Board Diversity Value explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The most concrete of the four arguments has nothing to do with fairness: half the buyers of most products are unrepresented in most boardrooms.
The four heads of board diversity value
An independent director with audit committee chairmanships since 2005 sets out four ways in which women members on a board of directors certainly add enormous value.
One — board diversity value in the process itself
First is the value of sheer diversity. Women bring a different perspective on to the board. Typical boards are male dominated. In this practitioner's experience, a male dominated board tends to become excessively closure-oriented and the focus can shift from better decisions to early and quick decisions without adequate deliberation and involvement of all parties. Women can influence such boards to be more deliberative and generative.
Three of the four points are drawn from personal observation, and are offered as such. The third is different in kind, and it is the one that survives any disagreement about the others.
Thirdly, women bring tremendous value simply because they constitute 50% of humanity. They would usually constitute 50% of the immediate or eventual consumers of the company's products or services. The actual number would vary from industry to industry, but I come from the perspective of the FMCG industry, where I worked for long. In that industry, buying decisions are made very largely by women, and their presence on the board helps the business significantly, as they also represent the consumers of that company.
This is a market argument, not a fairness argument. A board deciding on product design, pricing, packaging, distribution and advertising for a customer base that is majority female, with no member of that group present, is deciding at second hand — reliant on research to tell it what a director could tell it directly.
The point is stated carefully: the actual number would vary from industry to industry. It bites hardest in consumer goods and least in a business selling industrial equipment, and the honest form of the argument acknowledges that rather than asserting it universally.
Note how this connects to the handbook's earlier framework. Brand value depends on the role of the brand in the purchase decision and on empathy — how good is business in listening and responding to customer's requirements and also their unspoken needs. A board that cannot hear the majority of its customers is weaker at exactly the thing brand strength is measured on.
Two — ethics and the vigil mechanism
Secondly, women bring a sharper sense of ethics and fairness. They can play a great role in overseeing vigil mechanisms that are now mandated by law.
The connection to the vigil mechanism is a practical one. That duty requires a director to ascertain and ensure that the company has an adequate and functional vigil mechanism and that the interests of a person who uses such mechanism are not prejudicially affected — work that depends on being approachable and on following what happened to complainants rather than only to complaints.
Four — the decorum point
Lastly, and on a lighter note, there is a very practical "decorum-related" benefit that a board derives from having women members. The tone and tenor of the conversation around the board table certainly improves and becomes more civil and constructive when there is a woman in the room!
Why a law was needed
A second practitioner explains the regulation: Corporate Boards have been old boys' clubs! Board seats were for life! The Companies Act 2013 has changed that. Boards are forced to look out for woman directors.
But with a warning about compliance in form only: so, are these women directors, relatives of Board members / promoters who play a subdued role on the Board? Just compliance by letter and not by spirit? Are these women with the right skillsets and an independent mindset that could have their voice heard at the table and help in sound decision making?
And an ambition beyond one seat: Women Independent Directors is the way forward and it can't be just a One on Board Club! For balanced decision making at least 1/3rd of the Board should be women! Be the first woman on the Board, but be an advocate for change!
Common mistakes
- Treating board diversity value as a compliance matter rather than a business one.
- Filling the seat with a promoter's relative and satisfying only the letter.
- Appointing one woman director and treating the requirement as met permanently.
- Deciding consumer strategy with no member of the majority customer group present.