It’s appalling how most companies hire women directors only to comply

The need to comply seems to have become a stronger driver of gender diversity than the belief that it adds value or creates the brand image of a progressive organisation.

The Companies Act, 2013 has made several important provisions that modernise India’s corporate governance system. Amongst others, employing women directors on the boards of certain companies is seen as a welcome move towards gender-balanced boards. However, that being a mandate, most companies are only hiring women directors to comply.

KPMG in India’s Board Leadership Centre and Women Corporate Directors India (WCD) conducted a survey among more than 100 tenured corporate leaders. The survey report titled, ‘Towards Gender Balanced Boards’, revealed that over 50 per cent of the respondents indicate that companies are hiring women directors primarily to comply with the regulatory mandate. So much so, that the need to comply seems to have become a stronger driver of gender diversity than the belief that it adds value or creates the brand image of a progressive organisation.

According to the report, the proportion of women directors between 2010 and 2016 has increased by 180 per cent. However, there still is room for greater diversity and to achieve that there needs to be a change of mindsets, voluntary diversity targets, alignment between board composition and strategy, and looking beyond personal networks for director appointments.

In line with the survey results, and emphasising on the need to go beyond simply complying with a corporate governance mandate, while hiring women board directors, Mritunjay Kapur, partner and head-risk consulting, KPMG in India said, “In today’s constantly evolving and volatile business world, decision making in boardrooms has become extremely complex and dynamic. The need of the hour is a more diverse set of board members to lend a balance and mix of skillsets. Gender diversity is a significant aspect of a balanced board, and while the legislation has played a significant part in institutionalising it, a lot more needs to be done to ensure substance over form, to fully reap its benefits.”

Over 50 per cent of the respondents indicate that companies are hiring women directors primarily to comply with the regulatory mandate. So much so, that the need to comply seems to have become a stronger driver of gender diversity than the belief that it adds value or creates the brand image of a progressive organisation.

As per the report, the reason behind many companies hiring women directors only to comply, could be due to the lack of companies with formal diversity/plans/targets (75 per cent) and because a large number of these organisations are beset with traditional gender stereotypes (69 per cent).

That said, the report also reveals that although a majority respondents agree that women directors contribute significantly to boardroom discussion, most companies lack a formal induction programme for directors. This means that directors – both men and women – may have to take proactive steps on their own to become familiar with the organisation.

As per the report, a significant proportion of the male respondents (over 80 per cent) agree that women are as qualified / experienced as their male peers and contribute well to boardroom discussions (85 per cent). The women respondents also overwhelmingly (98 per cent) agreed that they are able to provide insights on strategic matters.

In line with that, Pankaj Arora, partner, governance risk and compliance services, KPMG in India says, “According to our survey report, while 85 per cent men feel women are capable enough and contribute equally to boardroom discussions, we still see a dearth of women leaders in boardrooms beyond the regulatory mandate. While the mandate has given women a voice in the boardroom, we still have a long way to go for a truly gender-balanced board.”

Further strengthening the belief that women in the boardroom impact the business positively, the survey results also show that 68 per cent respondents largely agree that women improve board dynamics by creating a positive environment (68 per cent) and are better at providing inputs/ feedback in a constructive manner (51 per cent)—traits that help in decision making at the board level. However, men and women respondents differ in their opinions on the other traits/advantages that women bring to the table.

While nearly half of the male respondents agree that women bring in a comparatively balanced view of risks, there is little agreement between them on other traits that women bring to the table. On the contrary, a significant majority of women respondents unequivocally agreed that women: (a) create a positive environment, (b) have a more balanced view of risks and (c) are better at conflict management.

Among other findings, the survey also reveals that as much as 89 per cent of the women respondents considered ‘expertise in a particular domain’ as a pre-requisite for their board membership. However, only half of these women identified ‘business contacts and networks’ as a prerequisite. On the other hand, since 86 per cent of respondents indicate that companies leverage internal networks/peer groups to hire new directors, women with strong professional networks tend to be at an advantage.

In conclusion, if women aspire to hold prominent board positions in corporate India, then it is important for them to not only build their domain knowledge but also expand their professional networks. They should consider ways to create opportunities for others as professional relationships with those individuals might translate into boardroom opportunities for themselves. “They should also constantly seek ways to update themselves on key industry trends, regulatory developments, emerging technologies and the evolving risk landscape,” the report suggests.