Tribute2 Indian women by Ministry of Corporate Affairs2 include provision in companies bill Women on boards mandatory: How feasible is this proposal?

Women on boards mandatory: How feasible is this proposal?

Published on Tue, Mar 08, 2011 at 21:04

Updated at Tue, Mar 08, 2011 at 21:18 | Source : CNBC-TV18



It's the International Women's Day today and the government has decided to pay tribute to Indian women by dropping a bombshell on India Inc. The Ministry of Corporate Affairs has decided to include a provision in the proposed Companies Bill, whereby any company which has five or more directors shall have at least one women director.

Murli Deora said, "The proposed provision in the Companies Bill will give rightful due to our women in the corporate world”

How feasible is this proposal? In an interview with CNBC-TV18’s Shereen Bhan, Tushar Chawla, partner, Economic Laws Practice, answers.

Here is a verbatim transcript of the exclusive interview with Tushar Chawla on CNBC-TV18. Also watch the accompanying video.

Q: The Ministry of Corporate Affairs seems to suggest that there is no dearth of qualified women who can possibly join boards as directors. While this is really a great boost towards women empowerment, how practical is this move?

A: There is no doubt about the fact that it is going to be very challenging for the companies to implement this. If you talk purely of Indian companies, you look at the scenario today. How would women directors be inducted into the board? Either there has got to be lateral hiring or the concerned persons got to be recruited into the company at a fairly early stage to be groomed as a prospective member of the board. How difficult would that be? You can very well imagine. In case of lateral hiring, companies would have to go for a recruitment drive, and that is purely from an Indian company’s perspective.

If you look at foreign companies coming into India establishing joint ventures with Indian partners then how do we get that implemented? Do we go and tell the foreign shareholders that look you cannot have more than three directors on the board and out of which one has got to be a women. How do we get that implemented, that is a problem. That is am sure would be a problem.

Q: Currently, an individual cannot be on the board of more than 20 companies. What we understand from our Ministry of Corporate Affairs sources is that about 27,000 companies have about five directors and all these 27,000 companies, if this bill does get passed and this clause is inserted in the Bill, will now need to have one women director. Do you think that this 20 cap, this 20 ceiling that we actually have in terms of number of boards that you can be on will have to be relaxed, given the fact that we may not perhaps have had as many women who will be qualified to be on boards of the companies?

A: I think the ceiling is 15. In case you want to go above that, you will have to take the approval of the Central Government. So, I do not know whether the government is interested in relaxing that. But of course the approval of the Central Government would have to be required in order to induct more board members.

Q: Do you think this is going to lead to a situation where a lot of businesses in corporate India are family drive, are promoter driven, it is going to lead to an influx or women within the family now being made part of the board. So, in that sense, is it really going to be a real empowerment?

A: That is a difficult question, whether that would be an empowerment in real sense that needs to be seen. Yes there are fair amount of competent women in the country today and thanks to the education system. I am sure there is going to be real time empowerment only when you see it from the perspective of implementation. When you grant enough powers to the concerned member of the board, you give them authority then obviously there is going to be real time empowerment.

Q: Do you think this is going to go through?

A: With the government proposing the reservation bill, reservation for the women in the Parliament, I am sure this will go through.

Q: That Bill has not been passed by Parliament yet, do you think the government will have to back down and at least not make this mandatory?

A: No. I don’t think so.

Q: So do you think it will continue to be mandatory?

A: It will definitely.