The Glass Ceiling in Chinese and Indian Boardrooms: Women Directors in Listed Firms in China and India

By Alice de Jonge

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

• Language: English
• Publisher: Elsevier Science
• Release date: Mar 12, 2015
• ISBN: 9781780633435

Alice de Jonge

Dr Alice de Jonge is a Senior Lecturer in law at the Department of Business Law and Taxation at Monash University, Melbourne, Australia. She lectures in the post-graduate subjects Asian Business Law, International Law and Policy and International Trade Law. In 1998 she was awarded the LAWASIA Research Award. She has worked on various consultancies with international aid organisations and is the author of the book Corporate Governance and China’s H-Share Market (2008) as well as numerous other book chapters and journal articles.

Book preview

The Glass Ceiling in Chinese and Indian Boardrooms

Women Directors in Listed Firms in China and India

Alice de Jonge

Table of Contents

Cover image

Title page

Copyright

Dedication

Preface

About the author

1. Introduction and overview: Government regulation for gender diversity on company boards in China and India

1.1 Overview of this chapter

1.2 Choice of research subject: why China and India?

1.3 Description of research context

1.4 Aim of the book and analytic framework

1.5 Methodological approach: mixed methods research

1.6 Overview of book structure

2. Corporate governance in India and China: The regulatory and institutional framework

2.1 Corporate governance rules and regulations

2.2 Corporate governance in India

2.3 Corporate governance in China

3. International comparisons and the political context of women on boards

3.1 Politics and the economy: does women’s political empowerment promote economic participation?

3.2 State-owned companies in the forefront

3.3 State policy mechanisms and state-driven corporate social responsibility

3.4 Non-state measures aimed at increasing women’s representation in corporate leadership

4. The social and economic context of women on boards

4.1 The international framework for protecting women’s rights and advancing women’s interests

4.2 International norms shaping national policy

4.3 National institutions: social and economic policies and programmes in China and India

5. Literature review and theoretical context

5.1 Legal transfers and regulatory change

5.2 Institutional theory

5.3 National culture and organisational behaviour

5.4 Gender and leadership literature

6. Study 1: Organisational predictors of women on corporate boards in China and India

6.1 Introduction and development of hypotheses

6.2 Methodology and results

7. Study 2: Understanding attitudes towards gender diversity and affirmative action in China and India

7.1 Introduction and development of hypotheses

7.2 The survey questionnaire

7.3 Levels of support for affirmative action measures

7.4 The respondents

7.5 The firms and their boards

7.6 What policies were in place at firm level?

7.7 Testing the hypotheses: beliefs about the reasons for gender imbalance on company boards

7.8 Political barriers and business networks

7.9 Support for gender equity measures

7.10 Country differences in views about mandatory quotas and other measures

7.11 Discussion

8. Conclusion

8.1 Key findings

8.2 Contribution to knowledge

8.3 Limitations

8.4 Future research

References

Government legislation, regulations and policy statements

International legal instruments

Index

Copyright

Elsevier

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Copyright © 2015 A. de Jonge. All rights reserved.

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ISBN: 978-1-84334-617-3

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Dedication

This book is dedicated to the memory of my Oma, Janna de Jonge, and my Grandma, Blanche Hutchings

Preface

The aim of this book is to understand the influences behind perceptions of government regulation for gender diversity on listed firms in China and India and to further understand the environment within which those perceptions are formed. This understanding is important for policy formation. If the main obstacles to the introduction of special measures for gender diversity are political, then traditional political campaigns may help to overcome such resistance. In the meantime, social and organisational initiatives, including mentoring schemes, networking programs, childcare provision and flexible work arrangements, can be used to assist talented women with the potential to contribute at the boardroom level. Where the main obstacles to the introduction of special measures are social and economic, then regulatory initiatives, including mandatory targets and quotas, can help to ensure that qualified women are nominated to decision-making roles and can also help to promote social change by breaking down traditional patterns, alliances, beliefs and prejudices. Quotas have been most effective when backed by enforceable sanctions, as is the case in Norway, where women now occupy over 40% of directorships in publicly listed companies. Voluntary targets have also been effective, though less dramatically so, as experience in Spain, France, Belgium and elsewhere demonstrates.

Women at senior corporate level in both China and India operate in an environment where corporate boards are dominated by men and where the prevailing culture presents many obstacles to career advancement for women in business. Fewer than 10% of directors on the boards of major firms in China are women, while fewer than 5% of directors leading India’s top firms are women. Experience from many other countries indicates that simply waiting for economic development and social change to bring about the conditions for gender equality does not work. Special measures of the kind envisioned by Article 4 of the Convention on the Elimination of All Forms of Discrimination against Women are needed. In both China and India, government regulations expressly seek to establish and protect equal rights for women in employment, social security and political participation. Both countries have also established regulations and guidelines aimed at enhancing the quality of corporate governance in publicly listed corporations. The question this book seeks to explore is whether similar corporate governance measures aimed at ensuring gender diversity on company boards are likely to be effective in the different environments of China and India.

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, 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.

Institutional theory considers the processes by which structures, including rules, norms and routines, become established as authoritative guidelines for social behaviour. It inquires into how those elements are created, diffused, adopted and adopted over space and time. Although the focus is typically upon the perpetuation of stability and order, institutional theory also seeks to understand processes of conflict, reform and change in social structures (Meyer & Rowan, 1977; DiMaggio & Powell, 1983; Powell & DiMaggio, 1991; Scott, 2004). Both legal transplant theory and institutional theory are relevant to the problem examined in this book, which is whether and which regulatory reforms aimed at promoting greater gender equity on company boards might successfully be adopted in China and/or India.

