Market regulator Securities and Exchange Board of India (SEBI), in consultation with the Ministry of Corporate Affairs (MCA), recently released a discussion paper that proposes more stringent disclosure norms. According to the new standards, India Inc. might soon have to significantly work on its gender parity score, with boardrooms being judged on diversity metrics that go beyond the composition of directorships. SEBI could now ask the top 100 listed companies to disclose what percentage of their women employees earn less than the median wage, get healthcare benefits, and what their skill level is (unskilled, semi-skilled and skilled). Even in the differently-abled category, companies will now be required to disclose what percentage of them are women and the benefits such employees are getting.
These disclosures will be part of the Business Responsibility and Sustainability Report published by the listed companies along with their annual reports. These disclosures will be voluntary in FY21, beyond which they become mandatory.
According to Amit Vadera, Head of Staffing for BFSI at staffing firm Teamlease Services, once these rules are implemented, gender issues would automatically become part of board-level discussions. He says “Organizations will do their best to comply and will take steps to have better gender balance. This will bring in more women at the workplace, ensuring salary parity.”
The development comes as gender parity at the workplace as it is a key issue globally. Even companies themselves didn’t know about the on-ground situation, since no such consolidated data is maintained. However, after the new rules come into play, companies will have access to better data and in those cases where deficiencies are found, boards will be forced to take corrective action.
“Pay parity based on gender is a challenge across the world and pretty much prevalent in India too,” says Aditya Mishra, CEO, CIEL HR Services. “This could help correct the diversity balance a bit better,” he adds.
Such disclosures could also be viewed as positive by shareholders as many of the leading institutional investors are being more mindful about Environmental and Social Governance (ESG) practices adopted by corporates.
“This exercise nudges companies to use a new lens to assess their business and these ESG metrics will provide a whole new vantage point to steer change,” says Shruti Rajan, Partner at Law Firm Trilegal. “Collation of these data points will be quite compliance intensive though, and it will be interesting to see how many companies take it up on a voluntary basis in the first year,” she adds.
Experts say the new disclosures would provide a truer picture of gender parity. “Right now, some companies claim they have a good track record in the matter since they have women in the top leadership. But in the new format, you have to disclose the percentage of women at each level such as board, top management, middle management and entry-level,” says an independent director, who sits on boards of two listed companies.
Until now, gender-related disclosures are very basic. Listed companies are required to disclose only the number of women employees in the organization and steps taken by companies to ensure a safe work environment. However, improving disclosures is only the first step and regulators need to be proactive and mindful of the fact that companies may try to find a way around the new rules. For instance, companies could start outsourcing the work to third party contractors where payment will be linked to the outcome/delivery. “Women employed by the small contractors may continue to be deprived of the wage parity intended by this reporting. It is not possible for the government bodies to enforce this reporting on the small contractors,” says a leading headhunter for corporates.
SEBI’s recommendations are based on suggestions given by an expert panel. MCA had appointed a special committee consisting of officials from MCA, SEBI, and the institutes of accountants and company secretaries. The report also suggests enhanced disclosures by corporates on environmental sustenance.