to train SC/ST candidates. Assocham, Ficci and CII have reportedly taken up a slew of actions, including the creation of a corpus for skill enhancement, adoption of industrial training institutes and using advocacy to promote affirmative action.

Despite these assurances, there is indeed historical and chronic resistance to affirmative action among most employers. This makes legislation more appealing. The problem, however, is that the government has no assured way of enforcing it, for technical and infrastructural reasons. An affirmative action law exists for government jobs, but the quotas remain mostly unfilled at state-owned enterprises and banks. Some years ago, the estimate was that 54% of the SC/ST quotas in the government remain unfilled. In state-owned enterprises, nearly 80% remain unfilled. The figure for PSBs is 45%. At the university level, only a fraction of SCs/STs occupy teaching positions. The standard explanation is that there are not enough qualified candidates, and that education and skill enhancement projects must be undertaken to enable better supply. This may be true to an extent. There is also another unexplored reasonthat many minorities and Dalits have career preferences at odds with where the government may want to see them. Thus, several sectors fail to attract sufficient applications from them.

In many countries, affirmative action is supported by public policy, incentives to the private sector, skill enhancement and the like. Thus, over time, companies have begun to see affirmative action as a part of their social responsibilitydemanded by investors, many of whom now operate on diversity checklists. The general approach has been to state the companys policy on affirmative action, set targets, report periodically on the progress and seek shareholder endorsement. The entire process builds an explicit public commitment. This indeed has been the way global corporations have progressed on the employment of groups that have been historically discriminated against.

There is enough international evidence to show that compulsory affirmative action has indeed failed all around without exception. At the same time, there is not enough to say that all companies warm up easily to voluntary action. It is thus no wonder that India Inc is uncomfortable with the governments request for employment data of SCs and STs in annual reports.

The government may now consider a middle path of first targeting the listed companies through a combination of regulation and recognition for those in compliance. The regulatory approach can only be tried if Sebi thought it fit to amend Clause 49 of the listing agreement to require listed companies to state their policy on affirmative action in providing jobs to identified categories (women, Dalits, physically handicapped, ex-servicemen and so on, without stipulating the types or quotas); the current numbers in different skillsets; targets if any, and the progress made. International investors, including the likes of the IFC, ADB and leading pension funds, encourage such reporting and disclosure, along with safety, health and environmental standards. In many countries, such reporting is an expected norm, and companies are required to explain and justify if they have not complied with such reporting. Often, this is taken up for debate at shareholder meetings.

It is another matter that most of the listed companies have not yet complied fully with corporate governance requirementsbut in this case, for want of any better alternative, we may let hope prevail over experience.