Studies have shown that companies perform better when there is an equal representation of women at senior levels. However, some countries have a noticeable lack of female leaders. This article focuses on how China and India need to find their own paths towards ensuring greater female participation in corporate leadership.
By 2012, almost half of all countries in the world had established electoral gender quotas for women, in recognition of the need to ensure that half of the population is not isolated in political life.1 While most developing countries introduced gender quotas during the 1990s, largely in response to measures agreed upon during the 1995 Beijing-based UN Fourth World Conference on Women, developed countries, led by the five Nordic countries, had already adopted gender quotas in the 1970s and 80s.2 These countries recognized early the importance of having women’s perspectives and priorities represented in policy decision-making. They also recognized the need for special measures, however temporary, to enable women to overcome the cultural and structural barriers to entry into political life.3
More recently, the Nordic countries have also led the way in establishing quotas for women in economic decision-making at the top. Norway’s 40% quota for women on listed company boards was introduced in 2003 and the country has now achieved that target. The quota worked because it is backed by a strict enforcement regime – companies that fail to meet the 40% target for each gender on the board of directors after receiving several warnings are subject to forced dissolution if non-compliance continues.4 This makes the Norwegian regime different to quota targets for women on boards established in other European countries such as Belgium, Spain, Italy and France.5 The experience of these countries suggests that each society will find its own path towards gender equity in economic decision-making, and that no single formula will be acceptable or effective in all national contexts. Even for countries where quotas for women company directors are not currently politically feasible, there are, however, lessons to be learned from Norway and other countries leading the way. In particular, countries can learn from each other about the many other measures that work to enable and assist women of talent to rise to the top. These include well-designed maternity leave entitlements, child-care availability, flexible working arrangements, mentoring schemes and training opportunities.
Special measures aimed at bringing more women to the boardroom table are not simply a nice idea or an indulgence, but an economic necessity. In many developed countries, an aging population means an increasing need to ensure that all human talent is utilized to its maximum capacity. The marketplace for innovative ideas is also becoming much more crowded. As the World Economic Forum’s Global Gender Gap Report 2010 noted:
Innovation requires new, unique ideas – and the best ideas flourish in a diverse environment. This implies that companies benefit by successfully integrating the female half of the available talent pool across their internal leadership structures.
There is general agreement that a diverse group around the boardroom table ‘tends to analyze decisions more thoroughly than one in which the members are all demographically similar.’6 Companies with more women directors also tend to consider the needs of a wider range of stakeholders than those dominated by male directors. Research by McKinsey & Co further demonstrates that ‘Women leaders matter.’ Companies with higher numbers of women at senior levels are also companies with better organizational and financial performance.7 This research is supported by other studies also linking the presence of a ‘critical mass’ of women directors (three or more women) on a company’s board with better governance quality and financial performance.
A lack of female talent in corporate leadership is particularly noticeable in two of the largest economies in the world – China (the world’s second largest economy) and India (the world’s sixth largest economy). Women living in China and India comprise nearly eighteen percent of the world’s talent, and yet their talents remain largely untapped – to the detriment of decision-making quality and innovation.
My own study of 168 publicly-listed companies from mainland Chinese firms, and 500 from India, confirms findings elsewhere that around nine per cent of board directors in mainland Chinese companies are women, while less than five per cent of directorships in Indian-listed firms are held by women.8
A number of factors – individual, organizational, and social – typically operate simultaneously to create barriers to women’s career advancement in the corporate world, in Asia as elsewhere. Throughout Asia, there is a ‘leaky pipeline’ effect that sees the proportion of women gradually deplete at higher levels of the corporate hierarchy. In China, the greatest leak occurs between middle and senior level positions, while in India the largest leak in the pipeline occurs between junior and middle level positions, with almost half of all women leaving before they reach the middle of their career. These and other findings suggest that in different societies, a combination of factors operate in different ways to impede women’s career progression in business. This again suggests that each country needs to find its own path towards ensuring greater female participation in corporate leadership.
