[Anmol is a student at National Law School of India University, Bangalore.]
Ever since the rise of the feminist legal theory, every regime of law has been critiqued from a narrow yet powerful feminist lens, and corporate law is no different. Over the past few decades, gender diversity and corporate governance have conterminously been a part of a larger global discourse. Whether it is the recent law on inclusion of LGBT+ communities in boardrooms in California or Section 149(1)(b) of the Companies Act 2013 (Act) mandating ‘one-woman quota’ in corporate boardrooms, gender diversity has been a recurrent challenge and an aspiration of corporations. With the implementation of the woman-quota in C-suites and policies for anti-discrimination and sexual harassment at workplace, Indian laws, whether corporate or constitutional, seemed to have played an important role in making boardrooms relatively more safe, accessible and diverse. While the present legal framework surely does mandate for women’s representation, this blog argues that it does so in a conditional and tokenistic fashion. It is argued that the law often seems to confuse means with ends, thereby losing sight of what is ultimately of concern, which in this case is diversity and inclusivity or the lack thereof. In order to make the case for corporate diversity and inclusivity, the author uncovers its latent tangible benefits. By making the so-called business case for diversity, the blog lays the foundation for the meta-argument about boardroom diversity beyond the realms of gender-binaries and women’s representation.
The Business Case for Diversity and its Tangible Benefits
The business case for inclusion and diversity bolsters the broader corporate governance project of representation. Diversity and inclusion, whether in terms of gender, sexuality or both, are potent corporate tools. Diversity increases the board’s ability to identify and recognise the needs and interests of its stakeholders, who are themselves becoming increasingly diverse in their identities and thereby in their demands. The evolving social dynamics of the market warrants companies to improve diversity among their director ranks, underscoring a greater awareness of the need to address environmental, social and governance issues (ESG). As argued by Novena Sutiono, more diverse boards produce and harbour varying points of view which inevitably tend to reduce the risks of environmental and social costs. Arguing from the stakeholder theory perspective, businesses are located at the intersection of various social institutions which makes them duty-bound to address not just business concerns, but also socio-cultural issues. Furthermore, as societies evolve, businesses have to align themselves with the prevalent social fabric in order to cater to their employees, customers and investors. In addition to complimenting the ESG concerns of corporates, diversity also enhances their social and market reputation, setting them apart from their competitors. An increased membership of female directors positively enhances the corporate reputation of corporates and differentiates them for being socio-culturally relevant and politically responsive to the pertinent issues of gender equality and representation. While there has been tremendous growth in female presence in boardrooms and corporate houses over the past few years, there are other blind spots that need to be accounted for.
As the very idea of diversity is evolving and in fact, expanding, it is argued that the call for diversity in boardrooms should not just be premised on gender-binaries. Today, the market requires corporates to reorient their policies to include not just women, but also people from the LBGT+ community on their boards. With respect to its business case, similar to women’s representation, LGBTQ+ diversity in boardrooms also offers manifold benefits. LGBT+ representation will also enhance the understanding of the community, which simply makes good business sense. Boards that lack a LGBT+ lens on their decisions may bear the risk of overlooking risks and potential opportunities, making diversity a paramount business concern, and not just an incidental socio-cultural project. Therefore, corporates cannot simply afford to ignore the value of LGBT+ diverse boards, from the perspectives of both, corporate governance and business considerations. It is empirically proved that customers levitate towards brands and companies that espouse and share their individual and collective social consciousness and values. Thus, by tapping into the relatively contemporary social paradigm, corporates may have an opportunity to capitalise on a global multi-billion dollar LGBT+ market across sectors. What makes the case for LGBT+ representation stronger is the growing demography of queer community in India and across the globe. Consequently, the LGBT+ corporate bonhomie is also a potent source of competitive advantage for corporates. It can thus be concluded that the cost of lack of diversity and inclusivity is not only heavy, but detrimental to the business and its stakeholders.
Paradox of Section 149(1)(b) and Gender Diversity
As evident from the Kotak Committee Report on Corporate Governance, under-representation of women in the Indian corporate sector has been a perpetual cause of concern and it was with the intent to bridge the gap between women and top management that, Section 149(1)(b) of the Act was introduced in 2013. While the law was touted to be a harbinger of diversity and gender-inclusivity in the corporate arena because of its legislative intent, in practice, it fell prey to its foundational narrowness and legal inefficacies. By appointing female family members to the board, Indian corporations have (mis)used the women-quota for tokenism, rather than meaningful representation. Due to tokenism, the law continues to fail in serving its purpose of women’s representation and diversity in boardrooms. It is further argued that, even if non-family members are appointed as directors, the goal of diversifying boardrooms is not actualised due to the sheer lack of ‘critical mass’. According to the Kanter’s Critical Mass Theory, critical mass is a number or percentage that represents a minority substantial enough to make a contribution. According to the theory, one-woman quota often fails to make any dent in the male-dominated boardrooms due to the lack of number of women required to constitute a critical mass and thereby make a contribution. As the Act mandates for a minimum of only one-woman director, irrespective of the size of the company’s board, women’s appointment has been innocuous, owing to the practices of tokenism and proxy-representation. Therefore, what seemed to have been instituted to serve the cause of women’s representation, has actually been used by corporates for optics and as a formality.
In addition to the aforementioned practical lacunae in the law, it is argued that the Act suffers from foundational narrowness. While companies may now have at least one-woman director on their respective boards, the Act still does not accomplish gender diversity in its truest sense. By not addressing the cause of representation of the third-gender and viewing gender through the binary lens of male and female, corporate law turns a blind-eye to transgender people. History bears testimony to the fact that the transgender community has never been able to find a space or a guarantee of representation in any kind of institution. Whether it’s the public or corporate sector, they have been marginalised and discriminated against, and have always been stuck between the binaries of male and female. It is therefore argued that, while the transgenders as a part of the LGBTQ+ community have made meaningful advances towards both, legal recognition (by virtue of NALSA v. Union of India) and social acceptance, these strides are unfortunately not seen in the corporate boardrooms.
The author believes that the issue of transgender representation in boardrooms poses structural challenges to the corporate sector, that require the law to re-evaluate its idea of gender-representation and diversity. From diversity recruitment programs to inclusion-orientated training and other structural changes, transgender representation, similar to the issue of women’s representation, will require corporates to make institutional positive commitments. Since there is a stark absence of transgenders at every level of management, true representation will only be possible with a policy of affirmative action in recruitments and promotions. While all of the above might seem to be long-term corporate undertakings, some of the top Indian corporate houses such as Wipro and Godrej have already led the way by their gender-inclusive and diversity initiatives. Wipro is committed to hiring, developing and nurturing LGBTQ+ talent not just in India, but across the globe. Similarly, Godrej has employed an active trans hiring mechanism to ensure diversity and representation of the transgenders in the company’s diaspora.
Conclusion and Recommendations
The author believes that the law has to re-examine itself and focus more on the issue of gender diversity through a non-binary and a critical mass perspective. As stated before, even with Section 149(1)(b) of the Act, women’s true representation has been dismal. It is therefore recommended that the law must provide for reserving 30% of boardroom seats for women and transgenders in order to achieve a critical mass and thereby truly represent and diversify the boardrooms. While the representation of transgenders might be a long-term goal, the author believes that the law has to provide legal succour in terms of affirmative action in hiring and promotions, in order for them to at least enter the corporations and subsequently, the C-suites with time. Until the law and the corporations become more sensitive and inclusive of all genders, gender-diversity in corporate law will persist to be a fond illusion.
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