• The Law Gazette

Representation of Women on Board of Directors

Women for a very long time despite their high qualifications have not been represented adequately. Companies need to realize that women are highly compassionate about their work and also offer perspectives different than men in board meetings which in the long run can benefit the company and its employees. Hence, companies should acknowledge gender diversity in their Board of Directors making women a desideratum and including women with the adequate qualifications.


The main idea for bringing women on board is not just to do away with gender biases but to realize that women do contribute immensely to the success of an enterprise. Women have carved a niche for themselves in not just doing household work effectively, but also in holding key leadership positions. Chanda Kochhar (former Managing Director at ICICI bank), Shikha Sharma (Managing Director and CEO of Axis Bank), Mallika Srinivasan (Chairperson at Tractor and Farm Equipment) are some examples of women whose leaderships have managed to reap in successful results for organizations and companies they were/are a part of [1].


With the increasing number of women staff these days as compared to the opposite gender working in a company, a women director can deal with cases of harassment against employees at the workplace in a more understanding manner thereby providing comfort and ease to the women employees.


HOW DOES COMPANIES ACT 2013 BRIDGE THE GENDER BIAS?

With the coming of the Companies Act, 2013, which repealed the Companies Act 1956, listed companies are now required to add one women director to their board. So unlike the earlier act, now there are mandatory provision for including at least one female on the Board of Directors for companies falling under a certain class. Section 149(1) of the Companies Act 2013 provides that every public company which is listed shall have at least 1/3rd of the total number of directors as independent directors. It further states that every company should also have a Board of Directors consisting of individuals who are directors and shall have:

a. at least three directors if the company is public, two directors if it’s private and in case of One Person Company a minimum of one director; and

b. can appoint a maximum of fifteen directors (or more but only by passing a special resolution), provided further that such class or classes of companies shall have at least one woman director.


Thus the second proviso to the section provides for the appointment of a minimum of one woman director on its Board of Directors. Furthermore the said class/classes are explained under Rule 3(i) of the Companies (Appointment and Qualifications of Directors) Rules, 2014. According to the same, every listed company shall appoint a minimum of one woman director that too within a time period of one year from the commencement of the second proviso mentioned above. Also the unlisted public companies, who have a paid-up share capital of Rs. 100 crore or more or have a turnover of Rs. 300 crore or more (as on the last date of latest audited financial statements) are mandated to appoint a minimum of one woman director within one year from the commencement of the second proviso.


As per the Companies Act, 2013 and Rule 3 of the Companies (Appointment and Qualifications of Directors) Rules, 2014 a timeline of six months have been provided to the companies incorporate under the Act to comply with the said provisions. Further, companies which have registered themselves under any of the previous Companies Act, the requirements as discussed above need to be addressed within one year. In cases of any vacancy of a woman director, the same has to be occupied within three months from the date of such vacancy by the board or not later than the next meeting of the board, whichever comes later.


Therefore such women-centric mandates have been brought in so that women all around the country can get adequate and suitable opportunities to be appointed as directors in the company. This not only ensures a gender balance but also makes the company function in a more efficient manner. These regulations are a saving clause at a time when there is considerable underrepresentation of women at higher-level executive positions of the corporate world, despite having the necessary qualifications and skills/expertise.


EXISTING PROBLEMS AND SUGGESTIONS

The need of the hour is to see that compliances are strictly enforced in order to ensure the existence of a minimum of one woman director in every company. As per Sec. 450 of the Companies Act, 2013 if a company or its officer or any other person contravenes any of the provisions of this Act or the rules for which no penalty or punishment is provided elsewhere in this Act, the punishment shall be in the form of fine which may extend to ten thousand rupees, and where the contravention is continuity a further fine of one thousand rupees will be imposed on an everyday basis of such continues breach [2].


On analysis of Sec. 450 of Companies Act, 2013 it can be seen that this section itself is not specific and not even strict. This demands for austere statutes to be brought in to ensure the presence of women directors in companies, transgressing which can result in heavy-duty fine and imprisonment as well. According to a report by the Harvard Business Review in 2011, women in top positions were judged based on several parameters and a conclusion was drawn that women directors take more initiatives and build better relationships as compared to their male counterparts. Not only that, but it was also found that they have the ability to perform better [3].


A praiseworthy initiative was also taken by The Securities and Exchange Board of India (SEBI), where in 2015 guidelines were issued asking companies to appoint at least one woman director on their respective boards. However, it also needs to be realised that unless the same is not strictly regulated, not every company will seek to bring in a woman director as a board member. Additionally, every company shall aim to ensure that women are in equivalent positions as men and are paid equally so that their work and expertise is respected.


CONCLUSION

The Companies Act, 2013 in India has recognized the importance of gender diversity by making it compulsory to appoint at least one women director in a certain class of companies. However, its benefits will be short-lived if the same is not implemented and enforced strictly; call for greater government supervision is needed in order to reap fruits of such regulations. Compliances providing for the participation of women as directors is not merely a numbers’ game nor is it just about their rights, It is about what companies are losing out onto by not making use of the potential that women possess. Thus, to make an impact a strictly governed compulsion which will ensure that no one surpasses this mandatory provision in place is a necessity; leading to the representation of more women on the Board and other senior-level leadership positions as well.


REFERENCES

[1] STP Team, 5 Powerful Women Directors in Indian Companies, shethepeople, https://www.shethepeople.tv/news/5-powerful-women-directors-in-indian-companies/.

[2] Vaibhavi Tadwalkar& Soundarya Lahari Vedula, Representation of Women on the Board of Directors under the Companies Act 2013, Christ University Law Journal, 2015.

[3] Amit Kumar Singh, Role of Women Director in Corporate Board, Indian Legal Solution, 2018, https://indianlegalsolution.com/role-of-women-director-in-corporate-board/.


ABOUT THE AUTHOR

This blog has been authored by Eesha Bisht, who is a 4th Year B.A., LL.B. (HONS.) student at Symbiosis Law School, Pune.


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