Companies Should Aspire 50% Female Directors At Firms: Piyush Goyal
Union Minister for commerce and industry Piyush Goyal said that the reservation policy will not take the country further and companies should aspire to have as many as 50 per cent female directors on their boards.
“Unless we set ambitious goals, we are not going to achieve much. We should be aspiring for 50% of directors of companies to be women, not by reservation but by their might, by choice. We should also be aspiring for 50 per cent of businesses to be owned by women, through the sheer dint of their capabilities,” Goyal said.
Speaking at an event organised by the FICCI Ladies’ Organisation, Goyal said, “The reservation policy will only mean a sarpanch making his wife a sarpanch, or a chief minister — as we have seen in the past — making his wife a dummy chief minister.”
“We should rather have the Sushma Swarajs of the world as role models for women, or Smriti Irani in our times or a finance minister like Nirmala Sitharaman becoming a role model, who didn’t come through reservations but through sheer dint of their hard work, dedication, commitment and capabilities. That’s the women of tomorrow,” Goyal added.
According to the seventh edition of Deloitte Global’s Women in the boardroom report released earlier this year, women held 17.1 per cent of the board seats in India. The number has risen by 9.4 percentage points from the 2014 edition, the year when the Companies Act made it mandatory to have one woman member on every board.
Compared with men, a smaller group of women are taking on many more board seats and fewer women serve on more boards according to Deloitte Global’s stretch factor metric. The metric examines how many board seats an individual holds in a particular market. The higher the stretch factor, greater the number of board seats the same director occupies. In India, the stretch factor for women increased slightly from 1.22 in 2018 to 1.30 in 2021.
According to the fifth edition, the average tenure of women directors had seen a marginal increase from 5.0 years in 2018 to 5.1 years in 2021, which, compared to global standards, has decreased from 5.5 years in 2018 to 5.1 years in 2021. The average tenure for women fell from 6.3 years in 2018 to 5.3 years in 2021 in the US, 4.1 years to 3.6 years in 2021 in the UK, and 5.7 years to 5.2 years in Canada.
The study found a positive correlation between appointing a female CEO and diversity on the board. Companies with women CEOs have significantly more women representation on their boards than those run by men − 33.5 per cent vs 19.4 per cent, respectively. The statistics are similar for companies with female chairs, with 30.8 per cent of women on boards where women are CEOs compared to 19.4 per cent with men as CEOs.
Companies Act 2013
The revised Companies Act (‘Act’) was approved in August 2013 and, for the first time, made it mandatory for all listed companies and other large public limited companies to appoint at least one woman director to their boards. The Act also states that any intermittent vacancy of a women director should be filled by another woman director within three months of such vacancy, or by the company’s next board meeting, whichever is later.
Companies were given until 31 March 2015 to comply with this legislative provision. This provision was incorporated in the law to further promote diversity in Indian company boardrooms. The number of women on boards in India increased by 4.7 percent in the past two years from 7.7 percent to 12.4 percent. This has helped India close its gap with the global average, which stands at a roughly 15 percent. Women comprised 3.2 percent of the board chairs in India in 2016, up 0.5 percent from 2014.
Goyal said India will emerge as a USD 30-trillion economy in the next 30 years, compared with over USD 3 trillion now. He said the government is working actively with different countries to finalise Free Trade Agreement (FTA) and talks with the UK are in final stages.