Mandatory Appointment of Woman Director under Companies Act, 2013: A Feminist Critique

GLA University - B.Com | LLB | B.A.
GLA University | B.Com | LLB | B.A.

Though Section 149 (1) of the Companies Act, 2013 is touted for its progressive stance. But can a mandatory provision exhaust the patriarchal climate of the boardroom? Gayathri Balasubramanian asks some pressing questions on the efficacy and implementation of the provision. And if it will affect overall gender disparity and stereotypes in the workforce.

By Gayathri Balasubramanian, a third-year BALLB student at School of Law, Christ University, Bengaluru.

Introduction

The Companies Act, 2013, is considered to be landmark legislation that revamped the laws governing a company from its birth to dissolution. The legislation attempted to do away with all the provisions that were obsolete and inconsistent with growing business trends.

The scant representation of women in Indian corporates has been appalling. Section 149(1)[i] was introduced to counter this disparity as it mandated the appointment of at least one woman director in certain classes of companies.

While this provision prima facie may seem to be an efficient step towards achieving gender equality, its compliance or rather non-compliance by companies reveal otherwise.

The first part of the article analyses the efficacy of the law in terms of its implementation. The latter addresses the problem of gender equality based on various social factors which impede the growth and development of women in corporate boardrooms.

Mandatory Appointment of Women Directors under the Companies Act 2013

Section 149(1)—read with clause 49 of the (Securities and Exchange Board of India) SEBI listing agreement and Rule 3 of the Companies (Appointment and Qualification of Directors) Rules 2014—provides that every listed company or public company with paid-up share capital of 100 crore rupees or turnover of 300 crore rupees or more shall appoint at least one woman director.

The Securities and Exchange Board of India extended its deadline by six months to April 2015 for companies to appoint a woman director on board. As of March 8, 2015, around 180 out of 1456 National Stock Exchange Companies had not appointed a woman director on board.[ii]

According to the 2014 Catalyst census,[iii] women accounted for merely 9.5 per cent of the total Board seats in 200 BSE companies.

PIMR Indore Admission

While non-compliance by numerous companies including few Public Sector Units is a matter of concern, attention has to be paid to companies that have complied.

Of all the companies that made the appointments as per the rule, 278 companies made the appointment in March 2014,[iv] which shows that appointments were made solely to pose compliance without any change of heart.

More than half of these women, about 612,  held non-independent directorships.[v] Among them, around 82 directorship positions were held by women from the promoter group (were part of the family). To name a few, companies like Reliance Industries, Videocon Industries, JK Tyre and Industries, Bajaj Corp and TVS Motor Corp, Godfrey Phillips India etc.[vi]

The companies that failed to appoint even a single woman on their board excused themselves, claiming that they couldn’t find qualified women with suitable experience.[vii]

But the actual reason for the non-appointments is the process by which women directors are appointed. The nomination committees do not take affirmative action when mentoring women or maintaining a database for the same.[viii]

With only twenty-nine per cent of women in the labour force in 2011, India ranked at 113 among 135 countries on the Global Gender Gap index.[ix] The data is telling of the reality and the same is a direct consequence of social and gender inequality.

Rather than ensuring quantitative changes, the focus should be on regulating the structuring and functioning of the nominations committee.[x] Additionally, the recruitment process should be inclusive with adequate training opportunities for women.

Unless there is a deliberate attempt to hire women through affirmative action, a vague legislative mandate coupled with poor compliance will not solve the problem of gender inequality.

‘Check the box’ attitude: Inclusion for the Sake of Inclusion

The lack of women directors in boardrooms is appalling, making women part of an outgroup in the Board.

Between 2002-2012, NSE listed companies had about 8 per cent of women in top executive positions. Further, only 4.79 per cent held significant positions including executive, non-executive or independent directorship.[xi]

The theory of social identity expounds that individuals who are a part of the outgroup may be influenced or dominated by the ingroup (majority).[xii] The latter in this case constitutes men. Research suggests that having a minimum of three women on the board composes a ‘critical mass’ that would help them voice their opinions and contribute the most.[xiii]

Being the only woman on the board becomes disadvantageous, making for an unconducive work environment.

The provisions are not at all specific, defeating the purpose of the Act. For instance, it doesn’t mandate women to be independent directors. Additionally, by restricting the mandate only to a certain class of companies, the Act gives them leeway to make token or namesake appointments.[xiv]

Therefore, measures should be taken to appoint more women and promote them to higher executive levels. Mandating just one appointment cannot solve the problem of gender inequality as there are a lot of factors that are unfavourable for women in a boardroom crammed with men.

Repudiating the Business Case of Gender Diversity

In 2013, the International Labour Organisation ranked India at 120th position out of 131 countries in female labour participation.[xv]

Ample research has indicated that the inclusion of women at the helm could improve firm performance, good corporate governance and higher returns. This argument should be enough to incentivize companies to appoint more women.[xvi] It is even considered as a tactical move to boost the ‘demographic’ diversity, thereby promoting the organization’s reputation and performance.[xvii]

However, such reasons are principally flawed since they reduce a more nuanced and bothersome issue to numbers and quantifiable gains.

