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Gender Representation On Corporate Board: Challenges And Opportunities

Although many scientific studies have examined the relationship between the gender gap and appreciable economic performance, their results are similar. Many countries have political and social debate in promoting gender equality and the representation of women in business. The gap has yielded no clear evidence of a link between female representation and firm performance has generated uncertainty among investors, policymakers and executives around the world.

As financial success is an inherent component of any organization, economic impact of increasing the representation of women on boards of directors can be determined if, and how, regulations promote women in higher positions. Therefore, this article explores the general relationship between performance and female representation.

Introduction
The activities of the company or organization is supervised by the board of directors. It hires and supervises senior management, serves as the company's main corporate governance and sets corporate strategy. The actual performance is affected from defining business strategy by board of directors. The positive and negative effects of diversity depend on whether they are mutually exclusive or how they are managed.

Diversity is often seen as a double-edged sword, which means that there are more positive and negative effects of increasing diversity.
Furthermore, preliminary studies have shown no clear consensus on the effectiveness or harms of gender diversity.

At first glance, corporate boards show a relationship between female representation and economic performance, with diversity and overall performance being positive negative or non-significant. Therefore, it is not clear to what extent the increased representation of women on corporate boards correlates with the observed performance.

For gender equality, leadership positions should be considered for women. The goal is to ensure greater female representation, but not to increase performance. Therefore, business performance may not be associated with proportion of women on boards, but more women on boards reflect "real world" also financial results contributed by gender-related factors.

Business diversity indicates that a better performance is associated with higher proportion of women as group has heterogeneous directors with varying economic growth and success. An end result not shown in the last two cases is a negative correlation between a high proportion of women and good performance.

Objectives of the Study
The objective of the study is to try and identify the correlation between the performance of the company and having female representation on board of a company.

Research Problem
There has been a debate about the representation of women in business over years. "Global Gender Gap Report 2020"[1] states that "there would be still 100 years to achieve gender equality based on current progress."

Is it possible to have gender equality in companies and whether is it useful to have women on board?

Research Question
  • What is the condition of women on board of companies?
  • Is there any provision in the law to safeguard the position of women on board?
  • What is the relation between having women on board and the company performance?

Research Methodology
My study is based on "Doctrinal Method." There are many concepts or doctrines in this regard. The resource materials are secondary. I have used secondary assets like books, articles, and journals, and Internet-based research.

Analysis
"A woman with a voice is by definition a strong woman, But the search to find that voice can be remarkably difficult."- Melinda Gates, Cofounder and Co-Chair of the Bill and Melinda Gates Foundation

People have dreamt establishing of a just and equal society by destroying of all forms of inequality in society, tearing of all borders.

Why focus on the women on the board?
The women on the board is measured as an indicator of gender performance, therefore it is focused. Also, having more women in the group is detrimental to other employees. For example, it breaks stereotypes about women in leadership positions and encourages women to live lives they don't think they can achieve.

By nurturing women's "professional imagination", and increasing their ability to lead by example and express themselves in leadership roles, barriers to greater diversity in the board can be broken. Many of the women in the board have a strong identity and are inspired by cultural change which suggests that women can become leaders.

It is financially material to have the board with more women. The "McKinsey & Company Diversity Wins report 2020" found that "companies whose boards are in the top quartile of gender diversity are 28 percent more likely than their peers to outperform financially and found this relationship statistically significant."[2]

However, other research indicates that gender diversity is important in the boardroom, as they allow more skills, perspective, and experience to make better decisions. A significantly statistical relationship with overall growth globally is found as more companies are hiring female directors.

Having more women in the group prevents them from taking more risks, reduces aggressive tax strategies and improves company reputation, revenue levels, and performance consistency. Companies and their shareholders should not ignore these decisions, especially when faced with a global pandemic that is forcing companies to differentiate themselves from their business competitors.

For companies with more women in the group, the average number of women with different responsibilities is slightly higher. These companies is highly diversified and gender-sensitive, or they may employ more women on their boards of directors.

However, it is not clear whether companies with a diverse workforce are hiring more female directors, or whether greater diversity in boards of directors contributes to this trend. Therefore, it is not surprising that companies with women on their boards of directors have women in the workplace and since this relationship is not significantly statistical, it is not reasonable to make a comment about the relationship between the two.

