Gender diversity makes most financial sense: Smriti Irani

More than 50 years ago, Milton Friedman in his epochal essay said the social responsibility of a business is only to increase profit. While that may be true, the world has, since then, become more complicated and businesses have also become more cognisant of their social responsibility. However, the issue of an imbalanced gender workforce still percolates in India Inc.

Barely 1.6% of Fortune 500 companies in India have women MDs and CEOs. In The Next 500, a ranking of emerging companies, the number is slightly higher at 5% but overall, for the Fortune 1000 India companies, only 3.2% are led by women MD/CEOs.

“There was an assumption that Fortune 500 companies would know better. Now, imagine what is the scale of affairs in companies that are not Fortune 500 companies,” asks Smriti Irani, honourable minister of women and child development during a panel discussion at the launch of the white paper ‘Enhancing Women Leadership In India Inc.’

The Fortune India-SPJIMR study is backed by apex industry body CII, Bill & Melinda Gates Foundation, and the Ministry of Women & Child Development. The nationwide study of CEOs, CHROs, and emerging women leaders--conducted across 4 cities via 16 extensive roundtable discussions--brings to the fore not just the challenges of creating a fair representation of women leaders, but also suggests actionable solutions to the problem after extensive discussions with leaders of corporate India as well as a survey with Fortune 1000 India companies.

Although women account for nearly half the population in India, their contribution to GDP is only 18%. Several challenges are standing in the way of women leading to the helm of companies but the most significant one is the leaky pipeline in middle management.

“One very alarming issue is the fact that maternity leave is now used as a tool to have women come out of middle management because of the unintentional bias that maybe she will not be as productive or maybe her work is not valuable enough to want her back in the system,” adds the minister.

Over 30-40% of women employees quit the workforce by the time they enter middle management. This is the time when they invariably get married or have a family. They take maternity leave and the return post childbirth gets challenging as most of them find it difficult to return to work. Organisations also shy away from hiring a woman in mid-management roles as they know there could be a six-month ‘maternity leave’ in the offing. It is paid leave and most organisations don’t want — or can’t afford — to make that investment.

The minister discourages the idea of policing by the government on shop floors of companies and would rather be focused on how companies can do financially better when there are more women.

Hiring more women and retaining them for C-suite and P&L (profit and loss) roles also makes financial sense for businesses. The numbers speak for themselves. McKinsey Global Institute estimates that if the gender gap in participation, total working hours and productivity were all bridged, the world economy would be up 26%. Moreover, gender diversity on executive teams were 25% more likely to have above average profitability than companies in the bottom quartile of diversity, while companies which have more than 30% female executives are more likely to outperform companies that don’t.

“We have to stop thinking of women in top positions as a diversity issue. We have to do this because it makes good business sense,” says Debjani Ghosh, president of NASSCOM. She also suggests holding the companies and shareholders accountable instead of the government and start associating women in top positions with higher profits and sustainability.

The decade-old mandate to ensure at least one woman member on boards has certainly worked in favour of women's representation on boards. While the number of women on boards of listed companies has increased from 8% to 17%, only a handful of women directors are mostly in demand.

“There are competent women available to be on boards. The onus should be on board members to seek out the right candidate,” says Preetha Reddy, vice chairperson, Apollo Hospital Group. Instead of asking for tax benefits, she opines that companies that employ women should be given a 1% reduction in the loan component.

Another suggestion that came up during the panel discussion was having a CEO’s agenda include building 'culture’. “Whether male or female, it’s the responsibility of CEOS to build a culture of inclusivity, equality, and equity. And we need to walk the talk, a committee within the company should ensure and monitor that policies written on systemic changes to promote diversity are implemented,” says Sameer Gupta, chairman and MD, Jakson Group.

Some solutions presented in the whitepaper include - incentives and ranking of companies, enhanced reportage and disclosures on diversity, increased representation of women on Boards, sponsorship/allyship in senior leadership roles, right ecosystem to expand base of the pyramid, care infrastructure, state-level public-private partnerships, and mandates for gender specific hiring.

Capturing the essence of the study, Sanjeev Puri, chairman and MD, ITC Limited, says, “There is merit and a business case in bringing more women to leadership roles. Women bring unique qualities and perspectives to the table that strengthens the enterprise. Let’s systematically focus on progress and merit, and consequently women will play a bigger role over time.”