Driving diversity through governance | Mint

Since the pandemic, the corporate world has undergone a significant change. What was happening post 2020 is not working anymore. The people, their demands, and what they want from their office are completely different. Questions on diversity, inclusion, equality, and whether India should be aligned with what the global powers say are being raised. Their concept of diversity is also being questioned.

Then there’s AI (artificial intelligence), which, though still a vague concept for many, is also an assumed threat to workplace dynamics. Experts say boards need to be more diverse. But how do you select a diverse board? Do companies have diverse boards, or is it just a matter of ticking boxes?

In an attempt to delve deeper into how corporate governance can be leveraged to alter the dynamics of DEI (diversity, equality, and inclusivity) in Indian companies and boards, Mint in association with JSA organized the fifth and concluding roundtable discussion as part of the Leadership Dialogues series titled Realizing India’s Economic Dividend: Distribution of opportunity. 

One of the key points made by the experts was that boardrooms in India need a paradigm shift. Companies need to have the right mindset to realise the potential of diverse boards and understand that innovation is only possible through diverse opinions and ideas.

Bringing in diversity involves making the right decisions. So, how can one choose the right director? One unanimous point by the panel was putting up any recommendation made by any shareholder in front of the NRC (Nomination and Remuneration Committee) because the selection of directors currently was heavily weighted in favour of the dominant shareholder, and other shareholders don’t have any major say in this.

The separation of the managing director and the chairman was critical, the leaders suggested. In the absence of which, the CMD would be rating his own performance and the whole concept of corporate governance would become redundant. Independent directors need to be truly independent so that there are fewer frauds, and audit issues. Everything goes to the board, but if the independent director truly has a voice and doesn’t care about reappointment, then only there could be some difference, the panel echoed.

Sandip Das of Caret Innovation Lab explained how independent directors struggled to become independent because of limited exposure before meetings and an expectation to accept whatever the CEO says and what he wants to hear. There’s not enough due diligence done and directors don’t have the capacity and ability to do due diligence themselves, he said.

Bringing up gender parity and pay parity on boards, U.K. Sinha, former chairman of the Securities and Exchange Board of India said that achieving gender parity on boards would remain a distant goal until a robust pipeline of women leaders was developed. He also emphasized how believing in diversity on the part of companies was critical as otherwise they would just be tick marks.

JSA’s Rupinder Malik also observed that while companies follow the compliance bit, very few organizations ensure the effectiveness of their implementation.

The experts opined that diversity on board was directly linked to innovation. Diverse ideas, skills, and workforce were critical to cater to a diverse group of customers. It makes business sense as well, pointed out Ruchika Panesar of NatWest Group while adding that it’s also about publicly available aspirational targets at all levels, including but not limited to senior levels across different types of capabilities and skills.

The panel discussed that the ripple effects of US President Donald Trump’s escalating war on diversity through executive orders dismantling the DEI programmes within the federal government—and also impacting private employers, especially its contractors or subcontractors—may be felt in India as well, though primarily in US-based multinationals.

A survey by workplace culture consulting firm Avtar finds that despite the pushback on DEI in the US, companies in India intend to be committed to it. The findings show that Indian companies and non-US MNCs will be continuing their DEI programmes without any change. The news seems promising, though it also needs to be seen whether we are talking about diversity only at boards or inclusion of women at all levels.

NSDC’s Ved Mani Tiwari raised a pertinent point about corporates realising that the women workforce is more productive than men. He also said that boards and companies need to start talking about the productivity of the value chain, because only 10% of the country’s workforce was employed in companies.

Not having enough skilled people in the workforce is another issue faced by many companies. While the answer doesn’t lie in one silver bullet, it requires a holistic approach and a rebooting of the education system by making it more skill-based, suggested Rahul Jain of Boston Consulting Group.

Sembcorp’s Vipul Tuli seconded his thoughts and said that upskilling of project workers should be taken up as a national initiative, while also encouraging private participation for the same.

On the role of AI (artificial intelligence) impacting the workspace, most experts believed that the technology will only prove to be a catalyst and only create more jobs than it will displace.

Independent director Vibha Paul Rishi said that if the government worked in concert with the industry and with the same intent, the true potential of AI could be utilised. It’s about developing the workforce along with developing skilling platforms, both at the institute level and at the corporations that all employees are adapting, adopting, while learning AI and genAI, the leaders said.

While we still may have a long way to go to reach the maturity of the western world as far as DEI is concerned, there is greater recognition now among organisations about how important the concept is. Inclusive businesses not only reap tangible business value when they bring in diversity, but also when individuals from varied walks of life come together, they bring unique insights and problem-solving approaches to the table. 

When the government and Sebi planned to introduce the concept of at least one woman director on the boards of listed companies, the idea was to encourage diverse opinions so that there is an aspect of challenging each other on a board.

It was the only way for corporations to make mature decisions in the long term. But the most critical aspect is a company’s belief in it, as otherwise these are just tick marks.

As per data, the number of women directors on company boards as of August 2024 is 26.8%; in countries such as France, Germany, and the UK, it is 40%.

However, it is also true that in 2016, this number was 16.8 %, so we have made considerable progress since then.