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Published : March 05, 2015 | Author : AmudhaMurthy
Category : Company Law | Total Views : 6931 | Rating :

Final Year Law student - B.A,B.L(Hons.) from School of Excellence in Law, Chennai

A Critical Analysis Of The Need For Women Directors In Indian Companies

Indian polity is treated to be the most complicated one. Our constitution enshrines with the basic rule that there should not be inequality which is persistent in the society. Predominantly inequality exist between human beings on the basis of sex. Apart from sex the others would include caste, creed, religion etc. Human fail to treat other human at par and most of all there continues a situation that eradication of such gender inequality is highly unavoidable in a country like India. Equality has to be maintained even in employment opportunities.

However the Indian constitution enshrines with provisions which deal with the importance placed for women in workplaces too. And that women do have equal means of livelihood as compared to that of men. Other recognition includes provision for equal pay for equal workcarried out by a women, maternity relief and such other provisions.

Ill-treating women has always been a passion for men and tracing back such treatments makes us get reminded of Sati, Child marriage, Female Infanticide etc. These sorts of treatment cannot be stopped only by spreading awareness about the need for women empowerment. But this can be achieved only by instilling the art of living in any women by making herself understand what she is and the reason behind why she has been created on this earth. Not only does the Indian social institution confine women rights but it’s sparsely spread across the globe. Now that women have started proving themselves and they have initiated a step in being a part of art, science, literature, space, army etc. one such initiative is that women being a part of corporate field. Legislature has taken a very bold step in building up women participation by including provisions for women to be a part of the board in the Companies Act, 2013.

Psychologically, it can be stated that when women are employed in a company there seems to be lot of positive energy in the form of having more focus as well as diversity in the work to explore more in the work place. Many fortune 500 companies show a drastic change in the increase in their profits and their further expansion of their business.

Moreover countries such as Norway, Belgium, France, Iceland, Italy, European Union, Germany, Spain, Malaysia, United Arab Emirates, Netherlands, Austria, Israel and Finlandhave shown that due to the participation of women in their boards there has been increase in the income of the companies.

Comparison With Europe

Based on GMI data for almost 6,000 companies in 45 countries, and including historical data, the survey provides a broad and detailed assessment of global progress on gender diversity among corporate directors. The survey finds extremely slow progress in most of the world countries outside Europe, which has led on this issue through the adoption of legal mandates for the representation of women on corporate board. Europe accounts for most of the modest improvements in the representation of women on corporate boards. India has seen an increase of 1.3 percentage points in the level of female directors since 2011, a faster rate of change than in many other countries. The proportion of women on its boards is now 6.5%. Hence, this shows the need for women directors in India.

Discussion of Provisions In Indian Companies Act, 2013

Section 149(1) of Companies Act, 2013 deals with women director. It states that every company shall have board of directors who are individuals with

Minimum number of three directors in case of a public company and two directors in case of a private company and one in case of One Person Company.
A maximum of fifteen directors.

Further it is also stated that such class or classes of companies as mentioned above shall have at least one women director.

Rule 3 of Companies (Appointment and Qualification of Directors) Rules, 2014 deals with women director on the board. With regard to section 149, the following companies shall appoint at least one women director on the board. Firstly, for every listed company and every other public company having

a) Paid-up share capital of one hundred crore rupees or more or,
b) Turnover of three hundred crore rupees or more.

The paid up share capital or turnover as stated above shall be the one which is mentioned in the latest audited financial statement. Moreover any company which is incorporated under the new companies Act shall comply with the above conditions within six months from the date of incorporation. However, any company which has been incorporated under the old companies Act shall comply with such conditions within one year from the date of incorporation.

In case if there is vacancy in the post of women director, such vacancy has to be filled as early as possible and it should not be later than the next immediate board meeting or after three months from the date of the post being vacant, i.e. whichever is later.

Women on Boards Make More Return

More women on board does not only mean the mode to attract sales and production but also creates some public image. It does increase financial return as well rather than mere media attention. In terms financial returns means that the return on equity (ROE) increases. The study reveals that the board of a private sector company, run by a professional CEO with a mix of both men and women, helped ROE rise by 4.4% in 2014 over the last year. In contrast, a similar company with a men-only board saw its ROE rise by a mere.1.8% in the same period. Certain other examples would be Chanda Kochhar, who heads ICICI bank and Kiran Mazumdar Shaw, director of Biocon Limited has shown a positive difference on return on equity. All the above analysis shows that there has been an increase in women participation on the boards and also the highlight of the entire legislation is that gender diversity has been addressed through initiating a move towards women on board. Failure to address such gender diversity would lead to serious economic consequences in future. Moreover there are so many countries which leave women unrepresented. Change gets accelerated only when there is dynamism in the mind set of people. It sounds as a warm welcome by stating that “such class or classes of companies as may be prescribed, shall have at least one women director”.These words mean to say no restriction being imposed in having number of women directors on the board. In a country like India where the scope for litigation is likely to be booming in the field of corporate and IP litigation where the future would rest, such legislation would bring in more clarity in specifying the rights of different genders and thereby avoiding unamicable issues. This improves corporate transparency. However certain companies such as RPG Enterprises Ltd, Essar Group, Mahindra and Mahindra Ltd are among the large conglomerates who are looking at bringing in women from government agencies, academic and research institutions, non-profit organizations, and audit firms, as most of the eligible women in the corporate world are already part of many boards. All listed companies must have at least one woman director on their board, according to new corporate governance norms finalized by capital market regulator Securities and Exchange Board of India (SEBI).

This small proportion of directors can be only on the boards of seven listed companies, which further restricts options for companies on the lookout for women directors, this is according to SEBI’s guidelines. Henceforth, need for women director in Indian companies has become inevitable. This is a good sign for the corporate growth in the country. There are many reasons for scarcity of representation of women in senior leadership positions. Experts say that women on boards lead to more profitability and sustainability. Thus, the 2013 landmark enactment has paved way for gender diversity and more women participation.
# Article 39(a) of the Indian Constitution.
# Article 39(d) of the Indian Constitution.
# Article 42 of the Indian Constitution.
# Section 149 of the Companies Act, 2013
# A report titled the Bottom Line: Corporate Performance and Women’s Representation on Boards (2004–2008).released by Catalyst organisation in March 2011.
# A report titled Gender Diversity and Corporate Performance released by Credit Suisse Research Institute in August 2012
# May 1, 2013 in Board Diversity, Corporate Governance, Daily Viewpoint, GMI Press Releases
# GMI Press Releases-The survey was authored by Kimberly Gladman, Ph.D., CFA, Managing Director, ESG Research, and Michelle Lamb, Senior Research Associate.
# Section 149(1) of The Companies Act,2013
# Rule 3 of Companies (Appointment and Qualification of Directors) Rules,2014
# Pg no.1.184, Taxmann’s Company Rules &Forms with Company Rules Ready Reckoner, Taxmann’s publications (P.) Ltd.
# Times of India-An article “company with women board members make more money” authored by Shubham Mukherjee & Namrata Singh, TNN | October 27, 2014, 02.04AM IST
# Section 149(1) of The Companies Act, 2013.
# Live Mint- An article” Indian companies’ scout for women directors” authored by Arundhati Ramanathan-Tuesday, April 29 2014. 05 57 PM IST

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