Both China and India have gender equality written into their national constitutions, and both have a form of gender quota built into their electoral systems. More recently, under India’s new Companies Act 2013, rules promulgated under section 149 of that Act now require all listed companies to have at least one woman on the board of directors. Despite the modest nature of this requirement, the new rules have sent many companies in a spin searching for acceptable female talent.9
While China, like India, has made a number of significant reforms in an attempt to improve corporate governance standards in state-owned enterprises in particular, so far there are no corporate governance measures requiring Chinese companies to consider gender diversity when board appointments are made. Moreover, despite the number of official statements issued by the state recognizing the importance of gender equity, state-controlled firms in China perform worse than family-controlled firms when it comes to the average proportion of women directors.10 In India, the opposite is true. An analysis of 500 National Stock Exchange (NSE)-listed companies revealed that Indian state-controlled firms had, on average, a higher proportion of women directors on the company board than their family-controlled counterparts.11 Given the size and importance of the state-owned sector in both countries, particularly in China, this is an important finding.
The finding that state-controlled firms in India have a comparatively higher proportion of women directors on the board may reflect the relatively high level of women’s political empowerment in that country. In the WEF’s Global Gender Gap Index for 2013, India had one of the highest-level rankings (at number nine) of all 136 countries included in the Political Empowerment sub-index. China scored much worse on this sub-index, coming in at number 59, indicating that a significant gap between men and women remains in Chinese political life. This was the sub-index within which the greatest gap between China and India existed. It was also the only sub-index in which India scored higher than China. When it comes to economic participation, for example, China ranks at number 62 on the WEF’s Economic Participation and Opportunity sub-index, while India ranks much lower on the list at number 124.
India’s top-ten ranking in the WEF Political Empowerment Sub-Index is largely due to the presence of constitutionally protected reserved seats for women at local government (Panchayat) level in India. At the national level (the level most relevant for any discussion of corporate governance policies) the situation is less promising, with only 11% of seats in India’s Lok Sabha (lower house of Parliament) held by women. The equivalent figure for China’s 12th National People’s Congress, following elections held in 2013, is 23.4%. At the same time, however, women politicians in China do not feature as prominently at leadership levels. India, unlike China, has had both a female president and a female prime minister, as well as a number of prominent female Chief Ministers. The difference may reflect the difficulties China’s female politicians face within the context of China’s Party-dominated political system. And these difficulties, in turn, are reflected in the lack of women gaining (Party-supported) nomination to board positions in China’s predominately state-owned enterprises.
India’s poor ranking in the WEF Economic Participation and Opportunity sub-index reflects the fact that only 29% of Indian women participate in the formal labour force, compared to 64% of women in China.12 The number of women employees at senior level in India is also low, at 14%, compared to a global average of 21%.13
What is the relevance of all this for policy-making in China and India? It may well mean that the two countries will follow quite different paths towards bringing women to the boardroom table. In India, women are beginning to use their political influence to protest against discrimination in the economy, as well as in other spheres of life. They are campaigning to get support for draft legislation introducing quotas for women in the national parliament, and legislation increasing local government quotas from one-third to one-half.14 They are rallying to demand better protection, including through better city-planning measures, for women alone at night in cities like New Delhi.15 Women in India are demanding greater access to decent education, and they are demanding that women have equal access to social programs such as the National Rural Employment Guarantee Scheme (NREGS).16 In 2013, India also became the third country in the world (after Pakistan and Tanzania) to open a bank dedicated to serving the needs of women. State-owned Bharatiya Mahila Bank takes deposits from everyone, but lending and other services are predominantly directed towards women, and a majority of bank employees are women. The NREGS and Bharatiya Mahila Bank are both examples of government-supported programs directed towards helping women overcome the current lack of economic opportunities open to women in India. Political pressure will need to be maintained if India’s women are ever to overcome the enormous social and economic barriers they currently face.
