Number of women on Indian boards doubles in 5 years

The number of women on the boards of companies in India has doubled over the past six years, from 5.5 per cent in 2010 to 11.2 per cent in 2015, said a report by Credit Suisse Research Institute. This has helped closed India’s gap with the global average of 14.7 per cent. However, India saw a slight decline in management diversity, from 7.8 per cent in 2014 to 7.2 per cent.

The report said India had the second lowest representation of women at the senior management level in the region, behind Japan and South Korea (both at 2.3 per cent). Asia Pacific has shown significant progress in gender diversity.

According to the bi-annual CS Gender 3000 report, companies with a higher participation of women in decision-making roles generate higher market returns and superior profits. With the data provided by the CSG 3000, the report examines whether the evidence continues to link gender diversity to better performance and looks specifically at firms with more than 50 per cent female representation in senior management, micro-finance institutions and venture capital firms.

The latest CSG 3000 report showed that of the 1,400 companies analysed in 12 markets across the Asia Pacific region, there has been considerable improvement, with a 60 per cent rise in gender diversity at the boardroom level from 2010 to 2015. However, overall female representation at boardroom level in Asia remains low at below 10 per cent at the end of 2015.

Companies with greater diversity continue to be rewarded with excess returns. Of the 265 APAC companies with over $10 billion market capitalisation, those with at least one female board member delivered 58 per cent out-performance in share prices from 2006 to July 2016.

On the management front, the APAC region also had the highest level of female chief executive officers. However, the report said both Emerging Asia and Developed Asia saw a decline in female CEO representation from two years ago, by about one percentage point.

Asian countries continue to dominate top positions in management gender diversity. Thailand overtook Singapore (now third in the region) to the top in terms of female participation in senior management (CEO and those reporting to the CEO), with 27.8 per cent of senior positions now held by women, followed by the Philippines, which registered 25 per cent. In Emerging Asia, women make up 13.2 per cent of business unit heads, the highest among all regions and a 17 per cent improvement from 11.3 per cent in 2014.

"Gender diversity in both board and particularly senior management position is a tremendousbenefit to companies and their shareholders. To understand the impact of gender diversity, we need to focus on management,” said Stefano Natella, head of Global Markets Research.

Natella said data show there is a strong correlation between companies with high levels of diversity in management and their performance. The report said the higher the percentage of women in top management positions, the greater the excess returns for shareholders. Hard metrics of financial performance have also justified this superior performance, according to the data. From year-end 2013 to mid-2016 , the out-performance of companies where 25 per cent of senior posts were held by women was a compound annual growth rate (CAGR) of 2.8 per cent, it was 4.7 per cent for firms with 33 per cent representation and 10.3 per cent for those with more than 50 per cent women in top management positions. Over this period there was a 1 per cent annual decline for the MSCI ACWI.

While the percentage of women on boards is rising, diversity in senior management continues to be of concern for countries like India. The report said there were Latin America, Japan, South Korea, India, Europe, West Asia and Africa have made limited headway in terms of diversity as cultural biases remain entrenched with an insufficient pipeline of and opportunity for female talent to make changes over the short or medium term.

However, the report said there is no consistent correlation between higher diversity in the boardroom and increased participation of women in senior management. It also said, paradoxically, that efforts made to increase gender diversity in boardrooms can limit the available female talent in senior management and hinder expanded representation of women in executive positions in the future.

The “Queen Bee” syndrome, which argues that women who have made it to senior positions actively seek to exclude other women from promotions into top management, has also been debunked by the report. Data in the CSG 3000 dispute this, as they show that female CEOs globally are significantly more likely to surround themselves with women in senior roles. Female CEOs are 50 per cent more likely than male CEOs to have a female chief financial officer and 55 per cent more likely to have women running business units, it said.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.