In addition, there has been an increased representation of women in sectors such as hospitality or catering that have been hit hard by the pandemic. These inequalities affect certain groups of women based on race, religion, ethnicity, ability, gender, and etc.

Companies Law, 2013
The Companies Act, 1956[3] provides no opportunity for female directors and the Companies Bill, 2011[4] was referred to Parliament for examination and report on the Companies Bill by the Standing Committee on Finance. The "Standing Committee on Finance" recommends "Appointment of at least one-woman director has been proposed to be mandated in such class of companies as may be prescribed. The class shall be prescribed through rules. This is likely to be in line with the policy of the Government for encouraging more and more women participation in decision making at various levels."

The "Ministry of Corporate Affairs" stated that:
"It is hoped that such indicative provisions will make the companies more alive to giving salience to the female gender in the realm of corporate governance. It is also in line with the Government policy to encourage women's participation in decision making at every level in the society."

In other words, with the enactment of this law, the government has encouraged more companies to add female directors to their boards of directors, thus reducing gender inequality and decreasing gender inequality in India.

As per "S. 149 of the Companies Act, 2013"[5] read with "Rule 3 of Companies (Appointment and Qualification of Directors) Rules, 2014"[6], the following class of companies shall appoint at least one-woman director:
  1. Every listed company.
  2. Every other public institution having:
    1. Paid-up capital of Rs 100 crore or more; or
    2. turnover of Rs. 300 crores or more.

In the event of a vacancy in the position of a woman member of the Board of Directors, such vacancies shall be filled at the next direct meeting of the Board of Directors or three months after the date of the vacancy of the position.

NOTE:
Paid up share capital or Turnover is as of the closing date of the last audited financial statements.

Corporations incorporated under the Companies Act, 2013 are required to comply with this section within six months from the date of incorporation. For corporations incorporated under the Companies Act, 1956, corporations must comply with the rules within one year of enactment of the Companies Act, 2013.

With the enactment of the Companies Act 2013, the inclusion of female directors in a particular class or classes of companies has raised a bar, so the governance. In order to make fair and ethical decisions, they make decisions based on the interests of stakeholders. This not only creates a public image but also attracts more production and sales. It's not just a matter of media attention but also financial return. Failure to address gender diversity could lead to economic consequences in the future.

Asia-Pacific: Percentage of women on the board [7]
An industry-specific approach helps to show positive trends and identify underdeveloped areas. Basically, most companies that deal with clients have better female representation in the workforce and at the junior management level. The financial, healthcare and real estate sectors are doing well. The IT, industrial, utilities, energy and materials sectors are lagging far behind.

"Gender stereotypes that emphasize the role of women as the main caregivers and that of men as the main breadwinners remain deeply ingrained in some regions."[8] Investing in women's skills at an early stage reduces organizational risks. Having more women in leadership positions reduces the cons of issues of inequality and gender pay gaps and female competence. Companies facing these issues can benefit from lower compliance costs in the future based on expectations of transparency and improved regulatory frameworks around remuneration practices.

Equal employment opportunities for women and men in the workplace allow companies in a competitive environment to differentiate themselves from their peers. In addition, fair compensation systems and representation improve employee engagement, talent attractiveness, retention, and performance.

Regulatory frameworks
Regulatory frameworks in companies are the driven force towards increasing gender equality. Since 2012, the European Union has been working in this field and the Council is proposing a decree in favor of equality on corporate boards. As a result, the six-member states of the European Union, namely Portugal, Italy, Germany, France, Austria and Belgium have adopted a mandatory provision for gender board diversity.

The other countries - The UK, Spain, Denmark, Luxembourg, Sweden, the Netherlands, Poland, Finland, Slovenia and Ireland - have agreed to soft and non-binding quotas. Greece, which previously held a small stake, by the end of 2020 announced a 25% binding effect. Malaysia in 2011 adopted a policy stating that companies having more than 250 employees must have at least 30% female directors by 2016. India introduced the Companies Act in 2013, to have at least one female director in public companies.

