The Glass Ceiling in Chinese and Indian Boardrooms

Women Directors in Listed Firms in China and India

Alice de Jonge

• Publisher: Chandos Publishing
• Year: 2015
• Print ISBN: 9781843346173
• eBook ISBN: 9781780633435
• Topic: Social Sciences
• Subtopic: Management
• Index: Social Sciences

This book is about women directors in China and India. The aim of the book is to understand more clearly where women are present on corporate boards, and the reasons for their continued absence from most listed company boards. The Glass Ceiling in Chinese and Indian Boardrooms is written at a time of increasing awareness, particularly in Europe, of the benefits of gender equity at the boardroom table, and of the costs of women's continued exclusion from corporate decision-making. Norway's gender equity legislation has now been instrumental in ensuring that women occupy over 40% of all company board seats in that country. France, Italy and Spain are amongst those countries now following the same path towards equity. But Asia in general, and the world's two largest nations in particular, still lag well behind. In China while women enjoy greater social and economic equality than many of their sisters in other parts of Asia, the male-dominated nature of the Party-state apparatus makes it unlikely that legislative change will be achieved any time soon. In India, while the country's 2013 Corporations Law now requires all major listed firms to have at least one woman director, the real challenges for women are social and economic, where much work remains to be done.- Based on detailed surveys of 1, 000 key listed firms in India and China- Provides results from empirical questionnaire surveys of key firms- Analyses the importance of board diversity in a rapidly changing world, and its significance for economic and environmental stability

1

Introduction and overview

Government regulation for gender diversity on company boards in China and India

This chapter provides an overview and outline of the book. It describes the research context and literature that inform the studies undertaken. It also outlines the research questions examined as well as the methodologies used in seeking answers to those questions.

Keywords

Corporate governance; board diversity; gender diversity; women directors; China and India; state-owned enterprises; mixed methods research; legal transplants; institutional theory; culture and organisations

1.1 Overview of this chapter

This chapter provides an overview of the book. It begins by providing a rationale for the choice of research topic. This is followed by a brief description of the research context and identification of the literature specifically relevant to a study of women on company boards. The aim of the book is stated and is followed by a brief overview of the analytical framework underpinning the studies undertaken to fulfil this aim and the methodologies used. The chapter then describes the structure of the book, which includes a summary of each chapter and an outline of the two studies undertaken to fulfil the aim of the book.

1.2 Choice of research subject: why China and India?

China and India were chosen as the focal markets for this research for a number of reasons. First, the sheer size of these economies makes it important for the rest of the world to understand them and the way they operate. As well as being the world’s largest nations in terms of population, China is the world’s second largest economy and India is the tenth largest economy in the world (WB, 2012a). China has also been ranked as the third fastest growing economy in the world with GDP growth at 7.8% in 2012, slowing to a projected 7.6% in 2013; while India’s economic growth is still robust (at around 5% for the 2012–13 fiscal year), despite slowing from previous growth rates of over 8% for 2009–11 (IMF, 2014; The Times of India, 2014b; WB, 2012b). Women make up nearly 50% of the population in each country (World Population Statistics, 2014). Together, Chinese and Indian woman make up nearly 18% of the total population of the world (http://www.worldpopulationstatistics.com). Their ability to fully participate in economic activity is crucial to the future of economic development for both the region and the world.

Second, China and India represent two of the oldest and most important civilisations in the world. Yet, there is currently very little research seeking to understand what modernisation means in these two very important societies (Jacques, 2012). This book attempts to fill some of the gap left as a result of this omission.

A study that makes comparisons between China and India enables instructive insights into the differing impacts of social, economic and regulatory reform on women’s participation in business leadership. The two countries have strong elements of similarity as well as important points of difference. Both China and India are developing countries which had strong elements of state control until the 1990s and which both began to open up to foreign direct investment in the early 1990s. It was also in the early 1990s that both countries began to implement a series of major reforms in company law and corporate governance regulation. Yet, at the same time, both countries have followed very different pathways towards marketisation of the economy and development of a modern securities market (Black & Khanna, 2007; de Jonge, 2008; Khanna, 2009). China and India also have very different political systems and very different cultures (Francesco & Mahtani, 2011; WEF, 2010a). India is a vigorous democracy and one that performs better than average when it comes to women’s political empowerment (WEF, 2012). Political participation has failed, however, to translate into economic participation, and Indian women remain woefully underrepresented in the economy, particularly at senior levels (WEF, 2012). China, on the other hand, is a country where politics is dominated by a single party – the Communist Party of China (the Party) – and where women appear to do equally well in both political and economic participation (WEF, 2012). This book explores the implications of such differences when it comes to recommending regulatory reforms aimed at enhancing women’s representation in corporate leadership.

