Board diversity is a concept something to ponder about in new age of company law.

1. BOARD DIVERSITY AS POSITIVE
FACTOR FOR BETTER CORPORATE
GOVERNANCE

2. INTRODUCTION
• Recently, there has been an trend for diversifying the
board. Intuitively, diversity means having a range of many
people that are different from each other. There is,
however, no uniform definition of board diversity.
Traditionally speaking, one can consider factors like age,
race, gender, educational background and professional
qualifications of the directors to make the board less
homogenous. Some may interpret board diversity by taking
into account such less tangible factors as life experience
and personal attitudes. A simple and common measure to
promote heterogeneity in the boardroom – commonly
known as gender diversity – is to include female
representation on the board.

3. DEFINITION
• Professor Lisa Fairfax defines board diversity
as “the portion of women and people of
colour on a corporate board, and focuses on
gender, racial and ethnic diversity’’… J. Robert
Brown, Jr. observes “Diversity encompasses
gender and race, two categories heavily
represented among consumers but not among
directors. It also includes persons with views
and backgrounds at variance with
management

4. • J. Robert Brown, Jr. observes “Diversity
encompasses gender and race, two categories
heavily represented among consumers but not
among directors. It also includes persons with
views and backgrounds at variance with
management.

5. GENDER DIVERSITY IN BOARD
• Gender balance makes good business sense. Women
make up over half of the World population, account for
nearly half of the working population, outperform men
educationally and are responsible for the majority of
household purchasing decisions. Women are as
successful as their male counterparts at university and
in their early careers, but attrition rates increase
significantly as they progress through an organisation.
The under-representation of women in senior roles and
at board level impacts the performance, governance
and reputation of companies, as they fail to attract and
retain the widest possible range of talent.

6. WHY WOMEN ON BOARD?
• Improve performance at Board and business
levels through input and challenge from a range
of perspectives;
• Access and attract talent from the widest pool
available;
• Be more responsive to market by aligning with a
diverse customer base, many of whom are
women; and
• Achieve better corporate governance, increase
innovation and avoid the risks of ‘group think’

7. GLOBAL BOARD SEAT HELD BY
WOMEN

8. NORWAY

9. • The Public limited companies to meet the
requirement of gender diversity on boards
until 1 January, 2008.
• Consequences of Non-Compliance could result
into dissolution of the company.
• However, no company has been dissolved so
far on account of the non compliance with the
gender rules.

10. FRANCE
• In January 2011, the French Law was modified
and quotas were introduced in order to improve
the representation of women on boards of both
listed and unlisted companies.
• W.e.f. 1st January 2017
• Proportion of men and women directors should
not be below 40% in case of listed companies and
non-listed companies having revenue or assets
over 50 million euros employing at least 500
persons for three consecutive years.

11. INDIA
• The 2nd Proviso 149(1) of the Companies Act, 2013 and rule 3 of
Companies(Appointment and qualification of directors) Rules, 2014
mandates for prescribed class/classes of companies to have at least
one women director.
• Every listed company
• Every other public company having-
1.Paid-up share capital of one hundred crore rupees or more; or
2.Turnover of three hundred crore rupees or more.
• The paid up share capital or turnover, as the case may be, as on the
last date of latest audited financial statements shall be taken into
account.
• According to Clause 49 of the Listing agreement it is mandatory to
have atleast one women director on the board.

12. WHAT CAN BE DONE TO HAVE MORE
WOMEN ON BOARD

13. AGE DIVERSITY ON BOARD
• Traditionally, most members of corporate boards are
mature, experienced, and by default senior directors.
This can be explained by the inherent nature of
company management and career evolution, which
results in considering retired executives or executives
which had a significant work experience in other
companies in the same industry as ideal non-executive
board members. Still, age diversity on boards helps the
company to benefit from the different perspectives of
different age groups, and the value of having the
perspectives of younger directors on boards is
emerging as an aspect of diversity worthy of attention.

14. • (Walt and Ingley 2003)found that companies in the
consumer services and products industry are more
likely to appoint directors in a more diverse age range.
They conclude that in order to deal with a wide range
of customers' needs and interests, boards have an
advantage when their directors reflect this age range.
• When addressing age as an element of diversity, there
are many facets to consider. While one may believe
that older board members bring more experience to
the table and younger members bring more energy and
a new outlook

15. BOARD DIVERSITY BASED ON TYPES OF DIRECTORS –
INDIAN SCENARIO
• The BODs is entrusted with overall direction
and management of the affairs of the
company. In performing these functions the
directors are bound to comply with the
provisions of the Companies Act and to
perform general and specific duties imposed
on them by the Articles of Association. The
performance of BODs is a deciding factor for
the corporate governance.