The proportion of women will be at least 30% by 2022 in state and mixed-cap companies of Brazil. The United States, California approved a quota for public companies in 2018 that will be reached by 2019 or 2021, depending on the size of the board. The following is a summary of other countries have also adopted binding and non-binding quotas:

Countries with regulations or recommendations of European companies have a greater number of women on the board the average percentage of women on the board is higher than the regional average. In fact, when analyzing the performance of companies as part of the company's sustainability assessment across the country, we see that countries with binding quotas performed better than countries with a gender gap.

Why are the benefits low?
To achieve gender equality in business, it is not enough to focus on having more women on boards of directors. but why?

There are many factors:
  1. Women have been discriminated against in business for decades due to their limited experience in the industry, undermining their legitimacy.
  2. Including women as non-executive or independent directors does not lead to the desired results because the executive members have more say. This works well not only on boards but also on two-tier boards with both boards and attention is being given to gender representation just on the supervisory board and not executive boards.
  3. Women often face negative situations in the workplace that make them feel inferior to men, their opinions not being treated equally in the decision-making process.
  4. Just because they are women doesn't mean they are diverse and part of their agenda.
  5. Having more women on the board does not mean that there are more women on the board overall. In some countries, on average, women have more directorship than men, which means that many companies have the same women increasing the board diversity numbers for multiple companies rather than an increasing number of individual women taking up these positions.

Therefore, to measure a company's gender performance, the percentage of women on the board cannot be used. The gaps can be identified in a more meaningful way given the broader representation of women within the organization.

Less attention is paid to the number and leadership of women at the executive level and given attention only to position in board. This has led to positive growth and the proportion of women in board has increased in all sectors in recent years.

How can companies ensure that women retain talent and bridge this gap between the proportion of women in senior and junior management? It's a way to explore family protection policies because women take on more workloads and responsibilities in their personal lives. The biggest challenge is when they don't leave the workforce to advance in their career. Therefore, companies should ensure gender equality in the workplace by focusing on improving work-life balance policies.

Conclusion
Female directors are "more likely than their male counterparts to probe deeply into the issues at hand" leading to robust intra-board deliberations by asking more questions. Women bring different viewpoints, experiences, ideas, and perspectives than men. Women think about the people behind the value of company. Women are better at conveying their expectations and ideas as compared to men with more emotional intelligence and more systematic board work.

Companies need to hire more women for leadership positions. Diverse teams work better, allowing companies to learn new skills and drive innovation and efficiency. Having more women in senior management helps to ensure skill and experience to become a board member, companies align with the increasing number of regulations and fulfil their role of reaching their quotas, adapting to the increasing proportion of women on the board and hiring team members.

There is a weak correlation between the junior management positions and percentage of women in the workplace. However, the proportion of women in leadership positions has improved over the years. Progress is slow, and there are setbacks along the way, but it takes time to overcome addiction on so many levels and build skills and experience, and this trend is encouraging.

Bibliography:
  1. World Economic Forum (2020). Global Gender GAP Report 2020, https://www3.weforum.org/docs/WEF_GGGR_2020.pdf
  2. McKinsey & Company (2020). Diversity wins: How inclusion matters. https://www.mckinsey.com/~/media/mckinsey/featured%20insights/diversity%20and%20inclusion/diversity%20wins%20how%20inclusion%20matters/diversity-wins-how-inclusion-matters-vf.pdf
  3. Mca.gov.in. 2011. COMPANIES ACT, 1956. https://www.mca.gov.in/Ministry/pdf/Companies_Act_1956_13jun2011.pdf
  4. World Employment and Social Outlook � Trends 2020, https://www.ilo.org/global/research/global-reports/weso/2020/lang--en/index.htm
  5. www.mca.gov.in/. 2011. The Companies Bill, 2011. https://www.mca.gov.in/Ministry/pdf/The_Companies_Bill_2011.pdf.
  6. The Companies Act, 2013, Section 149, No. 18, Acts of Parliament, 2013 (India)
  7. Companies appointment and qualification of directors rules, 2014, Rule 3, 2014 (India)
  8. Froehlicher, M., Knuckles Griek, L., Nematzadeh, A., Hall, L. and Stovall, N., 2021. Gender equality in the workplace: going beyond women on the board. https://www.spglobal.com/esg/csa/yearbook/articles/gender-equality-workplace-going-beyond-women-on-the-board

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