New Delhi/Mumbai, July 29: The government plans to create a provision in the Companies Act to help more women break the glass ceiling and become directors on the boards of companies.
Finance minister Jaswant Singh told Parliament today that the government was considering an amendment to a section in the Companies Act that would prescribe a minimum number of women who had to be inducted into boards of corporate entities.
The government had indicated its resolve to increase proportional representation in company boardrooms by proposing an amendment to Section 252 of the principal act where a sub-section is being inserted.
The draft legislation is silent on the exact number and merely says “that all public companies shall have such number of women directors as may be prescribed”.
Indian business is sharply divided on the proposal with its detractors puzzling over a delicious irony: the political class has yet to arrive at a consensus on proportional representation in Parliament while it seems determined to ram it down corporate throats.
Women are rare in boardrooms and where they are present, they are there mostly because they are members of the families that run the businesses.
Jaswant Singh told the House that the government had not identified the class or classes of companies that would be required to follow the statute.
However, neither corporate houses nor professionals like chartered accountants are terribly keen on the idea of reservation for women in boardrooms.
J.J. Irani, member on the board of Tata Sons, had heaped scorn on the proposal at a recent seminar. “Good corporate governance cannot be mandated or legislated,” he said. “It has to come from within — through peer pressure.”
He said: “Of course, there should be women directors, but merit comes first, gender comes second.”
While he grudgingly admitted that the proviso would bring more colour to the boardroom if the bill was passed, he warned there could be more problems in the working of the board.
“First the government should come out clearly on whether it really is working towards reservation for women in Parliament. Both are democratic institutions. Before introducing reservation in Parliament, why meddle with corporate boardrooms'” asked .D. Gupta, former president of the Institute of Chartered Accountants of India and a practising chartered accountant.
Gupta felt that women directors ought to come through on merit and not on the basis of gender-determined quotas. “Selection of company directors should be gender-free,” Gupta said.
However, not everyone is against the proposal.
Sailesh Haribhakti, president of Mumbai’s Indian Merchants Chamber, said: “I was talking to Naina Lal Kidwai (of HSBC) on this. We felt that all major boards should have at least one woman on the board.”
“I am on several boards where I find women directors make a vital contribution.”
“The two are completely unrelated issues,” Haribhakti said on politicians mandating compulsory presence of women on company boards without reaching an understanding on representation in Parliament.
A spokesperson for Max India Limited, with interests in health-care and insurance, said: “Few women of calibre are in senior positions in India. The glass ceiling is for real. The provision setting out reservation for women in boardrooms is welcome, but they should be competent. One should not fill these posts just to meet a quota requirement,” he said.
Sanjiv Taneja, director, corporate affairs of Eli Lilly and Company (India) Pvt Limited, also a pharmaceuticals company, said: “To have members of a particular sex in boardrooms in terms of a fixed quota does not make sense. It may be viable in large public sector companies but should have no place in blue-chip corporates. There are a lot of criteria for choosing directors and those should be adhered to, irrespective of gender.”
Haribhakti said the glass ceiling exists everywhere, including the US. Carly Fiorina, the Hewlett Packard chief, is the only woman featured in a survey of the 50 most powerful persons in the world.