Name Shivankar Sukul

Roll No. 1638

Subject Corporate Governance
Semester VII
 ANSWER 1.

The Companies Act, 2013, and subsequent guidelines issued by the Securities and Exchange
Board of India (SEBI) made it mandatory for all listed companies to have at least one woman on
their boards—either as an executive or a non-executive director—before April 1, 2015.

With this, India moved a step closer to similar requirements in western countries, although their
gender diversity rules are far more stringent. Countries like Norway, Spain, Germany and
Canada require at least 40% of boards to be female. In France, a law passed in 2011 requires all
CAC 40 companies (those listed on the benchmark French stock index) to meet the 40%
requirement by 2017. Israel has an even stricter requirement—as far back as 1993, it passed a
government resolution mandating that 50% of boards comprise female directors.

Regulatory framework and the absurdity-

The LODR regulation 17(1)(a) prescribes for a woman Independent Directors which is far more
desirable than that under Companies Act. This is even more ludicrous as it says that top 500 and
1000 entities in market capitalization should have woman ID. We are trying to say that company
is also a social organization, and is therefore a carrier for the state to carry out its social
responsibility. But then they are forcing women in the Boardroom of top companies. This is
essentially saying that companies which are not performing well need not have women directors,
inclusivity and fresh perspectives. Are we aiming for token appointments – forcing women
directors in companies which are already performing well. This means we are not expecting any
voice or perspective from her, as the companies are already top performers. State just wishes to
showcase that top companies have women directors.

Rule 3 of Companies Appointment and Qualification Rules says that one woman director is
necessary for every listed entity, and for every other entity where paid up capital is more than
100 crore, or turnover is over 300 crore. This is very ludicrous as financial thresholds are
prescribed for appointment of women directors which has nothing to do with inclusivity, fresh
perspectives and better decision making.
Inspite of having an intention of gender inclusivity, there are certain loopholes as well which are
being transgressed time and again. Section 161 of the Companies Act, 2013 allows for
appointment of alternative director in place of a regular director who would be unable to
participate in company affairs due to being out of country. The law doesn’t say that alternate
director should also be of the same gender as the person in whose place he is made as an
alternate director. Thus, it is permissible for a company to appoint a foreign national as woman
director, and then by way of ordinary resolution, or by way of circulation (a meeting need not
take place every time, so a resolution would be circulated among directors, and is approved by
them through signatures, and it would be considered as approved), they can appoint an alternate
director in her place, who need not be a woman.

Having a look at the rules and regulations, it is evident that the rules are prone to be flouted. In
worst case, section 172 of the Companies Act, 2013 would be attracted i.e., penalty or fine would
be imposed. This means that compounding of offence is allowed. The person can pay the fine
and then appoint the woman director. There can also be situations like BASF India where the
legislators or Courts could not do anything for their apparent violation of the provision of having
a woman director.

Conclusion-

In order to create gender diverse boardrooms, both in letter and spirit, and to genuinely shatter
the glass ceiling, the market leaders in industry sectors need to step up and make more conscious
efforts to make their boards more gender diverse, thereby encouraging smaller companies to
follow suit. At the same time, the government and regulators need to amplify their roles as
watchdogs by ensuring stricter enforcement and introducing more stringent penalties.
 ANSWER 2.

The Establishment of Glass Ceiling Commission and bringing the issue of Gender Diversity
to Forefront.

Establishment and Mandate of the Committee

In the year 1986 the term Glass Ceiling was popularised by an article which appeared in Wall
Street Journal where the invisible barriers faced by women as they moved up the corporate
hierarchy was discussed in detail. Being very sensitive to these concerns, the US Government
decided to constitute the Federal Glass Ceiling Commission, a 21-member bipartisan body
chaired by the Secretary of Labour, was created by the Civil Rights Act of 1991.

Its mandate was to identify the glass ceiling barriers that have blocked the advancement of
minorities and women as well as the successful practices and policies that have led to the
advancement of minority men and all women into decision making positions in the private
sector.

Findings and Differences in Viewpoints

The commission took interviews of several CEO’s and top managers from the leading companies
in the US. The finding of the committee suggested that the opportunities for women and
minorities were not equal to the majority (whites and men). They also found that it is against the
best interest of businesses to exclude women and minorities. They concluded that there is also a
misperception among the races.

Unlike the steps taken in other jurisdictions such as India, the US Committee did not consider
inclusion of women as a social benefit but rather as an opportunity to ensure that the talents and
abilities of the women population is effectively and efficiently utilised by the corporates. This is
in stark contrast to the legislative intent evident in 57 th Committee Report where the idea of
inclusion of women was discussed and introduced as tokenism and not for inviting any real
inputs by women managers and directors.

Glass Ceiling research revealed three levels of artificial barriers to the advancement of minorities
and women in the private sector that contradict this nation’s ethic of individual worth and
accountability—the belief that education, training, dedication, and hard work will lead to a better
life. The three levels of barriers identified by the Commission research were as follows—

1. Societal Barriers which may be outside the direct control of business

2. Internal Structural Barriers within the direct control of business
3. Governmental Barriers

Hence the commission identified the three reasons for the barriers and formulated a
comprehensive strategy to combat the issue of gender diversity in corporates in these three
spheres.

The Legislative Response

Being aware of this problem at an early stage of identification, the US enactment of title 2 in
Civil Rights Act, 1991 was introduced. This is considered to be a watershed movement in the
pro-labour movement in US. This is now known as the ‘Glass Ceiling Act’ of 1991. Thus, not
just inquiry or commission, but a full-blown legislation was developed and accepted by the
government. This depicts the difference of attitude in India and USA, as unlike Indian response
in Companies Act, 2013, the legislature did not adopt a piecemeal approach to combat the
problem but rather identified the root causes of the problem and then decided to face it head on.

Introduction of Statutory Steps

The approach of the act was not top to bottom and cramdown based but rather holistic. Unlike
introducing tough compliances coupled with penal actions, the legislation decided to establish a
statutory authority Glass Ceiling Commission constituted by Secretary of Labor and other
members of senate which regularly met and issued recommendations to introduce gender
diversity in the corporate hierarchy. The committee is mandated to  conduct a study of
opportunities for women and to reduce artificial barriers to the advancement of women to
management and decision making positions in business.

The statute also envisioned to introduce the National Award for Diversity and Excellence in
American Executive Management for encouraging the businesses to take the issue of gender
diversity seriously while formulating their HR policeies.