Note: This is a reproduction of the article that appeared in the
Economic Times
Corporate leaders in India
have been watching the new Companies Bill’s passage through the houses of
parliament closely – it was passed by Rajya Sabha today. It had already been
passed by the Lok Sabha previously. The bill mandates at least one woman on the
board of a certain
class of companies—to be determined by the rules that are being framed potentially
based on market capitalization. While
there are murmurings of quotas, in reality, this is a progressive step that
continues the move to increased discipline in governance and an innovation
orientation.
Apart
from the famous McKinsey study of 2007, multiple studies in diverse countries
have made the case for women on boards. For example, the 2011 study of Dutch
companies by M. Luckerath-Rovers of Nyenrode University, showed that companies
with female directors performed better, financially, than those that did not.
The research argues that besides governance roles, Boards are a critical
linkage mechanism to the broader environment, and to that extent diversity is
important for all four linking features they establish – understanding
otherwise illusive information, communicating to the environment, getting
commitments of support from key external stakeholders and legitimizing in the
eyes of partners and current/future employees. This last feature is a critical
one in the Indian context, where firms struggle with the retention of key
talent.
Also,
consider this. A recent study by Booz & Company estimates that if Indian
women could achieve employment rates equal to men, the country’s GDP would
increase by 27 percent.
In
addition, emerging research from the Center for Talent Innovation has strongly
correlated diverse boards and diverse leadership with innovation and growth in
market share. The research will be public in September, but we’re talking
double digit deltas when compared with companies with non-diverse leadership.
India
has 5% of boards having women representatives, as against China at 8%, the US
at 15% and Norway at 35%. Pretty dismal numbers. India’s most critical issue is
that the pipeline is challenged. The research from the Center for Talent
Innovation has shown that there has been a significant Off Ramp issue as women
drop out at mid-management levels due to a combination of pull factors (societal
expectations, the pressure to be the care provider to children and to parents,
the lack of infrastructure for childcare and education, etc.) and push factors
- unfriendly work environments play a significant role: 72 percent of Indian
women professionals leave because their careers are not satisfying or
enjoyable; 66 percent leave because they feel their career progression is
stalled.
The
good news: An overwhelming 91 percent of Indian women want to return to work,
similar to the United States (89 percent) and significantly more than Germany
(78 percent).
However,
there’s bad news for employers: 72 percent do not want to return to their
former employer. There is a stereotype of success – for example, 73 percent of
women at multinational companies and 55 percent at Indian companies say they
need to compromise their authenticity to conform to their company’s standards
of executive presence, which is often a male vision of what excellence looks
like.
Hence,
such an initiative can have a significant directional impact. Larry Senn first
wrote about the “Shadow of the Leader” in 1970. It gestures at the reality of
how leaders through their likes, dislikes, treatment of subordinates, language
and idioms, personal preferences, beliefs and values tends to shape the
characteristics, culture and ways of doing business in the organization. When
you have a highly male leadership, there are consequent behaviors and norms
that emerge that tacitly exclude – think of the “let’s do business over a round
of golf” or “over a drink” and you’ll get the picture of how excluded an
average Indian woman leader might be. The more women leaders we have to set a
tone of “let’s make the decision over lunch” the more inclusive such practices
will get.
A word of
caution – there is much written about how difficult it can be for a
single representative of a minority (be it a woman, minority, young leader or a
different capability like a non-engineer in a group of engineers) to be heard.
I will watch this space closely to see how the first generation of brave
business leaders fare, as they make inroads into large promoter and
family-controlled boards and boards that have never had a tradition of
engagement with diversity.
