Author Name:   harshalmorwale

Companies Act, 2013 has new features which make it necessary for companies to add at least one woman in Board of directors but is it really working?

Has Companies Act, 2013 really enhanced position of women in corporate world?

At the start of this millennium, people of all the democracies all over the world had a dream in those eyes – To tear all the boundaries, destroy all the inequalities in the society and establish an equal and justly community. World has always been, diseased with caste system, gender bias and economical differences. But as I mentioned, we are trying to change and one of the important part of this change is “Companies Act, 2013”. Companies Act, 2013 has made provisions for gender equality, but are the corporate giants skirting these provisions?

New provisions about woman in Companies Act, 2013

Section 149 (1) of Companies Act, 2013[1] makes it necessary for the listed companies and certain other public companies to appoint at least 1 woman director on its board. Companies incorporated under Companies Act, 2013 shall be required to comply with this provision within 6 months from date of incorporation. In case of companies incorporated under Companies Act, 1956, companies are required to comply with the provision within a period of 1 year from the commencement of the act.

Why are these provisions added to the act?
Gender bias has been the problem not only in India, but even in developed countries like USA, UK, etc. So, yes there’s much scope for us to change. It’s time we give our female counterparts equal opportunities for betterment of humanity. To reduce this gender bias a provision in law can prove enough. And there might be a question in your mind do they really add value to the company? Answer is in the next point.

Do women on the board of directors really add significance?

According to a research paper –“Women on Boards of Directors" [2], presence of women on board of directors appears to have a positive influence on shareholder value at the global level. Also according to the report of research organization “Catalyst” [3] - Fortune 500 companies with the highest representation of women board directors attained significantly higher financial performance, on average, than those with the lowest representation of women board directors. So, yes inclusion of women on board of directors does add value to company’s financial performance.

Has the act really augmented the position of women in Indian Corporate Jungle?
The Act was really supposed to improve the position of women or dignify them but still, after one year of the commencement of the Act we’re skeptical about it.

The reasons behind it? Let’s see-
1. According to a report published on Economic Times’ online edition on Jun 10, 2014 –“India Inc still favours women of family, friends or prefer well-known names” [4]. The report mentions the name of several companies and their recently appointed women directors, who are either too popular or a family member. We can clearly see here, may be the competent women are not securing the spots here.

2. Only 4% of Indian company directors are women according to a report [5]. India has two companies in the Fortune 500, Reliance Industries and Indian Oil, but only one of their total of 30 directors is a woman, the report noted.

3. In August, 2014 just 2 months away from deadline of compliance of condition to appoint women on board of directors, 904 listed companies were yet to appoint women directors [6]. This non-compliance was a serious issue until the Securities and Exchange Board of India (Sebi) [7] threw a lifeline at India Inc extending the deadline till April, 2015. The point here to consider is, do these corporate giants still consider the conditions seriously, because it clearly looks like they don’t.

Last Word
Companies Act, 2013 has done its part, by putting provisions but now it’s up to these companies to use these provisions in a constructive way. One of such constructive way was keenness of India Inc to build a pipeline of women executive directors from within the rank and file through rigorous mentoring programmes. The programme initiated by Arun Duggal, the chairman of Shriram Capital is expected to create 100 board-ready women by this year. Among other mentoring initiatives, the Women in Leadership (WILL) Forum has been running a programme called 'Women on Boards Mentoring Series'. Corporates like TCS, Aditya Birla Group, Vodafone and Capgemini are members of the WILL Forum and have been putting high-potential women executives through such mentoring programmes to build their aspiration levels for board positions [4]. Let’s hope in recent future these initiatives and the Act, gives a whole new point where we have equal rights for women to vote on our boards.
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[1] Companies Act, 2013 - http://indiacode.nic.in/acts-in-pdf/182013.pdf
[2] Women on Boards of Directors -Do they add value? By - Eleonora Cenci, Andreas Hoepner, Michael Rezec & Andrea Schertler –
http://www.st-andrews.ac.uk/business/rbf/WomenonBoardsofDirectors-Dotheyaddvalue.pdf
[3] The Bottom Line: Corporate Performance and Women’s Representation on Boards – Catalyst - http://www.catalyst.org/media/companies-more-women-board-directors-experience-higher-financial-performance-according-latest
[4] India Inc still favours women of family, friends or prefer well-known names – The Economic Times – June 10, 2014 - http://articles.economictimes.indiatimes.com/2014-06-10/news/50478535_1_women-executives-will-forum-board-positions
[5] Only 4% of Indian company directors are women: report – Business Standard - http://www.business-standard.com/article/reuters/only-four-percent-of-indian-company-directors-are-women-report-114080701248_1.html
[6] 904 listed companies yet to appoint women directors: Report – The Economic Times - http://articles.economictimes.indiatimes.com/2014-07-07/news/51133455_1_sebi-norms-women-directors-woman-director
[7] Corporate India gets reprieve on governance norms – Business Standard - http://www.business-standard.com/article/reuters/only-four-percent-of-indian-company-directors-are-women-report-114080701248_1.html

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