In China, woman may be less able to exert influence over policy-making through formal political channels, but may well be better positioned to adopt other strategies aimed at supporting each other in both business and politics. Chinese women need to become much more active in establishing and supporting individual and organizational initiatives, such as mentoring schemes, networking events, women-focused recruitment events and gender targets for managers. They also need to start campaigning to ensure that gender balance becomes a higher priority for the country’s corporate and political (i.e. Party-based) leadership. At the moment, evidence suggests that gender diversity is even less of a strategic imperative for companies in China then elsewhere in Asia. Throughout the region and the world, companies need to take to heart the words of Nobel Peace Prize winner Leymah Gbowee:
Without women the world is functioning on only half of its brain – the brains of the men. We are missing a lot of the women’s ideas and ideologies, but we need these in order to progress and solve problems in the global economy.17
About the Author
Alice de Jonge is a senior lecturer in International Law and Comparative Business Law in Asia at the Department of Business Law and Taxation, Monash University. She is the author of the books Corporate Governance and China’s H-Share Market (Edward Elgar, 2008) and Transnational Corporations and International Law: Accountability in the Global Business Environment (Edward Elgar, 2011).
Reference
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2. Li-Ju Chen (2010). Do Gender Quotas Influence Women’s Representation and Policies? The European Journal of Comparative Economics.7(1)
3. Article 4 of the Convention on the Elimination of all Forms of Discrimination Against Women allows states to adopt temporary special measures to accelerate de facto equality for women.
4. Vibeke Heidenreich (2013). Consequences of the Norwegian gender quota regulation for public company boards. Chapter 17 in Machold, S., Huse, M, Hansen, K and Brogi, M. (eds), Getting Women on to Corporate Boards: A Snowball Starting in Norway (Edward Elgar, 2013).
5. Silke Machold, Morten Huse, Katrin Hansen and Marina Brogi (eds) (2013), Getting Women on to Corporate Boards: A Snowball Starting in Norway (Edward Elgar).
6. Bernardi, R. and Threadgill, V. (2010). Women Directors and Corporate Social Responsibility. Electronic Journal of Business Ethics and Organization Studies, 15(2): 15-21.
7. McKinsey & Co. (2013). Women Matter 2013: Gender diversity in top management: moving corporate culture, moving boundaries. Viewed 28 March 2014 http://www.mckinsey.com/features/women_matter.
8. Deloitte (2011). Women in the boardroom: A global perspective (November).
9. Srivastava, S. (2014). India Inc starts grooming women for boardroom roles. The Indian Express, 8 March.
10. My analysis of 168 mainland-Chinese publicly listed firms comprised 125 state-controlled firms (74.5%) and 35 family-controlled firms (21%). Seven companies were categorized as widely-held firms. The state-controlled firms had an average of 8.4% women directors, while the family-controlled firms had an average of 13% women directors (2011 figures). The widely-held firms had an average of 6.4% women directors.
11. My analysis of 500 NSE-listed companies (S&P CNX 500 index) comprised 59 state-controlled firms (12%), 290 family-controlled firms (58%), 78 widely-held firms (16%) and 73 foreign-controlled firms (15%). State-controlled firms had an average of 5.8% women directors, while family-controlled firms had an average of 4.6% women directors. Foreign-controlled firms had an average of 3.5% women directors while widely-held firms had an average of 2.8% women on the company board (2010 figures).
12. World Bank, Labor participation rate, female (% of female population ages 15+), 2012 statistics. Viewed 28 March 2014 http://data.worldbank.org/indicator/SL.TLF.CACT.FE.ZS.
13. Grant Thornton International Business Report (2012). Women in senior management: still not enough, p. 4. Viewed 28 March 2014 http://www.internationalbusinessreport.com.
14. Express news service (2012). ‘World waiting for India to pass women’s quota Bill’, The Indian Express, 4 October; Burke, J. (2010). Indian parliament approves plan for women’s quota, The Guardian, 10 March.
15. Kejriwal takes charge as Delhi CM, discusses women’s security with police chief’. India Today Online. 28 December 2013. Viewed 28 March 2014 http://indiatoday.intoday.in/story/arvind-kejriwal-aap-cm-delhi-ramlila-maidan/1/333326.htm.
16. Sudarshan, R.M. (2011). India’s National Rural Employment Guarantee Act: women’s participation in Himachal Pradesh, Kerala and Rajasthan. CSP Research Report 06 (January). Viewed 28 March 2014, http://www.ids.ac.uk/files/dmfile/ResearchReport06FINAL.pdf.
17. At the 2012 World Economic Forum Annual Meeting. Sherlock, C. (2012) Global Trends: Women’s Leadership a Cornerstone of Economic Progress. Viewed 28 March 2014, http://www.credit-suisse.com/.
