Do Women Directors Add Value? A Study of India Inc.

Abstract

As SEBI makes it mandatory for all the listed companies in India to have at least one woman director by 31 March 2015, debates are raised in different quarters about the actual benefits of such a measure for companies. There has been often debate about whether it is really useful to have more women in the Board. In this paper, we make an attempt to (i) briefly review the academic literature to see why companies may not appoint more women directors and what benefits companies obtain by having women directors and (ii) look at Indian data to see if companies that have more women on the Board have are indeed more profitable. Using board membership data for all the listed companies in India for which we could get data from the Prowess database of CMIE for the fiscal year 2015, we find that most of the Indian corporate boards do not have any women director and a few boards have only a token membership in the board. We also surprisingly find that boards having a woman CEO have fewer women members on the board (excluding the CEO herself) than in boards having male CEOs. We also find that companies that have more independent women directors are less profitable compared to companies with boards having no women directors. Study findings may change as time progresses; a three-year study may not be adequate to establish anything. With only 8.6% of the total board members in India being women, there is tremendous shortage of qualified women personnel to serve the corporate boards. India Inc. must gear up to welcome more women to the Board whereas women must warm up to boost the performance of companies by bringing diversity and quality decision-making to the Boards.KeywordsBoardWomen directorMandatoryFirm performance