When the Companies Act of 2013 prescribed that companies of a certain category should have at least one woman director on their boards, it was considered a good step to ensure better gender representation at top corporate decision-making levels. But most companies have not acted on the provision even after the deadline for compliance passed in March this year, and the government is thinking of taking action against them. It has issued notices to many companies to explain why they failed to implement the law. Appropriate action, including imposition of penalties, may be taken for non-compliance. The government has also sought information from SEBI on any action taken against companies for failure to abide by the provision. The law has mandated that companies with a paid-up share capital of Rs 100 crore and above or a minimum turnover of Rs 300 crore should have a woman on the board of directors.
Mandatory reservation is a tool often adopted by governments to give fair representation to social groups in fields like education, on official bodies and institutions and in other forums. Social and other prejudices on the part of authorities and decision-makers and backwardness resulting from historical oppression of some sections call for corrective actions like mandatory representation. While there is greater gender diversity in workplaces, representation for women is very poor at the board level. The argument that eligible women are not available is often an excuse. When women have excelled themselves is all professions, they cannot be considered lacking in qualities for board room positions. The case for more women directors is not just one for gender equality. Surveys have shown that companies with greater representation of women on their boards have performed better in terms of business than others with less representation. Such companies have also been less involved in problems like fraud and financial malpractices. Corporate governance has generally been better in such companies.
The need to have more women on companies’ boards has engaged the attention of all countries. Female membership in corporate boards is just over 10 per cent in the world, while women form half of the population. Much of this percentage is accounted for by developed countries. Even in some of those countries like Germany there is legally mandated quota for women on companies’ boards. Since most companies will not willingly appoint women on their boards and it may take many decades for women to secure fair representation by fighting for it, a legal mandate is needed for it. The government should enforce it.