16. • According to clause 49, the BODs of the company
shall have
• An optimum combination of executive and non-
executive directors.
• With at least one women director and
• Not less than 50% of the Board of Directors
comprising non-executive directors.

18. • Rotational Directors: At least two-thirds of
the Directors of a public company or of a
private company subsidiary of a public
company have to retire by rotation and the
term "rotational Director" refers to such
Directors who have to retire (and may, subject
to the Articles, be eligible for re-appointment)
at the end of his or her tenure.

19. • Nominee Directors: They can be appointed by certain
shareholders, third parties through contracts, lending
public financial institutions or banks, or by the Central
Government in case of oppression or mismanagement.
The extent of a nominee Director's rights and the scope
of supervision by the shareholders, is contained in the
contract that enables such appointments, or (as
appropriate) the relevant statutes applicable to such
public financial institution or bank. However, nominee
Directors must be particularly careful not to act only in
the interests of their nominators, but must act in the
best interests of the company and its shareholders as a
whole.

20. INDEPENDENT DIRECTOR
As per sub-section 6 of Section 149 of the Act, ID means a director other than a
managing director or whole time director or a nominee director,
a) Who, in the opinion of the Board, is a person of integrity and possesses relevant
expertise and experience;
b) - Who is or was not a promoter of the company,
Who is not related to promoters or directors in the company
c) Who has or had no pecuniary relationship with the company
d) None of whose relative has or had pecuniary relationship or transaction with the
company.
e) Who, neither himself nor any of his relative
i. Holds or has held the position of a key managerial personnel
ii. Is or has been an employee or proprietor or a partner, in any of the three financial
years preceeding.
iii. Holds together with his relative two per cent or more of the total voting power of
the company; or
iv. Is a Chief Executive or director, of any nonprofit organization, or who possesses
such other qualifications as may be prescribed

21. BENEFITS OF DIVERSITY
• Creativity and Different Perspectives
• People from different background and with different world
experience will be able to find solution to the similar
problem in different ways with different approach and
perspective. Emperical study indicates that more diverse
group foster higher creativity, innovation and produce
greater range of perspective and solution to the problems.
• Diverse groups are less likely to suffer from ‘group think’.
Dissimilar group may also contribute creativity by acquiring
information through more diverse set of sources.

22. • Access of Resources and Connections
• Directors with different characteristics will help
firm to access the different resources.
• Ex: Directors with financial industry expertise can
help the firm to gain access to investors who can
contribute to the firm.
• Directors with political links will help firm to deal
with government regulations or to win
government contracts.

23. • Career Incentives Through Signalling and Monitoring
• Diversity in the boardroom may signal to the low level
employees of the company that the company is
committed to the promotion and welfare of minority
workers.
• The minority status will not be a constraint to their
career in the company. The diversified boardroom
engages mentorship with directors and other
personnel and share their knowledge, expertise and
insights

24. • Public Relations, Investor Relations and Legitimacy
• Some companies will benefit more from conforming to
social expectations.
• Ex: consumer goods firm may want to maintain a
image of social responsibility.
• Firms in which institutional investors comprise major
fraction when compared to share holders will
surrender to investors demand on board diversity.
• Firms having more diverse board can be a means of
acquiring legitimacy in the view of the public,
government, media etc.

25. DISADVANTAGES OF DIVERSITY
• Conflicts: People often feel confused, threatened
or even annoyed by individuals with views and
backgrounds very different from their own;
constructive disagreements can become power
struggles and create a bad political atmosphere
that hinders project advancements.
• Bureaucracy: Decision-making can be delayed
due to diverging views and opinions, thus
corporate decisions and actions take time.

26. • Un-Productivity: Dissimilar cultural identities and
values, or simply said when people lack things in
common, could negatively affect the overall team
spirit that is essential for reaching high-levels of
productivity.
• Disunity: Everyone in the company might have a
different opinion on the way business should be
run and managed; thus, the company might have
people doing their own thing, especially if there is
no protocol and authority to ensure common
practices.

27. CONCLUSION
• A Board of Directors that has a good mix of members with
age, experience, and youthful perspectives balances the
insight and experience that comes from older board
members with longer tenure with the new ideas introduced
by younger and perhaps less experienced directors.
• We need leaders who are focused listeners and who
encourage all board members to participate. The quiet
member, who has been put on to a board for an important
reason, should not be allowed to languish. The leader must
demand contributions from each and every member. The
leader can literally count the contributions, and when
someone is hiding out, their opinion must be gently sought
out.