Norms blunt Cos Act’s a-woman-a-board rule

MUMBAI: The biggest pipeline of women talent pool is getting rejected even before being chosen for board positions at companies. The reason: regulatory and internal rules. Financial services churn out the highest number of women leaders but most of them can't be tapped, leaving companies scrambling with a narrow pool of talent to comply with a new legislation that requires every listed entity to have at least one woman on its board.

Women spearheading the country's top investment banks are restricted from taking external board memberships because of internal policies on conflict of interest while those leading mighty commercial banks can't occupy board seats of other companies as the Reserve Bank of India rules prohibits executives from taking outside board directorships.

About 34% of the top 100 companies traded on the bourses, including the biggest two by market value__ energy behemoth Reliance Industries and India's top IT services firm Tata Consultancy Services, don't have a single woman on its board, data from researcher Indianboards showed. FMCG major Hindustan Unilever, Asia's largest generic drug maker Sun Pharma and Ambuja Cements too don't have a single woman on their boards.
While the new Companies Act is silent on whether women directors have to be independent, sources said that capital market regulator SEBI plans to come out with rules specifying that they have to be independent in a bid to improve governance among listed companies. If it happens, then the challenge for companies is to get on board well-known and quality women professionals, who are currently in short supply. The talent pool has further shrunk with top bankers getting knocked off from the list. A deeper analysis of the Indianboards data revealed that of the top 100 companies, more than half don't have a woman independent director on its board.

Banking in India mints the maximum number of women CEOs, topping even the US. But ICICI Bank's Chanda Kochhar, State Bank of India's Arundhati Bhattacharya, Axis Bank's Shikha Sharma and Bank of India's Vijayalakshmi Iyer can't be tapped as regulatory norms don't allow banks executive directors from having any interest in any other company. Similarly, Vedika Bhandarkar, vice chairman and head of investment banking at Credit Suisse India, Aisha de Sequeria, co-country head and head of investment banking at Morgan Stanley and Kaku Nakhate, India head of Bank of America Merrill Lynch can't be roped in as global banks internal policies governing conflict of interest between clients restricts them from occupying external board seats. However, there are exceptions to both the rules, requiring special permissions.

"Employees are entitled to take up board positions, subject to review and conditions on issues such as conflicts of interest. These are viewed on case-by-case basis," said a HSBC India spokesperson. The bank's country head Naina Lal Kidwai is not on the board of any listed Indian firm. Peer banker Kalpana Morparia of JP Morgan Chase, however, sits on the board of Dr Reddy's Laboratories and CMC Ltd.

Some top women executives, however, don't agree with the new rule itself. "I believe that women should be on the board if they are competent and they can contribute. Having a woman on the board for the sake of having a woman, I don't believe it," said Shanti Ekambaram, president, corporate and investment banking, Kotak Mahindra Bank.

"It bugs me that women have to be on the board because of quota. I have told some people that I don't want to be on the board because of quota. The approach should be to have the best person on board. If it is to comply with the rule, you can bring in your wife or sister to fill up the position," said Vibha Padalkar, executive director and CFO of HDFC Life Insurance. In the insurance sector, rules don't allow executives to be on the board of competitors and that of corporate agents.

Prithvi Haldea of Indianboards, however, has a different take on the issue. "Half of the country's population are women and are eligible for directorships as there are no specific eligibility criteria like education and experience except that the person should be 21 years. So actually there is no shortage of women candidates. But companies will not want an unknown name on their boards. The shortage will happen when rules specify that the person has to be independent. But then good women candidates wouldn't want to take directorships of unknown companies."

Morparia of JP Morgan and Renuka Ramnath of private equity fund Multiples have been declining offers because of paucity of time and existing work assignments.

After the 2008 Satyam accounting fraud scandal and the recent NSEL commodity scam, regulators have been tightening corporate governance norms for listed companies and empowering independent directors. The new companies Act aims to ensure more women oversight in companies where boards typically comprise the 'gentlemen's club'.

The new rule, however, has thrown open an opportunity for executive search and leadership consulting firms like Hunt Partners and Spencer Stuart. They have joined hands with companies to groom and train potential women leaders for board positions. The training includes understanding the legal, corporate governance and M&A nuances.