International Journal of Ethics in Engineering & Management Education

Website: www.ijeee.in (ISSN: 2348-4748, Volume 2, Issue 10, October 2015)

A Study on Appointment of Women Directors

by Companies in Mumbai
Dr. Rajesh Kumar Agrawal
Director,
The Institute of Company Secretaries of India (ICSI)-Centre for Corporate Governance, Research and Training (CCGRT),
Navi Mumbai, Maharashtra, India

Abstract: Companies that are serious about corporate governance The existing companies has to comply with the above
and business ethics are turning their attention to gender diversity requirements within one year and new companies incorporated
at the most senior levels of business. This study examined under the new companies act has to comply within 6 months
whether the companies located in Mumbai (Listed as well as from the date of its incorporation.
Unlisted) are appointing women directors and the reasons for not
Further, if there is any intermittent vacancy of a woman
appointing woman as a director and the number of females
represented on the board of directors after the commencement of director then it shall be filed by the board of directors within 3
appointment of Women Director under the Companies Act, 2013 months from the date of such vacancy or not later than
and Listing Agreement. A questionnaire was distributed to the immediate next board meeting, whichever is later. This has
companies located in Mumbai. Women Director has a stronger been a welcome move.
positive effect on performance of the Board .Our study indicates India is not the first country to do so, many others like
that some of the companies have appointed Woman Director Norway, France, Italy, Spain and Belgium, Germany,
while remaining companies are yet to be appointed Woman Malaysia, Austria, Israel and European Union have already
Director on their Board. Women Director brings diversity of implemented such steps by introducing quota or legislation to
views, new perspective along with seriousness to the discussion of
appoint women directors in a company’s board and have
the Board. The research provides the reasons for non-
appointment of woman director such as non-availability of shown that due to the participation of women in their boards
Woman Director, male domination in management and also there has been increase in the income of the companies.
shows the extent of participation of women directors in the Board According to latest Catalyst Bottom Line Report, companies
Meetings. The presence of women on corporate boards seems to with more women board director’s experience higher financial
increase board effectiveness through reducing the level of conflict performance. Experts also believe that female directors
and ensuring high quality of board development activities. provide the greatest impetus for change in times of good
performance and also companies with women directors deal
Keywords: Board effectiveness, Corporate boards, Companies more effectively with risk. It leads to more profitability and
Act, 2013.
sustainability. Thus, the 2013 landmark enactment has paved
way for gender diversity and more women participation.
1. INTRODUCTION
2. OBJECTIVES OF THE STUDY
With the modern era the status of women is changing. The
Government of India has taken a revolutionary initiation by
a) To understand the concept of appointment of Women
the appointment of at least one woman director in certain
Directors in companies with the introduction of the provisions
classes of companies’ board of directors under the Companies
of Companies Act, 2013.
Act, 2013. The second proviso to section 149(1) of the act
b) To study which profession and qualification should a
makes it mandatory that every listed company shall appoint at
Woman Director should have.
least one woman director within one year from the
c) To understand the Board’s performance after the
commencement of the second proviso to section 149(1) of the
appointment of Woman Director.
Act.
d) To know the reasons behind the non-appointment of
Every other public company having paid up share capital of
Women Directors on Board.
Rs.100 crores or more or turnover of Rs.300 crore or more as
e) To study about how to remove the obstacles for non-
on the last date of latest audited financial statements, shall also
appointment of Women Directors on the Board by the
appoint at least one woman director within one year from the
companies.
commencement of second proviso to section 149(1) of the
Act.

