By Nupur Garg
It’s 2022, and women represent only 16% of the boardrooms in NSE 200 companies. Meanwhile in the US, 32% of directors at S&P 500 companies are women, and 98% of S&P 500 boards have at least two women directors. How long before we get there?
Gender quotas for corporate India are tilting the gender balance, but progress is slow. With few women in the C-Suite and fewer still on the entrepreneurial route, the same tiny pool of female leaders keeps getting wooed for board positions. We need to bring more women into the boardroom, but how?
Smashing the glass ceiling
Quotas bring results: Voluntary boardroom quotas have been effective in Sweden, a country that prioritises gender balance. There are no penalties for not hitting the quotas, but women still hold 34.7% of the board seats there. However, a similar soft quota policy has been less successful in Spain, where women hold just 26.3% of boardroom seats.
Hard quotas have more teeth since companies face penalties for non-compliance. In France and Norway, mandatory reservations have pushed up women’s representation in the boardroom to 43.2% and 42.4% respectively.
In India, the mandatory quotas implemented by SEBI since 2013 have shown results too. By 2019, of the top-1,000 NSE enterprises, 977 companies had a women director and 835 had an independent woman director, up from just 379 and 193 companies respectively in the financial year 2013-14.
More transparency and metrics: Gender diversity at the executive level has been linked with higher profits and long-term value creation for some time now. Recently, a UK-based report from 2021 added further validation by correlating high gender diversity in FTSE 350 boardrooms with better future financial performance and higher stock returns. Now even Goldman Sachs has thrown its hat into the ring by committing to take a company public only if it has at least two diverse board members, one being a woman.
So, there are clear advantages to appointing senior women for top leadership roles. Organisations could benefit by opening up about the number of women on their boards, the nomination processes for women candidates, and general board refreshment policies. Corporate leadership should also be encouraged to set and review measurable targets for adding more women to the boardroom.
Beyond the male networks: There is an innate desire for a harmonious board where everyone gets along and is similarly aligned. I see merit in this for nobody wants an acrimonious boardroom. But when everybody thinks alike, what you’re left with is an echo chamber.
Further problems arise when leadership is fixated on not ruffling any feathers. The default action is to look for candidates within the networks of existing board members, most of whom are male and whose networks are predominantly male as well. Any new additions are likely to be men—unless the company is specifically required to look for a woman.
A networking platform for senior women that boards and corporate leaders can tap into could prove valuable in this respect. Such networks exist at the global level but there is nothing tangible yet in India.
Support for female candidates: Besides identifying and eliminating systemic barriers that stunt women from rising up the corporate ladder, companies must prioritise mentoring and coaching high-potential women by senior management. Also important is ensuring the presence of female role models in women’s networks and support groups.
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However, training alone is not enough. Board directors must actually vote qualified women candidates into leadership roles. Qualifications are important because efforts to place inexperienced women in the boardroom will only set the conversation back. Rather than lower the bar, the challenge lies in connecting high-performing senior women to board roles.
Research suggests board positions could propel women into the C-Suite. A 2019 study found that significantly more women CEOs had prior board experience vis-à-vis their male counterparts. Interestingly, only 18% of the women CEOs recruited from outside the company had a CEO background as against 52% of male CEOs. Board experience could serve as an alternate qualification for female contenders.
Companies gain when women come onboard
A Credit Suisse report last year noted that gender diversity in leadership roles is positively correlated with higher stock prices and returns on capital. Moreover, companies with the best-performing stocks often have better diversity in both the boardroom and the C-Suite.
If there is a lesson here, it’s that women directors are beneficial for companies. Policies that bring gender diversity in the boardroom are not just about women’s empowerment. They also open up the board to new perspectives and ways of connecting with customers, many of whom are women. And that’s bound to be good for the corporate bottom line.
(The author is founder – WinPE. Views expressed are personal.)