Future Board Composition 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.
Three quarters of the workforce will soon expect an inclusive employer, and the investors have already started asking.
The workforce shift
Millennials will comprise 75% of the workforce by 2025. They want to work for diverse and inclusive organizations that better understand and address the needs of a diverse customer base. Legislation and investor pressure have ensured that Managements and Boardrooms are increasingly alert to diversity and inclusion in the workforce.
Innovative ideas are not inspired by someone echoing our own voice, the landscape requires new ways of thinking therefore diversity is important. Women on Board bring the much-needed diversity and definitely women participation in Boards will increase.
One remark in this conversation is worth dwelling on: it is interesting that along with an increase in women in Boardrooms topics such as Corporate Social Responsibility (CSR), Environment Social & Governance (ESG), Geopolitics and Risk Management have come centre-stage.
The claim is correlational and is offered as such — it is interesting that, not "because of". Both changes have other causes: CSR became statutory, ESG became an investor requirement, and geopolitical risk rose for reasons unconnected to board composition.
What makes the observation useful is the accompanying point about what stakeholders now assess: stakeholders are no longer looking at companies only for their profits — although that is critical — but also at what is the prevalent culture that got to the profit line.
That is a genuine shift in what a board is judged on. A profit figure is verifiable; the culture that produced it is not, and assessing it requires the board to have visibility into how the company behaves — which is the same capability the vigil mechanism duty, the internal audit relationship and the misgovernance watch all support.
Note the qualifier although that is critical. The proposition is not that profit has stopped mattering. It is that profit alone has stopped being sufficient.
For anyone thinking about future board composition, the practical implication is about skills. A board that must now deliberate on CSR, ESG, geopolitics and risk needs members who can, and those are not the skills that populated boards a generation ago.
Why the seats are still not filled
Asked why there are so few women on boards despite the economic case and the legal mandate: we find some women are on multiple Boards and others still waiting to get in! It could be lack of networking or not enough rigour in the Board process of inducting new board members?
And then the pointed question: is the Nomination and Remuneration committee doing its bit in mapping skill sets of the board members, identifying complementing skill sets and searching for the right candidate with as much fervour as you would for a C-Suite recruitment?
| NRC task | What it requires |
|---|---|
| Mapping skill sets of the board members | Knowing what the board already has |
| Identifying complementing skill sets | Knowing what it lacks |
| Searching for the right candidate | With as much fervour as you would for a C-Suite recruitment |
The comparison with executive recruitment is the sharp end of it. Companies run structured searches, use specialist advisers and interview extensively for a chief financial officer. Board vacancies are frequently filled from the existing directors' contacts — which reproduces the composition already there.
The wider argument for regulation
Organizations with inclusive and diverse boards, management teams and employees outperform those without — cited to a two-year study across 600 companies. Almost all managements agree that diversity and inclusion is critical to the culture and success of the organization. Clearly, an old boys' network of like-minded men will not serve the purpose of modern organizations. Therefore, a law was needed to help change mindsets and drive a best practice.
And on what women add to board deliberation: women add very different dimensions to a Boardroom discussion — moving the needle from "what needs to be done" to include "how it should be done" — a focus on the path to the goal rather than a "just reach the goal" approach.
Common mistakes
- Treating future board composition as a compliance question rather than a skills question.
- Filling board vacancies from existing directors' networks.
- Running a board search with less rigour than an executive one.
- Reporting profit without being able to describe the culture that produced it.