Meritocracy versus quota: What can India Inc do to have more women leaders?

Former Pepsico chairman, Indra Nooyi’s statement crediting the US system of recognising talent on the basis of merit and the fact that she wouldn’t have made it to the office of chairman had she been living in another country, including India, has led to innumerable debates and murmurs across India Inc. At Fortune India’s flagship Most Powerful Women Awards in Mumbai last week, one could overhear voices vociferously debating on this topic over coffee, cocktails, and dinner. Most found it controversial to come on record when we requested video bytes.

The heated offline discussions had two distinct schools of thought – while some rattled off names of prominent Indian women CEOs and leaders (such as Zia Mody, Kiran Mazumdar Shaw, Apollo Hospitals Reddy Sisters, Leena Nair (who currently heads Chanel) or Unilever India CEO, Priya Nair) and said Nooyi was over-reacting, the others felt that though the number of women leaders in India are certainly on the rise, we still have a long way to go.

“The India that Indra Nooyi was referring had genuinely less women entering the workforce, leave alone women being in leadership roles. That equation is beginning to change,” said a senior leader.

While we were putting together our Most Powerful Women special issue this year, we did some number crunching to find out where India’s Fortune 500 companies stood in terms of having women in leadership roles. The percentage was sadly abysmal – Within the Fortune 500 universe only 4% (20 companies) companies have women managing directors. The percentage of women CEOs is even lower at 0.4% (2 companies). Around 26 companies have women chairpersons (5.2%), but bulk of these are family-run businesses.

The mandate under Companies Act 2013, to have at least one independent director on boards of companies has led to 19% women representation on boards (according to CFA Institute India’s ‘Mind The Gender Gap’ report). The needle has certainly moved but according to the Fortune India study, 41 companies in the Fortune 500 universe have no women independent directors on their board despite the mandate. Around 216 companies have just one-woman independent director. In a country where close to 50% of the population comprises women, the ideal ratio of a company’s board should be 50:50 women and men. Only 18 companies have a gender-balanced board.  

The gap is largely due to less women making it to CXO roles or holding P&L positions within organisations. The CFA Institute India’s ‘Mind The Gender Gap’ report says only 10%-12% women hold key management roles in India Inc. Does the solution lie in having a mandate to have more women in CXO roles? It’s a vehement no from former Nestle India MD, Suresh Narayanan. “Quota is not good. It fosters a culture of mediocrity. Large companies must have a programme of identification of senior leaders from across the spectrum. It will not happen by legislation. Companies have to understand the benefit of having senior women leaders as directors of boards.” Nestle India is among the few companies which has a 50% women representation on its board.

“If companies can keep gender out of the room and focus on meritocracy, you will automatically have more women in the room,” says Sonal Agrawal, managing partner of executive search firm, Accord. So, the writing on the wall is quite clear – women are as competent as men. Organisations have to find a way to put more women in leadership roles. The lens shouldn’t be a ticking in the box activity, but focus on meritocracy. And, there will be enough women in top roles. It isn’t as easy as it sounds. There also has to be a concerted effort to ensure that women don’t exit the workforce in the middle management. It requires a 360-degree mindset change.