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 International Journal of Ethics in Engineering & Management Education
Website: www.ijeee.in (ISSN: 2348-4748, Volume 2, Issue 10, October 2015)
3. LITERATURE REVIEW Business Ethics (December 2013) has examined the factors
determining the representation of women on boards of
The following research papers have been reviewed: directors by considering three main questions dealing with
a) Mariateresa Torchia, Andrea Calabro, Morten Huse in an relationship between characteristics of ownership and
article titled “Women Directors on Corporate Boards: From governance on one side and female directorship on the other,
Tokenism to Critical Mass” (August 2011) has stated that the demographic attributes of women directors and women in
most corporate boards have only one woman director or a senior positions on French boards in relation to firm
small minority of women directors, therefore, they can still be characteristics and women demographic attributes. The study
considered as tokens. The article addresses the following focuses on French large and mid-capitalized companies
question: does an increase number of women corporate boards belonging to the SBF120 stock market index during a 5-year
result in a build-up of critical mass that substantially period running from 2000 to 2004. The results given evidence
contributes to firm innovation? The aim is to test if at least that the appointment of women directors is strongly related to
three women could constitute the desired critical mass by family ownership and board or firm size as well as related to
identifying different minorities of women directors. Tests are their professional services, valuable skills, and network links.
conducted on a sample of 317 Norwegian firms. The results French firms rely more on the demographic attributes of their
suggest that attaining critical mass makes it possible to women directors when they are appointed to senior board
enhance the level of firm innovation. Moreover, the results positions. It sheds light on the issues concerning the law that
show that the relationship between the critical mass of women comes into force in 2016, which imposes quotas of women
directors and the level of firm innovation is mediated by board members on boards of directors in French Companies.
strategic tasks. Implications for both theory and practice, and e) Yogesh Patel, Charu Patel on research titled “ Agenda of
future research directions are discussed. Women Empowerment At the Board- Amendment to
b) Mijntje Luckerath –Rovers on research titled “Women on Companies Act” published by International Journal of
Boards and Firm Performance” (May 2013) published by Innovations of Engineering and Management (July-
Journal of Management and Science investigates the December, 2013) has stated that the new act introduces a new
financial performance of Dutch companies both with and provision relating to Women Directors which stipulates at
without women on their boards. The analysis extends earlier least one woman director’s appointment on the Board of a
methods used in research by Catalyst (The bottom line: company. Women constitute 24 per cent of the Indian
corporate performance and women’s representation on boards, workforce. It has also stated that IPOs issued in India since
2007) and McKinsey (Women matter. Gender diversity, a 2002 and listed on Bombay Stock Exchange are investigated
corporate performance driver. McKinsey& Company, USA, for women presence on board of directors. The sample for
2007), two studies that are often cited in the literature, gender diversity of boards includes 404 IPO issuing company
although each has a methodological shortcomings. This during the period of April 2002 to March 2012. The issues
articles adds to the international debate, which is often which were delisted, or listed on NSE or on which complete
normative, through examining 99 listed companies in the information could not be gathered were dropped out from the
Dutch Female Board Index. The results show that firms with final sample. The total number of director positions in these
women directors on boards perform better than those without 404 companies were 3143 and these total directorships were
women on their boards. analysed for female presence compared to their male counter
c) Meredith B. Larkin, Richard A., Susan M. on research parts. Women constitute only 5.3% of the total number of
titled “Does Female Representations on Boards of Directors board members in the top 100 companies by market
Associate with Increased Transparency and Ethical capitalization on the Bombay Stock Exchange. Research
Behavior?” (2013) has examined the association between studies indicate a more representative Board enhances
corporate transparency and ethical orientation of Fortune 500 governance, ethical behavior and shareholder value.
companies and the number of females represented on the Compulsion of appointing at least one women as a director
board of directors from 2010 annual report data. The basis for can prove to be the balancing act but does that happen in spirit
this judgement was whether or not the firm was listed one would have to be investigated.
either (both) Ethisphere Magazine’s 2010 and World’s Most f) Karen Somerville, Catherine Elliott, Cathy Gustafson on
Corporate Citizens List. The results indicate that as the research titled “Increasing Women’s Participation on
number of women directors increased, the probability of a Corporate Boards in the USA” in August 2014 published by
corporation appearing on these lists increases. Journal of Business and Economics has explained the results
d) Mehdi Nekhili, Hayette Gafaoui on article titled “Are from a qualitative study of 15 women executives working in
Demographic Attributes and Firm Characteristics Drivers of small business in the United States indicate that while any of
Gender Diversity? Investigating Women’s Positions on them have interest in participating on corporate boards, they
French Boards of Directors” published by Journal of do not have the time to take actions to secure such positions.

