Even though the roots of corporate governance can be traced back to Adolf
Berle and Gardiner Means in the 1930s, the area finally emerged in the 1970s.
Corporate Governance is a patchwork regulation system developed over a period of
time through public and private policymakers and what is deemed to constitute as
successful corporate governance.
Over decades, the world has seen constant and radical change of how the boards
of companies fundamentally functions by the way of legislation and amendments.
The practices for good governance emerged and were heavily discussed.
structure to the board being one focal point amidst many, the ASX Corporate
Governance Council recommended that to add value, companies should have a
board with an effective composition, size and commitment so that it can
adequately discharge its responsibilities and duties as boards are a critical
component of improving corporate governance making board diversity integral.
A diverse board enhances the performance, and ultimately aims at cultivating a
real-world perspective which reflects the demographics. Board diversity can be
broadly classified into demographic diversity which consists of gender and race
and cognitive diversity with includes education and experience; this paper
focuses more on demographic diversity. 
Undeniably, merit has always been basis of for board appointments. So, do quotas
undermine merit? And is the quota system essentially anti-meritocracy?The quota system has been inculcated in corporate governance with the aim of
advancing women into boardrooms with the objective of correcting the present
flawed promotional system and turns it into meritocracy.Quotas have evidently
In 2003, Norway became the first country ever to introduce a Corporate Board
Quota (CBQ) of 40%. When introduced, there were only 7% of women board members
in the country, by 2008, the goal of 40% was almost achieved. Following suit, by
2018, 10 European Countries has also introduced CBQ. Conclusively debunking the
myth of quotas undermining merit. 
Boardroom Gender Diversity Quotas and Tokenism
The harsh reality is that women are still underrepresented and underpaid,
resulting in a lopsided gender balance in corporate leadership.We live in an age
where gender diversity in the boardroom has become an imperative factor for
effective corporate governance. Ethically, it is wrong when an individual is
qualified to hold a position and is denied the same on the ground of gender.
The presence of women on corporate boards not only combats systemic
discrimination but also tackles low representation of women. Moreover, a diverse
board have a direct impact on the organizations performance and decision making
by fostering innovation and creativity through the fresh problem-solving
approaches and perspectives, making gender diversity an important factor in
determining whether the company is well governed or not.
While several studies support that women on the boards lead to better governance
through diverse thinking, knowledge and experience; many argue that there is no
direct no correlation between diversity and company performance.
The quota for gender diversity has undeniably become a significant aspect for
promoting gender equality in boardrooms. But is it merely at face value? A range
of diversity in the boardroom certainly brings in people of different
backgrounds, skills and perspectives; enriching the quality of decisions made.
For gender quotas to achieve their purpose as an internal corporate governance
mechanism, the appointment of a well-qualified women who bring a valuable
perspective to the board is essential, but this can be problematic when
the quotas are filled only for the purpose of tokenism. This phenomenon leads
to women tumbling down a glass cliff instead of reaching new heights and truly
breaking the glass ceiling. 
With the rise in the implementation of feminist policies in the corporate world,
the chances organizations only complying with the quota mandate to conform
with the regulations and vis a vis maintain a positive image in the market are
have risen. Defeating the very purpose of the quota system and instead be at
risk of tokenism. Resulting in, the selected female members not being selected
on merit but rather only to fulfill the statutory quota; making their appointment
less legitimate in the eyes of the rest of the board members. Moreover, female
board members, especially independent members, are more likely to be side-lined
from board committees so as to limit the extent of their presence in internal
The Indian Scenario
In 2013, the Companies Act made it compulsory for all publicly listed firms to
have at least one-woman director.Section 149(1) of this Act aimed to improve the
representation of women on corporate boards. Out of the top 500 organizations,
ranked according to market capitalization on the National Stock Exchange (NSE),
only 303 (60.6%) had no women on their board in 2013 and were required to
appoint at least woman director by 2015. By 2017, at least one-woman director
was appointed by 82.8% companies and 13.6% had appointed two or more women to
However, even after the appointment of one-woman director, India fails to meet
the required critical mass. Critical mass is a percentage or number representing
a minority in contrast to token seats. Unlike other countries, who have a fixed
percentage of women occupying seats on the board, India has reserved only one
seat. A lone woman director, in comparison to a group, cannot make substantial
contributions and overcome gender barriers and may also face stereotyping. It
takes at least 3 women to achieve critical mass and have a fundamental impact on
enhancing corporate governance.
With only 13.6% companies with more than one woman director, India has failed to
imbibe these regulations in the right perspective and more so to escape strict
punitive measures, reducing their position to that of a buffer. Moreover, it has
been observed that to meet the requirements, companies many a time appoint women
with political affiliations or family ties.
Taking this into consideration, the Securities and Exchange Board of India (SEBI)
in 2018 mandated the appointment of independent woman directors on the board of
top 500 listed companies to curb the practice of the board appointing their own
relative as a puppet to comply with the mandatory requirements. This change
further ensures effective governance by ensuring gender equality in the nascent
Yet, all challenges have not been resolved and the lopsided male domination in
the corporate world still prevails due to the limits of corporate transparency
hindering substantive change.
While some countries like Norway have experienced the Golden Skirt Phenomenon
and achieved their objective through the quota system, a majority of countries
are facing complications which are defeating the very aim of the quota. Some
studies argue that soft laws instead of hard laws may be a better solution.
Soft laws enable voluntary systems instead of mandatory quotas which enable more
autonomy and flexibility to the organization. The United Kingdom allows organizations to formulate their own policy, set targets and disclose outcomes.
Australia and Netherlands allow companies to either comply with the country's
diversity targets or justify their non-compliance.
Such a shift may be required in the near future as diversity in boardrooms is
now slowly expanding to include LGBTQ oriented diversity. A LGBTQ oriented board
can help bring a new perspective to the table, which makes structural changes
exigent to shatter the glass ceiling.
Lastly, a board consisting of individuals from different backgrounds ensures
protection of the shareholder's interest as there is a higher probability of
efficient decision making and performance due to the expanse of knowledge, skill
and experience of the board members. Making the company economically prosperous
and ultimately increasing the company's value. Suggesting that board diversity
does in fact positively impact the relationship between governance structure and
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Written By: Saiesha Dhawan, B.A.LLB (2017-2022) GLSLC