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  • Chitrita Nayak



Corporate governance is commonly referred to as the broad system of several rules, regulations, practices, etc., by which the functioning of a company is controlled. It seeks to balance the interests of those who work for the company each day, as well as the stakeholders, along with the larger community as a whole. The first conception of the topic arose with the formation of the “Corporation, as introduced by the East India Company in the 1600s. The United States, however, can be credited with coining the term in its present form. Academics, business professionals, and the law enforcement systems have been concerned by this for a long time now, with each having its unique conceptions of what must be included under the ambit of this very wide-range term.

Corporate Governance – The Term:

Ironically, the abovementioned term has no single agreed upon definition on a scholarly or judicial basis. Indian corporate governance derives its understanding and a subsequent framework from the 1992 Cadbury Committee report, which defines corporate governance as, “the system by which companies are directed and controlled.” This definition, unfortunately, is extremely narrow and does not provide much scope for adaptation or change with respect to the developing corporate and legal landscape. A narrower definition is provided by Shleifer and Vishny in their seminal work, which states, corporate governance deals with the ways in which suppliers of finance to corporations assure themselves of getting a return on their investment.” Such definitions not only leave scope for a higher level of ambiguity and thereafter, interpretations, but also lack inclusivity in terms of rights, duties, stakeholders of the corporate ecosystem, among many others. However, the plethora of financial and securities related scandals of the 1990s and early 21st century have prompted the global legal community to initiate a positive change toward a broader and more inclusive understanding, and hopefully an indicative framework of corporate governance.

The Delaware Supreme Court, one of the world’s foremost authorities on corporate law and governance, has, on multiple occasions, emphasized the importance of good governance practices. In the case of In Re Caremark Int’l Inc. Derivative Litigation (Del. Ch. 1996) (“Caremark) the court instils a sense of confidence in the ability of the board of directors to take business decisions for the benefit of the company. The subsequent series of claims heard under theCaremark category have had a general tone of the court’s favour to the board, placing a rather high burden of proof on the plaintiff shareholders. Arguably, this does help in protecting the company’s structural autonomy through its board. However, this unfiltered trust shown by courts does disincentivise shareholders from bringing forth any claims against the board. More recently, the Marchand v. Barnhill (Del. 2019) case emphasizes that while Caremark does lay down a significantly high threshold for plaintiffs, it also emphasizes that “a corporate board must make a good faith effort to exercise its duty of care.” From a governance perspective, this seeks to answer the technical aspects of boards and their subsequent decision making. The main issue of the very composition of corporate boards, however, remains a contentious matter.

Gender diversity index and country-based regulations:

The Gender Diversity Index is an annual measure of several parameters to understand the extent to which all countries are willing to embrace the reality of gender equality on the corporate side. For the purpose of this article, one can limit the scope of observations to 2 countries – India and Australia. Both these countries have a lot in common with respect to historical, economic, and legal contexts. To begin with, both have had a colonial past under the British for a long time. Their history of being influential members of the Commonwealth is just the tip of the iceberg. In recent times, the collaboration presented by both countries is not only on the lines of commerce and politics, but also the growing priority awarded to the recognition of increased gender diversity on corporate boards. Additionally, both countries have seen sweeping regulations in recent times to incorporate a diverse corporate culture. As per a report published by the WGEA, women make up for 50.5% of the total workforce, but a mere 28.1% hold directorial positions. With India, the statistics indicate a poor situation with respect to both workplace freedom as well as the involvement of women in the corporate sector. The involvement of women in the paid workforce is a meagre 21%, contrary to the figures for the Australian context.

An essential question that is prompted here is indicated by Prof. Katherine Klein at Wharton Business School, “Do companies with women on the board perform better than companies whose boards are all-male?” The conclusion drawn by her review of several peer reviewed studies results in a neutral conclusion, of the lack of any substantial effect caused by the increase in gender-based diversity on corporate boards. The conclusion drawn by modern academia is that there is neither a strong case in favour of nor against the increased involvement of non-males on corporate boards. The study taken up by Prof. Klein is the famous study put forth by Post & Byron in 2015. However, this measures the effect of a diverse board as against the financial performance of the company. The corporate metric arguably must go beyond the usual metrics of financial considerations. The previously mentioned definition put forth by the Cadbury Committee emphasises on the elements of direction and control in corporate governance. The board of directors of a company dictate the corporate culture followed in the daily activities of the same. The call for diversity here, must be extended beyond the framework of gender and must be extended to race, occupational background and in the Indian context, caste. The proviso to Section 149(1)(b) of the Indian Companies Act 2013 contains the statutory basis for having “at least one woman director”. Conversely, for Australia, there is no statutory requirement per se, only an existing industry target set by the Australian Stock Exchange for 30% of corporate boards to be comprised of women.

