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Looking Beyond the Façade of Mandatory Quotas for Female Representation across Corporate Boards: A Critical Evaluation of the Position of Women Directors in the Indian Context.

Looking Beyond the Façade of Mandatory Quotas for Female Representation across Corporate Boards: A Critical Evaluation of the Position of Women Directors in the Indian Context.


Directors are the key managerial personals in a company and play an important role in the company’s overall well-being, achievement of goals and prosperity. Women directors and gender diversity plays a significant role in relation to good corporate governance practices. There exists some data which affirm the idea that adequate number of women directors and gender diversity in companies leads to a better brand image, greater profits and stricter compliance to rules. As far as India is considered, the position of women directors has always been a much-debated issue. The scant representation of women directors in companies have been appalling, warranting the need for greater gender representation across companies. However, studies and records which deal with the subject of position of women directors in India and more importantly representation of such women across companies are highly limited. This paper seeks to analyze the current position of women directors and gender diversity in board structures across multiple companies, the reasons for under-representation of female counterparts and the overall impact of such female representation on the company’s business efficiency, in terms of both, financial growth as well as good corporate governance practices. Lastly, it sets out certain useful recommendations and suggestions to minimize the gap in terms of female representation of directors.


A women director like any other director undertakes the responsibility of improving corporate credibility and governance standards of the company.[1] The position of a women director in a company is an important factor in determination of the company’s image as well as good corporate governance practices. Historically, disproportionate representation of women on corporate boards has been a persistent worldwide occurrence.[2] This emanates from an ingrained and rigid social ethos which does not warrant for the recruitment of women on these boards based on meritocracy but rather on primitive and orthodox practices, thus limiting their opportunities‟ to a great extent.[3] Section 149(1) of the companies act read with clause 49 of the (Securities and Exchange Board of India) SEBI listing agreement and Rule3 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 of300crorerupeesormoreshallappointatleastone woman director. The Securities and Exchange Board of India mandated for companies to appoint a woman director on board in April 2015.

The BSE200 Index over a period of five years i.e., 2015-2019[4] indicates that many companies have appointed a single women director in response to mandatory requirements by SEBI and section 149 of the Companies Act, 2013 and to avoid penalties imposed by the same however they merely act as tokens and do not have an active role to play in the functioning of the company.


Looking Beyond the Façade of Mandatory Quotas for Female Representation across Corporate Boards

The position of women directors under the company law has been a much-debated issue. A huge chunk of prior studies indicate a positive impact of female representation on the financial outcomes of a company or link it with a better brand image and reputation of the company.[5] In light of this, many regulators across the world introduced mandatory quotas for representation of women in corporate boards. Norway was the first country to introduce a mandatory legislative quota for representation of women, with the law binding a company to have at least 40% women representatives on the board.[6]  Other countries followed suit with Netherlands and Germany introducing a 30% quota for companies.[7]

Under the Indian Legislation, Section 149(1) of the Companies Act, 2013 mandates the appointment of one women director on the board of every listed company. This provision was inserted with an objective of increasing female representation on the board.[8] However, In India, due to a patriarchal and family dominated structure, companies started appointing a woman just for compliance purposes and to avoid penalties.[9] The penalty for such a contravention is not provided for separately and in such a scenario, the punishment under section 172 comes into play. It provides for a fine of Rupees 50,000 which may extend to 5,00,00 for non-compliance. As far as implementation of the mandate was concerned, it was a common phenomenon to appoint either unqualified women or women who were already well established in the market.  In the former case, these women were commonly family members who were appointed merely as tokens to facilitate the mandate without any real say in the decisions of the company whereas in the latter, the women act as a mere eyewash to avoid penalties as they’re part of multiple boards due to their expertise and would not be able to devote time and contribute effectively to the functioning of the company. In either case, companies appoint women in the board merely to avoid penalties. Their role is just for namesake, and they have no real say in the decision of the company.  This is in turn detrimental to the economy and brand image of the company.