1.3 Description of research context

The scarcity of women in top positions, senior management and, more particularly, on corporate boards has over recent decades become an area of concern for corporations and policy makers everywhere (Branson, 2012; Deloitte, 2012; EC, 2011; Machold, Huse, Hansen & Brogi, 2013; McKinsey, 2013a; Neville & Treanor, 2012). The need to ensure that women’s talents are fully utilised at all levels of decision making is being recognised as an economic necessity (WB, 2012c, WEF, 2013). An ageing population in many developed nations means an increasing need to ensure that all human talent is utilised to its maximum capacity. The marketplace for innovative ideas is also becoming much more crowded. As the WEF’s Corporate Gender Gap Report 2010 noted:

Innovation requires new, unique ideas – and the best ideas flourish in a diverse environment. This implies that companies benefit by successfully integrating the female half of the available talent pool across their internal leadership structures.

Recognition of the benefits of gender diversity in business decision making has generated a significant body of research seeking to understand the causes of gender disparity at the top. Yet, most of this research has been focussed on Western organisations and societies. Similarly, research examining the effectiveness of various strategies aimed at generating greater gender equality on corporate boards has also focussed on those Western nations that have taken the lead in adopting such strategies. Norway’s 40% quota for women on listed company boards was introduced in 2003, and the country has now achieved that target (Bergstø, 2013). The quota worked because it was backed by a strict enforcement regime – companies that still fail to meet the 40% target for each gender on the board after receiving several warnings can be subject to forced dissolution (Bergstø, 2013). This makes the Norwegian regime different from quota targets for women on boards established in Italy, France, Spain, the Netherlands, Iceland, Belgium and Finland, each of which has followed its own unique path towards gender diversity (Machold et al., 2013). Other Western nations, including the United Kingdom, Sweden, Canada and Australia have introduced softer initiatives of an even more voluntary nature, including best practice recommendations and reporting requirements (EC, 2011; Gender Equality Project, 2012). So far, Malaysia remains the only Asian country to include gender balance considerations in stock exchange listing guidelines (China Daily, 27 June 2011; Gender Equality Project, 2012).

A number of factors – individual, organizational and social – typically operate simultaneously to create barriers to women’s career advancement in the corporate world in Asia as elsewhere. Throughout Asia, there is a ‘leaky pipeline’ effect that sees the proportion of women gradually deplete at higher levels of the corporate hierarchy. In China, the greatest leak occurs between middle and senior level positions, while in India the largest leak in the pipeline occurs between junior and middle level positions, with almost half of all women leaving before they reach the middle of their career. These and other findings suggest that a combination of factors operate in different ways in different societies to impede women’s career progression in business. This again suggests that each country needs to find its own path towards ensuring greater female participation in corporate leadership. This book is interested in the potential role of quotas and other strategies aimed at promoting gender diversity on company boards in China and India.

1.4 Aim of the book and analytic framework

The first aim and achievement of this book is to more completely understand where women are present on company boards in China and India and where they still remain noticeably absent. More than simply bringing up to date the relevant literature benchmarking the number of women on company boards, the analysis presented in Study 1 of this book (Chapter 6) helps to identify where in the corporate world the most severe barriers to women with leadership potential still remain. Quantitative analysis tools are used to build as complete a picture as possible of the gendered nature of boardrooms in major listed firms in China and India. In particular, Study 1 examines the distribution of women directors amongst boards of different size, firms of different size, different workforce size, different industrial sectors, different geographical locations and firms of different ownership type.

