The issue of representation of women in Indian corporate sector has been an ongoing issue. And Securities and Exchange Board of India (SEBI) wants to change the mindset now.
In a clear cut indication that some concrete action would be taken against those companies which still haven’t appointed any women directors, SEBI Chairman Ajay Tyagi has said that penalties would be imposed now.
Women Representation In Companies: The Rule & Reality
As per The Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015, there should be at least one women director in every registered company inside India.
This was meant to be a rule since April 1st, 2014, but was later extended to April 1, 2015.
However, a recent report has been prepared by proxy firm Institutional Investor Advisory Services and Prime Database Group, which states that 15 of the top 500 companies in India, also called NIFTY 500, have not a single woman director.
Overall, women representation in the NIFTY 500 companies have now reached 13%, from a mere 5% in 2012, but still, we are way behind. Norway has 39% women representation while it is 34% in France, 23% in the UK and 21% in the USA.
SEBI Chairman Ajay Tyagi said, “What we need is a change in mindset. If one goes with an open mind, the representation of women on boards will be much higher,”
Are Women Being Given Actual Power?
As per the study on the state of women in Indian corporate sector, conducted by proxy firm Institutional Investor Advisory Services and Prime Database Group, a total of 4690 women professionals who are representing the board of directors at Indian companies were surveyed.
And a pretty interesting result came out: Very few women are actually being given some authority and power, while being represented in the board. Rest are all mere formalities, so as to fulfill the SEBI requirements.
While speaking on the launch of the report, SEBI Chairman said, “We will examine whether women should be independent director or not as the representation of women on boards improve.”, adding, “It is a very difficult issue and various other regulators including the government have to be brought in. We are committed to dig deeper into this issue..”
If we see the numbers, then we will find that 40% of the women directors are not independent, and they have been given very less authority to manage day to day operations of the registered company.
14% have executive roles, 6% are nominee directors, while only 8% are directors were non-executive promoter representatives, as per the report.
SEBI wants more women representation in corporate boards, because this means more productivity as well.
As per IMF study, replacing one man with another woman increases return on assets (ROAs) by 813 basis points. A 2015 MSCI study also found that a company with female leadership, which is atleast three women directors, generated a return on equity of 10.1%, versus 7.4% without it.
Arun Duggal, co-founder, Women on Corporate Boards (WCB) mentorship programme, and chairman, ICRA said, “Corporate India will soon find that this diversity is not only to meet the regulation but to help improve the performance of a company ,”
As per SEBI’s 2015 circular, a fine of Rs 50,000 to Rs 1.4 lakh, along with Rs 5000 penalty per day was planned to impose, if any company fails to appoint atleast one women director. However, in the absence of any clear cut guidelines, the imposition of these fines couldn’t happen.
But now, it seems SEBI is dead serious on this issue, and some concrete action would be taken very soon."Only 13% Women Representation In The NIFTY 500 Companies; SEBI Asks Exchanges To Impose Fine!",