Women in Leadership Roles

In a landmark decision, the Companies Act of 2013 made it mandatory to have at least one woman director on their board.

Did it make a difference?

According to research by Prime Database, reported by India Briefing in November 2023, the ratio of women directors at the time of the legislation, “which stood at one woman director for every 20 members” moved up to “one woman director for every eight board members in 2018.” Further, “of 4,783 directors, there are 885 women that cumulatively sit on the boards of Nifty-500 companies.”

So, the legislation did make a difference.

Compliance is the major driver for Indian corporations

In March 2024, the Economic Times wrote that “the male-to-female ratio in leadership roles at companies has remained unchanged over the past five years…, suggesting that corporate India still has a long way to go to ensure gender equality at decision-making levels.”

What can we infer from this? That once the compliance requirement was met, there has been little or no internally motivated change to keep the ratio growing. Another Economic Times article in October 2023 pointed out that “223 (or 45%) of the Nifty-500 companies have only one woman director.”

This reluctance, or inertia, is also visible in the lower representation of women in non-regulated leadership roles in corporate India. According to a PRIME Database Group report quoted by CNBC, “Women's employment share in corporate India lowers as the hierarchy increases: As many as 23% employees in corporate india are women, 13% hold key management personnel (KMP) positions, 10% are executive directors and 5% are managing directors or CEOs.”

While American corporations choose to have more women in leadership

This contrasts adversely with one in three positions occupied by women on S&P 500 boards, without a legislative mandate.

Globally, women occupied 34% of seats on the boards of S&P 500 companies in 2024, according to a study by search firm Spencer Stuart. But, it must be noted that this is not due to law mandating women on board but owing to decisions of individual corporations.

In their “Women in the Workplace 2024: The 10th-anniversary report” specific to corporate America, consulting firm McKinsey also noted “meaningful, though modest, gains in women’s corporate representation.” Though the numbers reduce at higher levels of the corporate hierarchy, women were occupying nearly 30% of the positions at the C-Suite level in 2024, up from 16% in 2015. The chart below illustrates the changes.

The benefits of women in leadership

Since these trends are based on independent decision-making by American corporations, known for their resolute pursuit of investor interest and bottomline health, it provides us with a good segue into examining the benefits of greater female representation in leadership positions. And equally, what Indian corporations could be missing out on.

The American Psychological Association, in an article published in July 2024, says that “Women leaders make work better.” They elaborate on this headline with supporting arguments drawn from various studies:

• Female leaders demonstrate more transformational leadership styles, according to a landmark 1992 meta-analysis of 61 studies led by Eagly.
• Team collaboration is greatly improved by the presence of women in the group, an effect that is primarily explained by women’s benefits to group processes, according to a 2010 study. 
• Women rank better than or equal to men in seven of eight traits relevant to leadership assessed in a 2008 national survey by the Pew Research Center.
• The mere presence of a female leader relative to a male leader led perceivers to anticipate fairer treatment in that organization and greater projected salary and status, according to a 2022 study led by social psychologist Mansi P. Joshi, PhD.

A post updated in December 2024 on the Harvard blog provides financial justification for greater representation of women in leadership roles. Quoting the McKinsey and LeanIn.org study it says:

• “Companies with the greatest proportion of women on executive committees earned a 47 percent higher rate of return on equity than companies with no women executives.  
• Companies in the top 25 percent for gender diversity are 27 percent more likely to outperform their national industry average in terms of profitability.
• Companies in the bottom 25 percent for gender diversity were significantly less likely to see higher profits than their national industry average.”

Conclusion

Having more women in leadership roles is clearly good for business. Indian businesses need to move beyond compliance and use it as a business strategy, as many American corporations are already doing. Indian businesses reach out to Ushankk for guidance as they go about building an inclusive and diversified workplace.

Not that we don’t have stellar examples in India.

The Institutional Investor Advisory Services India Limited (IiAS) report of November 2022 identifies “14 companies with four women directors on their board and another four companies with five or more women directors on board: Apollo Hospitals Enterprise (6), Godrej Agrovet (5), Godrej Consumer Products (5) and India Cement Ltd (5). While low in absolute numbers, it shows the path to others.”