Practical Perspectives From Corporate Leaders:

The Centre for India-Australia Studies, at O.P. Jindal Global University, seeks to understand the questions put forth in the previous section. On one such instance in 2021, it brought together a panel of female leaders from India and Australia to a seminar to discuss matters of tokenism on boards, viewing women as outsiders, as well as the slow realisation of gender equality on boards.

The guest of honour at the event, Her Excellency, The Honourable Margaret Beazley, AC QC began the session by acknowledging the lack of general acceptance of gender diversity. The emphasis of her analysis was largely centred around the deceptive and incomplete statistical figures, which often serve contrary to the context of any issue at hand. The 4 panelists, Sarah Kelly, Neema Premji, Shalini Kamath and Sonu Bhasin – represented the views of India and Australia through their illustrious careers as members of corporate boards, leaders, and academics. The similarities in the Indian and Australian experience was represented by the slow change in the corporate culture on boards. From women being viewed as a “glam quotient” on boards, to being increasingly viewed as a necessity – not only for better corporate image, but also for better decision-making and risk management on boards. The growing acceptance of gender diversity was accepted to be a product of the recognition of the individual skill sets and overwhelming experience offered by each one of them, regardless of gender.

The difference between the corporate context, however, is particularly intriguing for 21st century corporate law. The context of dynasty based corporate structuring is what makes the Indian context monumentally different. The emphasis provided by the Indian speakers was on the conflict presented by Section 149 (1)(b). The dilemma exists between appointing a female director alien to the general familial context of the company, vis a vis the fulfilment of the requirement in the statute. Ironically, noted companies like Reliance Industries Limited have female family members serve as independent directors on corporate boards. Another point of contention pointed out was the lack of having women directors with the relevant experience in the industry where the company operates. The disparity between the background of the director and the experience needed to actively contribute on corporate boards morphs into more of a regulation chasm than merely an ambiguity.

These differences especially become relevant when the lack of regulation is viewed in the context of India and Australia. While the latter does not have any statutory regulation, the similarly situated contexts of both countries make the lack of implementation of the said regulation in India seem more apparent. However, this references to the original question – Does the involvement of women bring about any real change in the company? India, traditionally, has followed the “insider” model of corporate governance, all while taking inspiration for its corporate governance norms and practices from the US and UK, which have historically followed the “outsider” model. This, as described by Prof. Umakanth Varottil, could lead to a disintegration of the transplant effect of corporate law in India. As indicated by the Caremarkcases, the focus of the US corporate context lies in the exceeding trust shown by judges in the business discretion of the board of directors. An overwhelming question lies in the very discretion awarded to the business decisions by the day-to-day management and the composition of the company. This question, unfortunately, remains underwhelmingly unanswered. The incorporation of salient features from other corporate governance systems certainly remains a favourable practice, but to a rather dismaying end. The very definitions of gender equality and the role of increased gender diversity on corporate boards remains a mystery, with a plethora of arguments for each side. The factors of better risk mitigation, general improvement of corporate culture, better policymaking etc. are few of the numerous, more modern considerations that form an essential part of how the topic of gender diversity in corporate law must be perceived.


While Gender Diversity on corporate boards remains contentious and highly debated, the major (and unresolved) consideration lies in the very benefit of a diverse corporate board. There exists very little to no research regarding the adverse effect of gender diversity on corporate boards. Scholarly understandings, thereby, must be weighed in the larger context of the social movement for increased inclusivity in every sphere of the workforce, not just the sophisticated corporate context. The matter of gender equality has been summed up succinctly by Elizabeth Broderick as,

“Gender Equality is the Unfinished business of the 21st century.”

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