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 International Journal of Ethics in Engineering & Management Education
Website: www.ijeee.in ((ISSN: 2348-4748, Volume 2, Issue 10, October 201
2015)
As well, these results suggest that while most of these women 4. RESEARCH DESIGN AND METHODOLOGY
agree that there is a problem with the lack of women on
corporate boards, they do not support the approach taken by Sample:
several European countries to legislate quotas. Instead, the The current population includes 9331 companies from the
majority of the women in this sample prefer a softer approach MCA portal. The sample size is 25 companies both listed and
to increase the number of women on corporate boards in the unlisted. The samples for the study were selected on the basis
United States, such as setting targets and publicizing the of Convenient Sampling Method. This study determined the
results. size and gender composition of the corporate boards of
g) Mareva Sabatier on research paper titled “A women’s directors by referring to the information provided under RTI
boom in the boardroom: effects on performance?” published and survey conducted by “Prime Database”, a corporate
in applied economics on 04 February, 2015 analyses whether database.
improving gender diversity in boardrooms improves firms’ Sources of data:
economic performance. In the context of French CAC40 –  Primary Data:
listed companies between 2008 and 2012,, this research uses an Primary data is originally data collected by
instrumental variable panel regressions, including production researcher’s first hand. In our research project, the
frontier estimates, to arrive at two key results. First, gender primary data was collected through survey of
diversity in boards depends on firms’ attributes including their questionnaire.
previous gender promotion strategies. Second, ond, promoting  Secondary Data:
women in boardrooms has a significant and positive effect on The secondary source of information was from
economic performance while accounting for the endogeneity books, existing researches and reports, internet and
boards’ gender diversity. Gender diversity even reduces magazines in order to build the theoretical frame for
corporate inefficiencies and enables firms to come closer to the research and to achieve its objectives.
their optimal performance.
h) Catherine Seierstad, Gillian Warner-- Soderholm, 5. DATA ANALYSIS AND INTERPRETATION
Mariateresa Torchia, Morten Huse on their research work
titled “Increasing
Increasing the Number of Women on Boards: The The data analysis and interpretation of
o the research project is
Role of Actors and Processes” (12 June, 2015) published by based on the questionnaire handed out to various companies.
Journal of Business Ethics has explained that understanding a) Appointment of Woman Director:

Has your company

the spread of national public policies to increase the
percentage of women on boards is often presented using

appointed Woman
different types of institutional theory logic. This article, look
beyond the institutional setting by focusing
cusing on the role of

Director?
actors. They explore processes that include who the critical
actors that drive and determine these policies are, and what
motivates them to push for change and employ a processual
design approach using a longitudinal country-comparative
country
case study exploring the case of Norway,, England, Germany 14%
and Italy. They map the political games, both inside and
outside legislative areas, including the micro-politics
politics among
various actors and groups of actors in the selected countries. Yes
Data are re collected through participation observations,
86% No
interviews and text analyses. The study contributes by filling
important gaps in the literature by embedding the discussion
about women on boards in politicking and national public
policies and by introducingg dynamic perspectives. Finally, by
using a processual design approach, they capture the reality of
the women on board debates at different points of time and in
different actor and motivational contexts. The study has Interpretation: The study has shown that 20 companies have
consequences for how policy-makers andd businesses may appointed Woman Director on their Board and remaining 5
follow up and act, based on the debates. companies yet to be appointed a Woman Director on their
Board out of total 25 companies.
 International Journal of Ethics in Engineering & Management Education
Website: www.ijeee.in ((ISSN: 2348-4748, Volume 2, Issue 10, October 201
2015)

To what extent is the

b) Reasons for Non-Appointment
Appointment of Woman Director
Director:

Reasons for Non-

participation of Women
Appointment of Woman
Directors in Board
Director?
Meetings?
Non-availability
availability of
Woman Director
8%
12% 10%
20% 60% Low
30%
60% Medium
High

Interpretation:: As the pie chart shows, the main reason for

non-appointment
appointment of Woman Director on board is “non- “non Interpretation: Grey area of the above chart shows 60% of
availability of Women Directors” which carries 60%. Woman Director having an enthusiastic participation in the
Secondly, the orange area carrying 20% for the reason meeting which is commendable, whereas orange area depicts
“Management is male dominated and do not want to diversify 30% response was medium. Only 10% Woman Director
the Board”. Rest of the part carries 20% and 8% for the reason having a low participation in the Board Meeting
Meeting.
are “The Board are in search of woman indepe
independent director e) Qualifications, Professional or otherwise for a Woman
to comply with dual provisions of appointment of woman Director:
director and independent director and “Other Barriers” in grey
and yellow area respectively.
What qualifications,
profesional or otherwise
c) When was the Woman oman Director Appointed by the
Companies:

When was the Woman are you looking for in the

Director appointed? Woman Director?
Before or after the
commencement of the… 10%
Expertise in the
Sector

