What India can learn from Spain’s law for 40% boardroom seats for women

On March 8, as the world celebrated International Women’s Day with exuberance and fervour, and also with trite tokenism, Spain moved beyond the hollow rhetoric and gave a nod to a draft law that seeks to bolster equal representation of women in politics, business and other institutions. 

One the eve of the day earmarked to reflect on the role of women in modern societies, and to draw attention to issues like gender equality, reproductive rights, and violence and abuse against women, the Spanish cabinet approved the gender parity law that will make it mandatory for corporate boards across the country to have at least 40% members from the “least represented gender.” 

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Since female boardroom representation is a key metric to track the global progress on gender equality, Spain’s move should be celebrated by women around the world.

The law, which is set to increase the number of women in decision-making positions in business and politics, now goes to Congress for debate and, subsequently, vote. 

Feminism matters

Spanish Prime Minister Pedro Sanchez had made the announcement about the draft bill during a Socialist party rally ahead of International Women’s Day. Sanchez, who is heading the Leftist coalition government, reiterated that his government was “not only taking a step in favour of feminism, but in favour of Spanish society as a whole”. 

He added: “If women are half of society, they should be half of the political and economic power. Some may see this as excessive, but those of us who believe in feminism see it as simply fair….Only through feminism will we build the best democracies, which is precisely what some people do not want to happen in Europe.”

The ‘Equal Representation of Women and Men in Decision-Making Bodies’ law will make it mandatory for any listed company with more than 250 workers and an annual turnover of 50 million euros ($53 million) to have 40% women in the management. 

In politics, the new law will require parties to offer equal numbers of male and female candidates during elections, with the aim of increasing gender parity in Parliament. The same requirement will apply to professional associations and juries for awards financed with government money. 

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Non-compliance with the new norm would be considered a serious offence; those refusing to follow it will be slapped with penalties.

Gender parity in Europe

The new regulation comes at a time when women make up 44% of the Spanish Congress and 39% of the Senate, and the percentage of female directors in listed companies has climbed above 30% for the first time. According to reports, there are 32.37% women on boards of directors now, 3.65% more than in 2021. 

While this figure has tripled since 2018, it still leaves Spain below the 40% bar, set by a new European Union (EU) directive in November 2022; it requires companies in all of its member countries to have 40% of the underrepresented sex among non-executive directors or 33% among all directors by 2026.

Spain, incidentally, has been at the forefront of landmark legislation in favour of women in Europe. In December 2022, it became the first European country to adopt legislation allowing for paid menstrual leave. Furthermore, lawmakers in the country also passed a bill protecting transgender rights. 

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On February 16 this year, the Spanish parliament approved the provision of sick leave for menstruating women; again, it is the first country in Europe to have done so. Spain is also among the first countries to remove the requirement for teenage girls to have parental consent in order to access abortion.

All these are remarkable changes which will  go a long way towards gender equality.  

Other countries of Europe, too, have led by example. In 2005, Norway became the first country in the world to introduce a 40% gender quota on the boards of all the listed companies, kickstarting an international push to force companies to have more women on boards. 

Today, several countries in Europe have moved ahead on gender parity. If France and Iceland have a 40 per cent fixed quota for women board members, Italy and Belgium have the minimum requirement of 33 per cent women on corporate boards. Germany and the Netherlands, on the other hand, have a 30 per cent fixed quota for women boards.

The sweeping reforms in Europe with regard to gender relations are significant because women have long been excluded from institutionalised politics in the continent, with the family law inscribed within civil codes making women subordinate to men for centuries. 

The gender order that emerged after the revolutionary militancy of the French Revolution in 1789 reinforced the superior position of men — in the army, for instance — and relegated women to the margins. The gender roles, defined in the late 18th century, were challenged by subsequent revolutions in the 19th and 20th centuries; women’s movements disrupted the dominance of patriarchy in public life.

