Woman directorship - Preceptive or Expedient

“Woman” whenever one hears this word, the image of mother, sister, friend, girl friend & wife will display in his mind. In the family scenario, especially in case of India, woman is angel of the family. One can’t imagine the life without woman. From the birth till the end of life, person needs a companion in the different form, say, mother, wife, friend, etc.

Gender equality

Provisions made under the Constitution of India such as: Right to equality under Article 14 of the Indian Constitution guarantees to all Indian women equality before law; Equal pay for equal work under Article 39(d), guards the economic rights of women by assuring equal pay for equal work; and Maternity Relief under Article 42, allows provisions to be made by the state for securing just and humane condition of work and maternity relief for women. From many years, the Government is providing special tax exemption to the women, but due to Indians’ thinking, the Indian society has remained male dominated. Are women now feel empowered in the sense that they are being equally treated by men in all spheres of life and are able to express one’s true feminine urges and energies? These are the important questions to be investigated with regard to women’s empowerment in India. The work place is one of the place where gender inequalities are easily noticed. (Every male boss has / wants a female secretary). But in the modern era the status of women is changing. The Government of India has formulated much legislation for women empowerment.

Companies Act, 2013 promoting women empowerment

With the introduction of new Companies Act, 2013, there’s mandatory inclusion of at least one woman director in the Board of every prescribed class of companies in India. It’s a much needed step initiated by Government for women empowerment, in the context of corporate world and ultimately, to recognize the role of women in promoting economic welfare of the Company.

As per second proviso to the Section 149(1) of the Companies Act, 2013, such class or classes of companies as may be prescribed, shall have at least one woman director. While as per SEBI (LODR) Regulations, 2015, appointment of woman director will apply to only such companies to whom corporate governance regulations are applicable.

Section 149 (1) clarifies that all the companies must have the Board of Directors, which shall consist of individuals –

• In case of Private Limited Company:-Minimum 2 directors
• In case of Public Limited Company:- Minimum 3 directors
• In case of One Person Company (OPC) :- Minimum 1 directors

Rule 3 of the Companies (Appointment and Qualification of Director) Rules, 2014 provides class of Companies which shall appoint at least one woman director, these are-

• Every Listed Company
• Every other Public Company having
• (a) Paid-up share capital of Rs. 100 crore or more; or
• (b)Turnover of Rs.300 crore or more.

Any intermittent vacancy of a woman director shall be filled-up by the Board at the earliest but not later than immediate next Board meeting or three months from the date of such vacancy, whichever is later.

It is hereby clarified that the paid up share capital or turnover, as the case may be, as on the last date of latest audited financial statements shall be taken into account.

Any company which is incorporated under the new Companies Act shall comply with the above conditions within six months from the date of incorporation.

Number of directorships

As per the provisions of Section 165 of the Companies Act, 2013, a person shall hold office as a director, including any alternate directorship, in not more than twenty (2)) companies at the same time subject to maximum directorships in ten (10) public companies. However, SEBI restricts directorship as an independent Director to maximum seven (7) listed companies only. In case an independent is a Whole-time Director in any listed company, he / she can hold directorship as an independent director in maximum three (3) listed companies only.

Simplifying above citations in the context of any woman to be appointed as a woman director:

1. She can be appointed in a total of twenty (20) companies as Director including alternate directorship.

2. Out of the total of twenty, she can hold the position of Director in a maximum of ten (10) public companies.

3. Out of this ten (10) she can be in a maximum number of seven (7) listed companies and three (3) unlisted public companies.

4. If she is already a whole time director in one of the companies her maximum independent directorship in listed companies is three 3.

It may be noted that for considering the limit of public companies in which a person can be appointed as director, directorship in private companies that are either holding or subsidiary company of a public company shall be included.

Default in appointing women director

Stock Exchanges are advised to impose the following fine on listed entities for non-compliance with the requirement of clause 49(II)(A)(1) of listing agreement:

For any non-compliance beyond September 30, 2015, SEBI may take any other action, against the non-compliant entities, their promoters and/or directors or issue such directions in accordance with law, as considered appropriate. [CIR/CFD/CMD/1/2015 dated 08th April, 2015]

Keeping in view the above penalty, the Company should appoint woman director on its Board. Yet according to an estimate, nearly one-third of top 500 listed companies do not have any female representation on their boards.

Why to appoint woman director on the Board?

Before answering this question, I would like to draw your attention towards the qualities / traits of woman, which are as follows:

• Negotiator  (at the time of buying “sabji” or household things);
• Adaptable (female leave her house and his family for making new family);
• Organiser (manage whole house);
• Good learner (while teaching her children, she learns too);
• Arbitrator;
• Networker (she can easily mix up with others) ;
• Good listeners;
• Proactive and many more.

By considering the above qualities, if the Companies appoints woman on their Board, then definitely they will be benefited in many ways like by way of negotiation power of woman, company can crack a decent deal at the reasonable consideration or say, by good networking skill, company can make new clients which will ultimately helpful to boost up the economic conditions of the Company, for example, Chanda Kochar, Managing Director of the top of the private bank of India (ICICI Bank Ltd). Women are thought to be more inclined towards social work. As now the Corporate Social Responsibility provisions become mandatory, woman directors can effectively contribute towards CSR activities of companies by minutely following the flow of activities, acting upon concerns and so on. WDs with different backgrounds offer unique perspectives that may help counter the conventional wisdom and increase consideration of a wider range of potential solutions.

Ground reality

With the compulsion of woman director on the Board, many companies have welcomed this step open heartedly by bringing women director on the Board. Some of the companies have selected woman director from the field of academics, law, art by keeping in mind the different perspective like effective CSR implication and brand building. Even, preferences also given to members of professional bodies like ICAI, ICSI & ICMAI for candidature as a woman director on the Board. Inspite of such advantages, some Corporates appoint woman director out of compulsion merely for compliance purpose from the group of promoters of the Company but it’s not valid at all. Corporate should have to gulp up the spirit behind the law for enacting woman director’s appointment in Company. There is one saying – “Change your attitude, change your destiny.” Keeping in mind this saying, if corporate change their mind and see the things in positive way, it will be win-win situation for them by appointing woman director on the Board.

Many corporates raising the doubt on availability of enough capable women for the position. Some corporate also argue that they have not been appointing WDs because they’re not able to find right candidate for the same. But they forget that in present scenario girls are doing better than boys in most of the fields. The annual results of Secondary and Higher Secondary Board examinations reveal this fact- More women are getting degrees than men, and are likely to fill new jobs in every field. Hence if you desire something so much, so truly then the universe will definitely conspire (जहाँ चाह, वहाँ राह) to find the right woman candidate for the Boards.

Conclusion

Rigid, conservative and typical mentality of Board members ignore the concept of woman director by stating that ‘she’s only lady’. But we should accept the provision of women directors in spirit and not just in letter by keeping in mind the benefits of gender diversification. Considering the present scenario, we see woman director is truly a gem for the company if the legislation is implied in correct spirit as thought by law maker, so why should we restrict it to only few big shot companies. We must try to incorporate many other mid size companies too by reducing the threshold limit as specified in the legislature.

References:

• Companies Act, 2013
• Companies (Appointment and Qualification of Directors) Rules, 2014
• SEBI (LODR) Regulations, 2015
• Business Standard – March 17, 2015