30%
60%
12% Willingness to
contribute to the
Before company
88% After

Interpretation:: As per the results shown, 60% companies

expect the Woman Director should have expertise in the sector
Interpretation: 88% companies have appointed Woman which can be seen in blue area. 30% companies expects the
Director only after the commencement of the Companies Act, willingness to contribute to the company and only 10%
2013 and 12% companies have appointed Woman Director companies expects capability to provide solutions to the
before the commencement of the Companies Act. 203. situational problems which can be seen in orange and grey
d) Participation of Women Directors in Board Meetings: area respectively.
 International Journal of Ethics in Engineering & Management Education
Website: www.ijeee.in (ISSN: 2348-4748, Volume 2, Issue 10, October 2015)
6. FINDINGS, CONCLUSIONS AND SUGGESTIONS [4]. Lückerath-Rovers, M. (2011). Women on boards and firm
performance. Journal of Management & Governance J Manag Gov,
491-509.
The presence of women widens the talent pool which enables [5]. Mareva Sabatier (04 Feb. 2015). A Women’s Boom in the Boardroom:
businesses to benefit from large number of able people. One effects on performance?Vol 47, Issue 26, pp. 2717-2727. Available at:
benefit of diversity is that people with different backgrounds http://www.tandfonline.com/doi/abs/10.1080/00036846.2015.1008774
[6]. Nekhili, M., & Gatfaoui, H. (2013). Are Demographic Attributes and
may have different viewpoints. It can also serve as a credible Firm Characteristics Drivers of Gender Diversity? Investigating
signal of greater focus on corporate governance and gender Women’s Positions on French Boards of Directors. J Bus Ethics
diversity and acceptance of women skills. Journal of Business Ethics, 227-249.
[7]. S. Karen, E. Catherine, G. Cathy (August, 2014). Increasing Women’s
It comes to know from this study that maximum number of Participation on Corporate Boards in the USA. Journal of Business and
companies in Mumbai are appointing Women Directors and Economics. Vol 5, No.8, pp. 1338-1348.
the reasons include for non-appointment of women directors [8]. Seierstad, C., Warner-Søderholm, G., Torchia, M., & Huse, M. (2015).
Increasing the Number of Women on Boards: The Role of Actors and
by remaining companies are non-availability of Woman Processes. J Bus Ethics Journal of Business Ethics.
Director, Management is male dominated and do not want to [9]. Torchia, M., Calabrò, A., & Huse, M. (2011). Women Directors on
diversify the board and the board are in search of Woman Corporate Boards: From Tokenism to Critical Mass. Journal of
Business Ethics, 299-317.
Independent Director to comply with dual provisions of [10]. Yogesh Patel, Charul Patel (July-December 2013). Agenda of Women
appointment of woman director and independent director. Empowerment At the Boards- Amendment to Companies Act.
It can also be revealed from this study that maximum International Journal of Innovations in Engineering and Management.
Vol 2; No.2: ISSN: 2319-3344. Available at:
companies appointed Woman as a director only after the a. http://www.gtia.co.in/papers/IJIEM22062013.pdf
commencement of the Companies Act, 2013 and the
participation of Women Directors appointed by the companies
in Board Meetings was 60 percent which is commendable and
surely shows an enthusiastic participation by women.
The results give evidence that the appointment of women
directors is strongly related to family ownership and board and
then the appointment of women directors is related to their
professional services, valuable skills, and network links.
Indian market regulators SEBI’s move to get listed Indian
companies to include women on its board of directors has met
with mixed results with most firms choosing to merely install
women relatives on the board instead of making an effort to
fill the posts on merit, thereby nullifying the purpose of the
law.
Though the legislation and quota can be effective to bring
women to the top positions in the companies, its benefits will
be short lived if there are no proper guidelines to implement it
an if it is not properly supervised by the Government. Woman
should be accepted for their skills and not just because they
are women. It’s indisputable that only experience women with
the right qualifications should be appointed as a director of the
boards. There are lots of talented women out there, the
deserving and qualified women should be brought on board.

REFERENCES

[1]. AmudhaMurthy (March 05, 2015). A Critical Analysis of the Need for
Women Directors in Indian Companies. Accessed on 23 September,
2015.Available at http://www.legalservicesindia.com/article/article/the-
need-for-women-directors-in-indian-companies-1774-1.html
[2]. Bhavyags (October 27, 2014). Appointment of Woman Director.
Accessedon23September,2015.Availableathttp://www.legalservicesindi
a.com/article/article/appointment-of-woman-director-1717-1.html
[3]. Larkin, M., Bernardi, R., & Bosco, S. (2013). Does Female
Representation on Boards of Directors Associate with Increased
Transparency and Ethical Behavior? Accounting and the Public
Interest, 132-150.