It helps to have more women on board

The representation of women on corporate boards has been widely debated in seminars and conferences across the world. Experts have highlighted the impact of gender diversity on corporate performance, emphasising the advantages of collective wisdom through female participation. Women on many corporate boards have demonstrated their capabilities through their effective contribution. Having women on boards offers distinct advantages: it brings diverse perspectives, greater intuitiveness, and a more collaborative leadership style. A growing body of academic research supports the link between gender diversity and improved financial performance. 

A study conducted by McKinsey suggests that women’s participation enhances organisational performance, with one of the biggest advantages being participative decision-making. Further, the intellectual stimulation within the boardroom improves with gender diversity. Women also contribute to more effective communication, and their collective wisdom leads to better decision-making.

Women bring qualities such as sensitivity, sensibility, dexterity, and patience—attributes essential for effective leadership. Patience and perseverance, in particular, are defining traits of successful leaders.

There is no shortage of qualified and experienced women capable of assuming roles of corporate directors. Their ability to collaborate with board members is unquestionable, and they can contribute meaningfully to boardroom discussions. Gender diversity in the boardroom is a strategic advantage, not just a regulatory requirement. 

A study by the International Monetary Fund (IMF) indicates that companies with more women in senior positions tend to experience significantly higher economic benefits.

The legislative intent also favours gender diversity in the corporate boardrooms. The Indian Companies Act, 2013, mandates the appointment of at least one woman director for: a) All listed public companies; b) Every public company with a paid-up capital of at least Rs 100 crore; c) Every public company with a turnover of at least Rs 300 crore. 

This requirement helps break traditional gender stereotypes, promotes gender balance, and enhances boardroom effectiveness. While this mandate may seem relatively liberal compared to stricter global norms, it is nonetheless a welcome step.

According to the PRIME database, women constitute only 17% of board directors in India, compared to the global average of 19.7%. However, certain sectors—such as healthcare, IT, and telecom—have fared better in gender representation.

Encouragingly, 60 per cent of women directors hold independent directorships, dispelling concerns that companies would comply with gender diversity mandates by appointing relatives of board members. Some forward-thinking companies appointed women directors even before the statutory requirement was introduced.

Despite progress, the representation of women in top corporate positions remains disappointing. According to the PRIME Database, women accounted for only 21.8 per cent of top leadership roles in 2023.

Among board committees, the Corporate Social Responsibility (CSR) Committee has the highest proportion of women, followed by Audit Committees.

A global comparison reveals that European markets have demonstrated leadership in promoting gender diversity. Norway was the first country to set a high minimum threshold limit—at least 40 per cent women board members. Non-compliance attracts regulatory action. Other countries, including Germany, France, Belgium, Denmark, and Italy, also have adopted this model, resulting in a significant increase in the number of women directors. France accounts for 43.2 per cent of women directors.

To fully realise the potential of gender diversity, companies in India must go beyond the stipulated minimum of one woman director on the board. Companies must have at least one woman independent director. Further, the statutory minimum threshold limit for female representation must be progressively enhanced. This will also enhance the overall governance practice of corporates. Companies like Infosys have more than the stipulated number of women directors.

India has made a promising beginning in terms of gender diversity. Though India is one of the first developing countries to take up the issue of women’s representation on the board, there is a long way to go when compared to developed economies.

Companies in India must go beyond the statutory requirement to reap the dividends of gender diversity. What is required is a shift in the corporate mindset.

(The writer is a professor and director at MQI College of Management, Bengaluru)

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.