The second aim and achievement of this book is to develop a more complete empirical understanding of the (cultural and institutional) reasons behind the continued absence of women in Chinese and Indian boardrooms. A survey of senior company leaders in China and India was conducted. Survey respondents were asked for their perceptions of the obstacles inhibiting women’s entry to the boardroom. The survey was also used to assess attitudes towards proposals for regulatory reforms aimed at assisting women in overcoming those obstacles. Respondents were asked to respond favourably, negatively or neutrally to a number of different proposals for regulatory/institutional reform. The results of the survey were then used, in combination with other data, to identify those reforms least likely to meet with resistance from social and organisational sources. The book concludes with a number of tentative recommendations for regulatory reform and other initiatives aimed at supporting women with the talent and ability to succeed as company directors in China and India.

The conceptual framework underpinning this book combines the insights of legal transplant theory, institutional theory and cross-cultural scholarship. Legal transplant theory warns that regulatory concepts from one political–legal–social culture cannot simply be transposed to a different context and expected to operate in the same way, or with the same degree of effectiveness (Legrand, 1997; Mattei, 1994; Watson, 1978, 1993; Berkowitz et al., 2003). Law is a product of the society and political system in which it operates – not the other way round. A socio-legal approach (as opposed to a legal–doctrinal approach) to the study of regulation explicitly recognises this. It recognises that the choices of decision makers, resulting in regulatory change, are themselves shaped by wider social forces (Berkowitz et al., 2003; Halliday & Schmidt, 2004). Likewise, those affected by a particular regulatory change will demonstrate a variety of responses and attitudes towards that change depending upon personal beliefs and experiences that have also been shaped by social forces.

Gillespie (2008) argues that legal transfers, such as those involved in corporate governance reform, involve communication between interested stakeholders at every stage: from the promotion of particular choices through the selection of a particular model (or models) for reform, its adaptation to the local context and, ultimately, its implementation, adaptation or rejection. These interested stakeholders form epistemic communities – comprising both international and national actors – which may be more or less influential at different stages of the reform process. The corporate leaders surveyed in Study 2 of this book (Chapter 7) can be seen as interested stakeholders forming one such epistemic community.

According to institutional theory, organisations respond to a variety of institutional pressures that impact upon their structures and behaviour (DiMaggio & Powell, 1983; Meyer & Rowan, 1977; Zucker, 1977, 1988). Jennings (1994) identifies three types of pressures that impact upon organisational structures and practices. Coercive pressures come from legal mandates or influence from organisations they depend upon. Mimetic pressures to copy successful forms arise during periods of high uncertainty. Finally, normative pressures to homogeneity come from the similar attitudes and approaches of professional groups and associations exercising influence over the attitudes and thinking of decision makers in the organisation.

DiMaggio and Powell (1983) conclude that the net effect of these institutional pressures is to increase the homogeneity of organisational structures in an institutional environment. As new practices and structures (such as targets or quotas for women directors) are more widely adopted and accepted, they become gradually more legitimised in the environment. Ultimately, these practices reach a level of legitimisation where failure to adopt them is seen as irrational and negligent or they become legal mandates (DiMaggio & Powell, 1983; Meyer & Rowan, 1977).

Meyer and Rowan (1977) note that when new standards, practices and/or structures are introduced at an institutional level this may be the result of, and may result in, a whole host of conflicts and disruptions to existing social, cultural and organisational structures and their ideological underpinnings. The authors identify a number of different ways in which organisational resistance to change may arise in response to such disruption. First, they note that ‘institutional myths’ may be met by ‘ceremonial’ acceptance as organisations seek to gain or maintain legitimacy in the institutional environment. Organisations may adopt, even prominently display, the trappings and vocabulary of institutional standards and expectations, but may do so at a merely superficial level. Alternatively, organisational ...

Table of contents

• Cover image
• Title page
• Table of Contents
• Copyright
• Dedication
• Preface
• About the author
• 1. Introduction and overview: Government regulation for gender diversity on company boards in China and India
• 2. Corporate governance in India and China: The regulatory and institutional framework
• 3. International comparisons and the political context of women on boards
• 4. The social and economic context of women on boards
• 5. Literature review and theoretical context
• 6. Study 1: Organisational predictors of women on corporate boards in China and India
• 7. Study 2: Understanding attitudes towards gender diversity and affirmative action in China and India
• 8. Conclusion
• References
• Index