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While Spain has set the ball rolling, in days to come, we will see many more European countries moving in the same direction. Since 2023 marks the 75th anniversary of the Universal Declaration of Human Rights — it enshrines that ‘All human beings are born free and equal in dignity and rights’ — it would be in fitness of things if it becomes a global mission: not to discriminate against women on the basis of their gender.

The Asian paradox

Asia is falling far behind its regional peers in terms of female boardroom representation, analysis from American finance company Morgan Stanley Capital International (MSCI) and Bank of America (BofA) Securities, the multinational investment banking division, revealed on March 9 (Thursday). 

According to research by BofA Securities, women make up only 20% of Asia’s boardroom, a mere  7% improvement from 12 years ago.  Within the continent, countries like Japan and South Korea lag even further behind. According to MSCI, the percentage of total director seats held by women in South Korea was at 12.8% in 2022. In Japan, 15.5% of its executive and director roles were women. Noticeably, both fell far behind the MSCI world average of 31.3%.

With more women moving up the corporate ladder and getting into high-ranking roles, women representation in India Inc boardrooms has improved in recent years. But the fight is far from over. While the glass ceiling in boardrooms is often written about, it is surprising when the same is applied in family-run businesses, against female relatives.

Groups such as HCL, TVS and Reliance have given the women family members equal rights, with the daughters offered top posts in various divisions. On the other end, there are conglomerates like Chennai-based Murugappa Group, where Valli Arunachalam has been fighting a spirited battle for equal rights as her male relatives. 

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Valli, her sister and their mother are demanding a board seat in Murugappa Group’s holding company Ambadi Investments (AIL), or a suitable value for their 8.23 per cent shareholding in AIL. 

Long way to go

We still have a long way to  go for gender diversity in boardrooms. As per the 2022 Deloitte Global’s report, titled ‘Women in the Boardroom,’ women hold 17.1% of board seats in India. According to an EY report of the same year, however, women currently hold 18% of board seats in India.

A look at the percentage of the preceding decade reveals why the pace of women’s representation has been slower: While there were 6% women in Indian boardrooms in 2013, this percentage rose to 9.4 in 2014.  In 2017, the figure was 13%, indicating the annual rise by 1%, less than 3.4% between 2013-2014. The report said that almost 95% of Nifty 500 companies have at least one female board member compared to 69% in 2017.

If more women occupy boardrooms in India today than in 2014, it is largely due to the fact that Companies Act 2013 mandates it. According to Section 149 of the Companies Act (2013), any company with a paid-up capital of more than one hundred crore, and an annual turnover of more than three hundred crore, must have at least one woman director on board. 

While the rule has helped, the deep-rooted structural barriers and gender bias have made achieving gender parity in the boardroom a distant dream in India. Besides, several reports have indicated that Covid-19 pandemic has hit women harder. Women have lost around $800 billion in income globally due to the COVID-19 pandemic, Bank of America Global Research has said in its recent report.

If we compare India’s figures with other countries in South Asia, the difference is stark. Malaysia, for instance, has the highest percentage of women board members in Asia at 26 per cent, ahead of the global average of 19.7 per cent. In 2022, Malaysia posted the highest percentage compared to similar countries like Singapore (17.6 per cent ), Thailand (17.8 per cent) and Hong Kong (13.9 per cent). The 2022 study by Deloitte found that Malaysia has the highest percentage of women chief financial officers among the Asian nations surveyed (34.9 per cent), more than double the global average of 15.7 per cent.

While India’s performance has improved, other countries are witnessing a stronger push to increase gender diversity on their boards through various stakeholders; European countries have taken the lead in this arena. It’s perhaps time to emphasise that gender parity is in the larger interest of any nation. 

As for India, doubling the percentage of women in the workforce would raise its GDP to $700 billion by 2025 and push the growth rate from 7.5% to 9%, states a research by the International Labour Organization. That’s reason enough for corporate India to do everything it takes to facilitate this.