Additionally, studies reveal otherwise as they establish a negative relationship between gender diversity and improved financial performance.[xviii] It will be futile to rely on this argument since such data sets are at the mercy of uncertain factors like boardroom dynamics. The same can vary from corporations to the region and government policies. An unfavourable or non-conducive environment will hinder women’s performance and contribution which would consequently weaken the business.

Addressing Gender Inequality in the Boardrooms: A Feminist Perspective

Catharine MacKinnon’s ‘dominance’ feminist theory identifies that sex discrimination in the eyes of law is based on either sameness or difference in men.

She refutes the idea of bridging inequality by claiming that women are the same as men or that they are different from men. Since in both these arguments, the standards used to determine the sameness or difference is invariably that of men where masculinity becomes the referent.[xix]

The gender equality approach does not take into account the experiences of women. These experiences are made of patriarchal oppression often exerted under the garb of  ‘difference’.[xx]

It is only women who are subjected to pay gaps, job security and economic dependence apart from other debilitating social factors.

The ubiquitous problem of ‘leaking pipeline’ forestalls the growth and accomplishments of women. ‘Leaking pipeline’ explains the short-lived professional growth of women as they have to subscribe to the social norm of becoming the primary caregivers to the family and children.[xxi]

As Hilaire Barnett states,

“To demand that women demonstrate that their abilities and capabilities are identical to men’s is to privilege men over women; to make man the superior standard which must be reached before entry into the public sphere can be justified, without any consideration of the reality of most women’s lives.”[xxii]

Besides the paternalistic nature of law, women have for long been considered as the subordinate gender, subjecting them to abounding societal stereotypes. Women were deprived of equal opportunity due to reasons independent of their capabilities or efficiency.

The same can be understood from a case in the United States, EEOC v. Sear.[xxiii] The United States Equal Employment Opportunity Commission sued Sears & Co. for violating Title VII[xxiv] by way of disparate treatment based on gender. The defendant company quashed the allegations of women’s underrepresentation by reinforcing and glorifying gender stereotypes.

The company rebutted the allegation of the underrepresentation of women for commission sales in the insurance market. It invalidated the accusation by posturing behind the testimonies of male managers. These testimonies claimed that women were not interested and were unsuitable for commission sales, thereby justifying their underrepresentation.[xxv]

Ironically, the EEOC on the other hand could not prove their allegations by simply showing the disparity in the proportion of men and women employed. But it was required of them to statistically and substantially prove that these women did not fit into those stereotypes and were truly competent for the job.[xxvi]

The Court’s ruling in favour of the defendant reasserts that more often than not, it is the law/ legal that acts as a paternal institution by imposing gender stereotypes.

This is a classic example to show how gender stereotypes and structural barriers have hindered women’s entry into the workforce. Even if somehow women manage to make it in, their growth and development are often obstructed. A law made to secure gender equality is true in its spirit only when it can also support those who do not fit such stereotypes.

Affirmative action or preferential treatment?

A legal mandate to appoint women by companies has been questioned as an unnecessary regulation.[xxvii] To answer this, it is pertinent to understand how patriarchy pervades both the public and private spheres of life.

The Law is known for distancing itself from regulating the private spheres of people, which unfortunately is the prime area where women are oppressed due to the ills of patriarchy.[xxviii] The public sphere on the other hand essentially constitutes men controlling other gendered subjects by making laws devoid of feminine figures.[xxix]

To reckon this in the given context can lead to logical inference. This means that the structural oppression faced by women in the private sphere rip them off their autonomy. Forcing them to enter the corporate world and take up senior positions by disassociating themselves from typical gender roles.

For this reason, laws are obligated to undo social inequities and provide opportunities through regulation in the public sphere. The legal requirement is only to be considered as a nudge to inculcate the notion of gender diversity.

It is for society to make way so that, first and foremost, women get an education and subsequently acquire higher positions in companies. If this is achieved, there will no longer be a need for token appointments or ‘business case’ to forge equal representation of women.

Conclusion

Section 149(1)[xxx] is perhaps a first step towards achieving gender equality in the Indian corporate scenario. However, there is an urgent need to reconsider its efficacy based on the changing circumstances and sustained non-compliance by companies.

There is a need to increase the number of women appointed. Additionally, some other amends, such as mandating women appointments for independent directorship and including more categories of companies under the Act’s ambit, can prove to be effective.

For women to be able to perform at their best, simple and unspecific legislative changes alone cannot achieve the cause. Women need to gain equal power in social and private life, to be able to decide and choose for themselves.[xxxi] There should not be any socio-cultural barriers and particularly stereotypical presumptions about their capabilities and choices by the corporations or the Law itself.

