Companies comply with Sebi order on women directors and appoint their relatives to the boards
Prahlad Rao | March 31, 2015
The intention is good but the compliance seems to be skewed and defeats the purpose. In February 2014, market regulator Securities and Exchange Board of India (Sebi) had issued a directive asking companies listed on stock exchanges to have at least one woman on the board of directors by October 2014, a deadline that was later extended to March 31 this year. But over 50% of the companies, instead of going for professionals, have elevated women relatives of their promoters to their boards.
India has over 15% working women and finding a professional in this talent pool should not be difficult process. However, Indian companies are not interested in gender diversity or in promoting independent thinking women. They opt for wives, sisters and other relatives of their owners to comply with Sebi order, at least on technical ground.
The market regulator has warned of necessary action if companies failed to comply with its directive of appointing at least one woman on their boards. With the deadline about to end, nearly 300 companies are scrambling to appoint a woman director on their boards.
“There are still a lot of companies who are non -compliant with Sebi guidelines. It is surprising that still a large number of companies haven’t found a competent women director. Such non-compliance should be condemned,” said UK Sinha, chairman, Sebi while addressing a capital market seminar organised by CII.
The Sebi chairman said that all non-compliant companies would face penal action as per Sebi provisions. The Sebi Act empowers it to take multiple actions against erring companies, which may include imposition of monetary penalty on companies and their promoters or directors, freezing of promoters shareholding and debarring the company and its executives from accessing the capital market.
If the private sector is resorting blatant nepotism by appointing relatives to the board, the public sector undertakings are no better. They are yet to find women members for their boards.
There is a strong case for balanced boards. Women board members bring better understanding of their customers and stakeholders. They bring fresh perspectives, new ideas, vigorous challenge and broad experience. This in turn leads to better decision making.
According studies, the companies with more women on their boards were found to outperform their rivals by over 40% in sales.
This is not just a gender numbers game. It is about the richness of the board as a whole, the combined contribution of a group of people with different skills and perspectives to offer, different experiences, backgrounds and life styles and who together are more able to consider issues in a rounded, holistic way and offer an attention to detail not seen on all male boards which often think the same way, and sometimes make poor decisions.
Gender diversity means: Better decision-making as a result of directors having a range of experiences and backgrounds. Women take their non-executive director roles more seriously, preparing more conscientiously for meetings. Women ask the awkward questions more often, decisions are less likely to be nodded through and so are likely to be better.
In August, 2013, the parliament approved the new Companies and ntroduced the concept of women directors on the boards of listed companies and some other class of the companies in an effort to improve governance. The objective was: Board diversity in terms of gender, professional experience and geographic experience. To foster creativity and generate new ideas; Sustainable and meaningful change in the business and image of the company by showing their seriousness towards gender sensitiveness; Improves the depth of its strategy development.
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