Need for reconsideration of Section 149 of the Company Act 2013: Empowerment or just a legislative formality? – Ms. Kholi Rakuzhuro

Need for reconsideration of Section 149 of the Company Act 2013: Empowerment or just a legislative formality?

Introduction

Landmark legislations have been made by the Government to empower women and encourage them to feel inclusive in elite platforms in the corporate field through Section 149(1)[1] of the Companies Act 2013 but also through the Constitution and various other legislations such as the SEBI Act, Companies Rules 2014 and even in the Legislative body of the Government. However, the issue is why is there so less efficacy on the implementations of these provisions?

Why need of reservation for women in the corporate board?

Systematic hierarchy that has prevailed from ancient times have not left its impact in today’s society. Revolutionary changes have been occurring but the stigma still prevails in most developing and especially in under developed society.

Women were always considered weak, only skilled for household chores and to bear children. The dictation of the society that tells women that we/they are not meant for more bigger and serious things in life has triggered women societies across the globe.  Historical event of The ‘women suffrage’ when women were first given the right to vote in the mid 90s strike the beginning of women empowerment era in the modern society.

Section 149(1) of the Companies Act 2013

Section 149 clause 1 of the Companies Act 2013[2] is a landmark legislation that has been implemented to have minimum of one woman director in a company with the main objective to do away with the stigma mentioned above and empower and encourage women to step up and take in charge of the opportunities that the corporate field has to offer. However, the expected results are not yield due to various barriers that will be flowingly discussed.

Other legislations regulating appointment of female director

Section 149(1) of CA 2013[3] read with SEBI listing agreement in clause 49[4] of the SEBI Act and Rule 3[5] of the Companies Rules 2014 under the provisions of Appointment and Qualification of Directors mandates appointment of at least one woman director in all public-private company that has a paid-up share capital of 100 crore rupees or turnover of 300 crore rupees or more.

Theory of Social Identity

Although  legislations and regulations have been implemented by the Government with an attempt to eradicate the system there is very less efficacy on the implementation of these provisions, because being a single female member in the board makes it disadvantageous for women to voice their opinion freely not been able to make optimal use of the position and opportunity at hand.

When women are given positions purely based on legislative compulsion on ‘quotas or reservations’, their ‘prima facie’ value seems to decrease, even the most deserving and capable female director appointed is constantly goes through performance pressure. Women attaining positions under quotas and reservations is always going to be viewed to as undeserving and unduly making them constantly feel they are part of the out group but dominated by the in group[6].

Recent studies suggest that a company having at least three female directors make it more advantageous for women directors[7] to produce maximum results reaching and attending to a larger amount of audience especially a company that has large female audience and customer based.

Enriching Policies

Firms that are headquartered in Countries or Cities where state encourages such policies are more prone to have women in these positions in the corporate board.

Corporate Firms with more progressive anti-discrimination on gender policies in hiring have a higher percentage of female directors in its company. Availability of medical amenities such as publicly funded abortion, supply of contraceptives to women and progressive family leave, the percentage of women directors will increase.

Equal working hours and equal pay will encourage women to work hard so that women do not see elite positions as unattainable. When overworked and very little pay it firstly discourages the laborer to work harder than she is capable of, second, she will start resting to terms that the society and the system around her entangled to the taboo that women are supposed and belong to this nature of the system.

Recent studies found that raising women’s labor force participation up to the same level as men can boost India’s GDP by 27 per cent[8].  In order to achieve the same, one general window to view is to legislate policies in this particular direction. If a state and its policies becomes progressive automatically its society and citizens becomes more accepting  towards opportunities of women holding directorship as Government’s policies impact on the outcomes of Corporate Governance on women and their representation on corporate boards. In Alaska there was zero number of women in the corporate elite while with nations that have a more advanced policy regulated had about 64 percent women directors. The US Constitution prohibits discrimination based on ground of sex and gender under section 10[9]. The labor force participation of women in US rapidly increased up to 50 percent in 2016 from 32 percent in 1948. However, this rise of women labor force does not equivalent to womens’ director and manager positions.

Encourage Female Participation

Numbers do not always have to be a cause of good work result, encouragement of female participation in labor force in addition as to familiarize women to a life of work with ease , reduce sexual harassment in work place, fear of been discriminated and to reduce gender equality. Example, OJU welfare Association Arunachal Pradesh, Women and Childrens’ home. Provision of short temporary stay to women in need and promoting their hand loom skills with a provision of Rs 4000 per month to help women in need to be self reliant[10].

International Labour Organisation (ILO) ranked India 120^th  out of 131^st  positioned countries in female labour participation in 2013[11], in 2019 India still ranked as low as 171^st out of 180^th countries with value percentage of 23.41 only[12] . According to recent studies India’s female labour force has decreased from 34 percentage in 2006 to 24.8 percentage in 2020[13].

Empowerment through the Constitution

The same has been in the Indian Constitution under Art 15[14] which prohibits discrimination on grounds of sex and Article 16[15] which grants equality of opportunity in public employment.

Clause 2[16], 3[17] and 4[18] of Article 15 provides special positive discriminatory provisions for women and children who belong to who are socially and economically less privilege through schemes and programs in order to encourage and secure women and children. In the case of Anjali Roy vs State of West Bengal[19] the court highlighted that clause 3[20] is an exception to clause 1[21] of Article 15 where the State can discriminate males by making special provisions for females when needed. Examples of such execution are exclusive Women’s Colleges, reservation of women in educational institutes, public transport and healthcare, right given to women for non-arrest before and after sunrise and sunset[22], special legislations like the Maternity Benefits Act[23] and Medical Termination of Pregnancy[24].

