Why Indian boardrooms have no diversity

Bombay Stock Exchange The study looked at boardrooms of 1,000 top Indian companies

Do India's corporate boardrooms lack diversity?

New research by D Ajit, Han Donker and Ravi Saxena of the University of Northern British Columbia, Canada, is offering some engaging clues.

They have profiled board members of the top 1,000 Indian firms - private and state-owned - that account for four-fifths of the market capitalisation of companies listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) in 2010.

Based on the surnames - which usually give away caste affiliation - of the members of these company boards, the intrepid researchers classified them into Forward Castes, Other Backward Classes (OBCs), Scheduled Castes and Tribes and foreign directors.

The boards had an average of nine members - 88% of them were "insiders" and 12% were independent directors.

The caste break-up of the men and women who run Indian businesses unearthed interesting - though not entirely unexpected - facts.

The research found that an overwhelming 93% belonged to the forward castes. OBCs - a collection of caste groups lower down in the hierarchy - accounted for 3.8% of the directors.

And despite six decades of affirmative action Scheduled Castes and Tribes, who languish at the bottom of the ladder, accounted for only 3.5% of the directors.

"The results show ... [that the Indian corporate sector] is a small and closed world," say the researchers in a recent paper.

"In the corporate world, social networking plays an important role. Still, Indian corporate boards belong to the 'old boys club' based on caste affiliations rather than on other considerations - like merit or experience."

The researchers find it difficult to believe that lack of merit could be the reason for such under-representation.

I told Gurcharan Das, author and business consultant, about the findings. Yes, he said, Indian boards do need more diversity. But, no, there was no "conspiracy" to keep the lower castes back.

"I cannot remember a single instance when anybody mentioned a candidate's caste when recommending the person for a board membership. Talent is what matters," he says.

Apologists for the caste system argue that caste and kin networks have traditionally promoted trust, a keystone of any successful business.

Indian society remains moored in primordial caste and kin loyalties, so why should business be any different?

Critics believe perpetuation of an outlawed system of social exclusion holds India back. They point to the fact that private businesses stiffly oppose affirmative action in hiring, saying such quotas can kill merit.

Mr Das believes that over time, things will change. India's economy, he says, is 21 years young, alluding to the liberalisation process which began in 1991.

"It is too early to achieve the desirable diversity," he says.

India, people like Mr Das believe, should push for affirmative action in private schools, and strive for "equality of opportunity, not equality of results". He has a point.

Studies show ethnic and racial diversities enrich economies and societies. A fractured society like India just holds the country back, as caste and clan groups extract concessions from the government.

And we still don't know how much this appalling lack of boardroom diversity in a rapidly diversifying economy hurts our competitiveness.

Soutik Biswas, Delhi correspondent Article written by Soutik Biswas Soutik Biswas Delhi correspondent

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  • rate this

    Comment number 50.

    What is the big fuss about diversity in he boardrooms. It's business and not 'reserved category' institution. How diverse is world's biggest economy China's boardroom. This writer seems to be too obsessive about such non-issues. It would have been a good analysis in case he would have taken up issues like how many Indian brands are competing with Western brands.

  • rate this

    Comment number 49.

    Its the society’s outlook that has to change and hence the suggestion of the “Kerala model”. With all its ills, its the only state in the whole union which doesn’t have skewed sex ratio, 100% literacy, high social indices etc. When I said education, it doesnt just mean formal education; it means education of the society. That is the only solution for true social harmony and development

  • rate this

    Comment number 48.

    These are issues India has been dealing with since 1947. Its not failure of recognition but rather improper implementation of the so called solutions. Unlike the US, where admission to Ivy league schools is somewhat arbitrary, the admission to most schools in India are still merit based, mostly. But even after graduating from these elite schools in India, they face the same social discrimination.

  • rate this

    Comment number 47.

    @Jay (43-46): I fail to see what u were trying to get at. Unless ur head is buried in the sand, u will see the social problems in India whether they are due to caste, ethnicity, etc. But so called recognition of the problem and stating the obvious is something any armchair expert can do. W/o an attempt at offering a solution, and stating the obvious (problems) is in my book a pessimitic outlook.

  • rate this

    Comment number 46.

    Many Indians, mostly who r 'successful' &/or frm privileged background, think that image is more important than reality.Very few have the ability to understand its consequences & fewer have guts to admit it.Fighting corruption or promoting merit (not caste or religion or gender) is not any idealism or day dreaming.It's also not pessimism but sign of foresightedness, confidence & optimism.


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