Also relevant are insights provided by those scholars who have tried to capture and compare the essential characteristics of different national cultures (Hofstede, 1984; Hofstede, Hofstede & Minkov, 2010; Schwartz, 1992). The most widely referenced framework for discussing and categorising differences between national cultures in this regard is the one developed by Hofstede in 1980. This book makes use of the most recent version of Hofstede’s framework, which identifies six dimensions of national culture: power distance, individualism/collectivism, masculinity/femininity, uncertainty avoidance, long-term orientation (Chinese value system) and indulgence versus restraint.

Legal transplant theory, institutional theory and culture analysis each provide valuable perspectives on forces of resistance to change within institutions and organisations undergoing transformation (Bovey & Hede, 2001; Greenwood, Suddaby & Hinings, 2002; Hall& Thelen, 2009; Neck, 1996; Schiele, 2011; Yilmaz & Kılıçoğlu, 2013). In this book, I utilise the insights provided by these scholars to examine (through the instrument of a survey) attitudes of company leaders towards a variety of different possible regulatory reforms aimed at enhancing gender diversity of company boards in China and India. The conceptual framework utilised to analyse survey responses recognises that attitudes towards gender diversity and towards regulatory/organisational change generally are themselves formed by a combination of individual, organisational, social/cultural and institutional/regulatory forces.

This book examines the theory that the most important obstacles to bringing about greater gender equity on company boards in China are political. Politics and policy formation in China are dominated by the Chinese Communist Party (the Party). Top Party posts and Party processes are, in turn, dominated by men (Ding, 2012). Gender equity on company boards simply does not feature on the Party’s current list of policy priorities. Special measures aimed at enhancing gender diversity in business decision making are unlikely in the current environment. If and when the Party and its key policy makers do decide to take the need for gender diversity seriously, then history indicates that change could be achieved with remarkable rapidity. In the meantime, women in China do relatively well in terms of health, education and economic opportunities when compared with other developing countries in Asia. They are well placed to begin campaigning for social and organisational level measures such as gender-blind recruiting practices, women-only networking, recruiting and mentoring events, and flexible working arrangements.

In India, in contrast, the key obstacles to bringing about gender diversity in business decision making are social and economic. At the elite level, wealthy Indian women have access to quality health and educational services. Unlike China, India has had both a female president and a female prime minister, as well as several influential female chief ministers. Indian women politicians are able to exercise influence over policy formation. Their influence is evident in the design of India’s National Rural Employment Guarantee Scheme and in the introduction of draft legislation establishing quotas for women in India’s parliament. More recently, female politicians were instrumental in establishing new rules issued under Section 149 of the Companies Act 2013 requiring all listed companies to have at least one woman on the board of directors. However, when special measures such as these are introduced, the problem is they are often thwarted by social and economic forces keeping Indian women, particularly those from the lower classes, in their place. Examples of such forces are examined in detail in Chapter 4.

Study 1 of this book (Chapter 6) uses quantitative data to explore organisational predictors of women on corporate boards in China and India. The most interesting finding to emerge from analysing the data collected for Study 1 is that while state-controlled listed firms in India had a higher proportion of women directors than did their family-controlled counterparts, the opposite was true in China. This finding indicates that government nominees to Indian company boards are more likely to be women than is the case for Chinese state-controlled company boards. This conclusion is further supported by the finding that companies operating in sectors dominated by the state – particularly, the energy, utilities, materials and industrials sector – tend to have fewer women directors than do firms operating in other industry sectors. The significant size and importance of state-controlled companies in the Chinese economy makes the conclusion that state-controlled firms in China are less likely to have women sitting at the boardroom table an important one. It is also a finding that indicates a lack of female influence in government decision making.

In Study 2 of this book (Chapter 7), surveys were conducted in both China and India to empirically test attitudes towards a variety of possible approaches to enhancing gender diversity on corporate boards through regulatory and/or voluntary measures. Survey respondents were senior employees of listed companies in China/India. Survey responses confirmed that women in India face greater social and economic barriers to corporate career advancement than their Chinese counterparts. Indian respondents were particularly aware that lack of educational opportunities was a barrier to women seeking corporate careers. Indian respondents were also more supportive of affirmative action measures aimed at assisting women to succeed in corporate life. Finally, survey responses also confirmed that women remained generally more supportive of affirmative action measures than their male colleaguesin both China and India.

The book concludes by highlighting the policy and social action implications of the findings from the studies undertaken. In particular, it concludes that social and economic challenges are going to be harder to overcome in India than in China. In China, the greatest challenge may well prove to be the male-dominated nature of the party-state political hierarchy. In both countries, it is suggested that efforts to achieve gender equity at the boardroom table need to be multi-pronged, with socioeconomic discrimination and the old boys’ club nature of politics and business all being addressed. The book ends by suggesting a number of areas for further research – particularly, studies aimed at evaluating the relative effectiveness of different types of measures aimed at assisting women to break through the glass ceiling.

About the author

Alice de Jonge joined Monash University from legal practice in 1992. She is now senior lecturer in the Department of Business Law and Taxation, Monash University, lecturing in the postgraduate units of International Law and Policy and Comparative Business Law in Asia. In 1998 she won the LAWASIA Research Award and in 2008 graduated with a doctorate in juridical science from the University of Melbourne Law School. In 2008 she was awarded the Dean’s Prize for excellence in teaching. She is the author of two books: Corporate Governance and China’s H-Share Market (Edward Elgar, 2008) and Transnational Corporations and International Law: Accountability in the Global Business Environment (Edward Elgar, 2011). She is also the author of various book chapters and journal articles.

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