To put it simply, no reasoning that base itself on a ‘business case’ or ‘increased benefits’ should be required to ensure equal representation of women in boardrooms.

They should be able to participate freely, only because they have the ‘right’ to do so.

 

Endnotes

[i] Section 149(1), Companies Act, 2013.

[ii] No woman director in 56 NSE-Listed Companies, The Economic Times(19.04.2016), available at https://economictimes.indiatimes.com/news/company/corporate-trends/no-woman-director-in-56-nse-listed-companies/articleshow/51893424.cms, last seen on (01.08.2020).

[iii] Elita Sequeria, Tanmatra: Developing The Leadership Potential Of Women In India, Catalyst available at https://www.catalyst.org/2015/08/18/tanmatra-developing-the-leadership-potential-of-women-in-india., last seen on (03.08.2020).

[iv] Press release, PRIME Database, available at http://www.primedatabasegroup.com/newsroom/PR-306., last seen on (03.08.2020).

[v] Ibid.

[vi] Nimitha Aboobaker, Dr Manoj Edward, Gender Diversity as a facilitator towards Human Capital Development in Boardrooms – the case of Corporate Governance law in India, Researchgate 1, 3 (2016), available at https://www.researchgate.net/publication/319065330_Gender_Diversity_as_a_facilitator_towards_Human_Capital_Development_in_Boardrooms-the_case_of_Corporate_Governance_law_in_India?enrichId=rgreq-, last seen on 10/08/2020.

[vii] Dr Rajesh Kumar Agrawal, A study on Appointment of Woman Directors by Companies in Mumbai, 2 International Journal Of Ethics in Engineering and Management 1, 4 (2015),

[viii] Yogesh Patel, Charul Patel, Agenda of Women Empowerment at the Boards- Amendment to Companies Act, 2 International Journal of Innovations in Engineering and Management 36, 39 (2013), available at http://www.gtia.co.in/, last seen on 11/08/2020.

[ix] P. Sikard, J. Dhami,G.S. Batra, Gender Diversity on Corporate Boards: A Case of India, 4 International Journal Of Management 292, 293 (2013), available at http://www.iaeme.com/ijm.asp, last seen on 10/08/2020.

[x] N Balasubramanian, Gender Equality, Inclusivity and Corporate Governance in India, Journal of Human Values 15, 23 (2003), available at http://jhv.sagepub.com/, last seen on 11/08/2020.

[xi] Supra 8, at 38.

[xii] Gro Ellen Mathisen, T. Ogaard, E. Marnburg, Women in the Boardroom: How Do Female Directors of Corporate Boards Perceive Boardroom Dynamics?, Journal of Business Ethics 87, 88 (2013), available at https://www.researchgate.net/publication/257541874_Women_in_the_Boardroom_How_Do_Female_Directors_of_Corporate_Boards_Perceive_Boardroom_Dynamics?enrichId, last seen on 12/08/2020.

[xiii] Sulphey M M, Shaha Faisal, The Position of Gender Diversity in Indian Corporate Boards, 14 International Journal of Economic Research 195, 200 (2017), available at www.serialsjournal.com, last seen on 12/08/2020.

[xiv] Afra Afsharipour, The One Woman Director Mandate: History and Trajectory, Oxford University Press 1, 14 (2015), available at http://ssrn.com/abstract=2686991, last seen on 12/08/2020.

[xv] Malika Basu, Ravi Peiris, Women in Leadership and Management in Public Sector Undertakings in India, International Labour Organisation, available at https://www.ilo.org/wcmsp5/groups/public/—asia/—ro-bangkok/—sro-new_delhi/documents/publication/wcms_632553.pdf, last seen on (04.08.2020).

[xvi] A. Haldar, R. Shah, S.V.D.N. Rao, Gender diversity in large listed Indian Companies, 12 Corporate Ownership and Control 573, 574 (2015).

[xvii] Ibid, at 576.

[xviii] Supra 14, at 16.

[xix] Hilaire Barnett, Introduction to Feminist Jurisprudence, 165 (Cavendish Publishing Limited 1998).

[xx] Catharine Mackinnon, Feminism Unmodified: Discourses on Life and Law, 41 (Harvard UP 1987).

[xxi] Supra 12, at 198.

[xxii] Supra 19, at 131.

[xxiii] Equal Employment Opportunity Commission v. Sears, Roebuck & Co., 111 F.R.D. 385 (N.D. Ill. 1986).

[xxiv] Civil Rights Act (Act of July 1964) (United States).

[xxv] Joan C Williams, Deconstructing gender, 87 Michigan Law Review 797, 818 (1989), available at https://repository.law.umich.edu/mlr/vol87/iss4/3, last seen on 12/08/2020.

[xxvi] Supra 25, at 815.

[xxvii] Supra 14, at 7.

[xxviii] Supra 19, at 64.

[xxix] Ibid.

[xxx] Section 149(1), Companies Act, 2013.

[xxxi] Supra 17, at 45.

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