As a solution to combat this issue, SEBI made it mandatory for companies to appoint at least one woman independent director on the board of top 500 listed companies (as per market capitalization) by 1 April 2019 and on the board of top 1000 listed entities by 1 April 2020.[10]The introduction of this mandate will now require an independent woman on the board seat,which aims at ensuring women’s participation and gender equality in true sense. But Indian corporate sector is into the nascent stage of gender equality as portrayed by the lopsided male domination that still continues. Therefore, it can be ascertained that the current legal regime for promotion of female representation is not sufficient in India and therefore it is vital for SEBIandother legislative bodies to come up with stringent regulations in pursuance of gender diversity across board structures and in turn good corporate governance practices.

As the analysis establishes above, a strong position of female directors has a positive impact on good corporate governance for companies. However, even in today’s day and age, gender egalitarianism is not an established phenomenon across board structures and appointment of directors which is why there exists numerous limitations with regards to the same.  As a suggestion, the word “Diversity” must be objectively defined in the legislation so that company does not construe diversity subjectively. The Policy must mention various measurable objectives to assess the company’s growth that can be quantified. Further, there must exist a regulatory mandate which makes it compulsory for companies to disclose figures related to gender diversity in board, figures confirming the number of women directors in a company and senior executive positions. The companies could also formulate a voluntary code of conduct based on increasing gender diversity. Even though most companies comply with the mandatory appointment of women directors, they act as mere tokens and are not involved in real decision making. It is imperative that companies follow this not only on paper, but in spirit too.


From the above analysis, it is a well-established disposition that the position of women directors and their representation facilitates a positive relationship with that of good corporate governance and promotes overall business efficiency in the financial context as well as creating a better brand image. Despite evidence which conclusively determines the same, the proportion of such women directors and moreover women independent directors remain much scarcer than that of men. This led to rolling out relevant legislations which impose responsibilities on companies by way of mandates promoting women directors by way of section 149 of the companies act and more importantly, the latest SEBI guidelines which provide for such women to be independent directors. Even though these guidelines have been instrumental in inclusion of more women directors, there still exists a major lacuna which needs to be fulfilled in this regard. Various above-mentioned suggestions for representation of women would go a long way in bringing this gap and achieving the said objective in an efficient manner.

[1] ICSI,CORPORATE GOVERNANCE REPORTING, Governance, Risk Management and Compliance, March 25th, 2018.

[2] Adams, R. B, Ferreira, D. Women in the boardroom and their impact on governance and performance. JOURNAL OF FINANCIAL ECONOMICS, 94(2), 291–309, (2009).

[3] Kaur, A., Singh, B, Construing reputation from gender diversity on boards: Indian evidence. PARADIGM, 21(2), 111–125, (2017).

[4] BSE Indexes, Statistics for the year 2016-2019,

[5]Kochan, T, The effects of diversity on business performance: Report of the diversity research network, HUMAN RESOURCE MANAGEMENT, 42(1), 3–21, (2003).

[6] Tommy Lund, The Norwegian Gender Quota Law and its Effects on Corporate Boards, SOCIAL SCIENCE RESEARCH NETWORk, 20(3), 1-32. (2015).

[7] Mohan,Genderdiversityquotas:Perspectivesfromacrosstheworld,JOURNALOFCORPORATECITIZENSHIP,2 (summer), 107-117, (2011).

[8] Ministry of Corporate Affairs, Report of High-Level Committee on Gender Representation on Corporate Boards- 2018, (2019),

[9] Arunima Haldar, Reeta Shah, S.V.D. “Nageswara Rao, Gender Diversity in Large Listed Indian Companies”, 12, CORPORATE OWNERSHIP & CONTROL, 573, 578, (2016).

[10] Regulation 19 of SEBI (Listing Obligations and Disclosure Requirements), 2018.

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