Conclusion

After detailed observations and study made on the aforementioned issues at hand, the author would conclude pressing on one issue as to why the Company legislation has to limit only to appointment of a minimum of one single female director.

The author suggests that,

• Firstly, if there are numbers of eligible female employees in a company, then, they should be elected as directors of the company board immediately, there should be a provision that allows them all to become directors of the Company without any bar.
• Secondly, there should be a legislation that mandates fifty-fifty reservation opportunities for both female and male to become directors of company.
• Third, there should be a legislation that mandates minimum of three female directors in a company and if eligibility comes into question
• Fourth, proper training and management for at least six to twelve months should be provided to female employees to make them capable for the position.
• Fifth, The State’s criteria does not equivalent on the Central level. Therefore, State’s percentage criteria for hiring female directors should be discarded and instead a Central Level criteria of equal fifty-fifty percent reservation for both male and female directors to be legislated.
• Lastly, actions should be taken by the concerned authorities to appoint and promote more women to higher executive so to remove the social barriers and stigma against women .

 

References

• Yannick Thamsb, Bari L. Bendella, Siri Terjesenc, Article Journal of Business Research: Explaining women’s presence on corporate boards: The institutionalization of progressive gender-related policies.
• Tanvi Apte, Nishtha Goyal, Article, Corporate Board Diversity: A Critical Examination of Mandatory Inclusion of Women Directors.
• Gayathri Balasubramanian, Article, Mandatory Appointment of Woman Director under Companies Act, 2013: A Feminist Critique
• Malika Basu, Ravi Peiris, Women in Leadership and Management in Public Sector Undertakings in India, International Labour Organisation, available at https://www.ilo.org/wcmsp5/groups/public/—asia/—ro-bangkok/—sro-new_delhi/documents/publication/wcms_632553.pdf.
• Tanya Malik, Karuna Bajaj,Article 2, GENDER-DIVERSITY IN BOARDROOMS: A DIAGNOSTIC STUDY OF SELECT FAMILY OWNED COMPANIES IN INDIA.
• Pradip Kumar Da, Impact of Women Directors on Corporate Financial Performance-Indian Context, World Journal of Social Science Research ISSN 2375-9747 (Print) ISSN 2332-5534 (Online) Vol. 6, No. 3, 2019 http://www.scholink.org/ojs/index.php/wjssr
• The Institute of Company Secretaries of India, COMPANIES ACT, 2013 APPOINTMENT AND QUALIFICATIONS OF DIRECTORS.
• The Institute of Company Secretaries of India, GENDER DIVERSITY IN BOARDROOMS (Revised Edition) The Companies Act, 2013 Series.
• Sulphey M.M , Shaha Faisal, Article: The position of gender diversity in Indian corporate boards.
• Soma Roy Dey Choudhury , Status of Women Workforce in Corporate Sector with Reference to Gender Inequality in Work place and the Provision of Companies Act, 2013.
• Jayati Sarkar, Ekta Selarka, Women on Board and Performance of Family Firms: Evidence from India.
• Siri Terjesen , Ruth H.V. Sealy, Val Sing, Women Directors on Corporate Boards: A Review and Research Agenda.

 

[1] The Companies Act (2013), Section 149 ( 1).

[2] Ibid.

[3] The Companies Act (2013), Section 149(1).

[4] SEBI Act, (1992), clause 49.

[5] Company Rules 2014, Rule 3.

[6] Gro Ellen Mathisen, T. Ogaard, E. Marnburg, Women in the Boardroom: How Do Female Directors of Corporate Boards Perceive Boardroom Dynamics?, Journal of Business Ethics 87, 88 (2013), available at https://www.researchgate.net/publication/257541874_Women_in_the_Boardroom_How_Do_Female_Directors_of_Corporate_Boards_Perceive_Boardroom_Dynamics?enrichId.

[7] ulphey M M, Shaha Faisal, The Position of Gender Diversity in Indian Corporate Boards, 14 International Journal of Economic Research 195, 200 (2017), available at http://www.serialsjournal.com.

[8] Business Standard: Female labour-force participation in India declined from 34 pc in 2006 to 24.8 pc in 2020, https://www.business-standard.com/article/pti-stories/female-labour-force-participation-in-india-declined-from-34-pc-in-2006-to-24-8-pc-in-2020-study-120030601403_1.html

[9] The United States Constitution, (1787), Section 10.

[10] OJU Welfare Association Annual Report 2014.

[11] International Labour Organization, ILOSTAT database.

[12] International Labour Organization, ILOSTAT database.

[13] Business Standard: Female labour-force participation in India declined from 34 pc in 2006 to 24.8 pc in 2020, https://www.business-standard.com/article/pti-stories/female-labour-force-participation-in-india-declined-from-34-pc-in-2006-to-24-8-pc-in-2020-study-120030601403_1.html

[14] The Indian Constitution (1950), Article 15.

[15] The Indian Constitution (1950), Article 16.

[16] The Indian Constitution (1950), Article 15(2).

[17] The Indian Constitution (1950), Article 15(3).

[18] The Indian Constitution (1950), Article 15(4).

[19] AIR 1952 Cal 825.

[20] The Indian Constitution (1950), Article 15(3).

[21] The Indian Constitution (1950), Article 15(1).

[22] Criminal Procedure Code,(1973) , Section 46(4).

[23] Maternity Benefit (Amendment) Act, (2017).

[24] Medical Termination of Pregnancy (MTP) Act(2020).

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