Women directors' pay has leapt ahead. Their roles are bigger too

The compensation of women independent directors in the Nifty50 companies doubled in the past five fiscal years, against a 1.7-times increase for their male counterparts during the same period, a new study showed.

Overall, the compensation of independent directors rose 11% CAGR (compound annual growth rate) between 2018-19 and 2023-24, showed the Deloitte study, shared exclusively with Mint.

The study, titled Independent Director Remuneration in India – Beyond the headlines, found that over the past five years, companies in the heavy manufacturing and IT sectors have paid higher to their independent directors compared to other sectors due to their size, scale of operations, and composition of international directors.

According to search firms, the fees are expected to grow further, with independent directors’ participation in various board committees likely to increase going ahead.

An independent director’s remuneration comprises sitting fees—for attending board meetings—and commissions linked to a company’s performance.

While commissions are expected to increase, sitting fees, which vary based on whether a director attends a regular board meeting or a committee meeting, are capped at ₹1 lakh per meeting by the Companies Act. The committee meetings could include those for audit, nomination, and remuneration committees.

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“The demand for experienced and highly skilled independent directors keeps rising along with the expanding scale of Nifty50 companies," said Dinkar Pawan, director at Deloitte, who focuses on executive performance and rewards. “Independent directors also sit on boards across certain sub-sectors leading to parity in pay levels over time."

Women directors rise

The study noted that the rise in women independent director remuneration is on the back of increased responsibilities.

For instance, in 2019, a female independent director was a member of two committees on average vis-à-vis three committees for male independent directors. By FY24, the woman independent directors' responsibility, too, increased to three committees on average.

In 2024, female directors represent 22% of the Board in Nifty50 companies, up from 18% in 2019. This has led to faster growth rate of their remuneration and a reduced difference with men, said the Deloitte report.

The study looked at private companies only and did not include the public sector.

“A large number of companies retain women independent directors, because a minimum number on board is now mandated for certain kinds of companies India," said Aparna Mittal, founder for Samāna Centre for Gender, Policy and Law. “But it still remains a check box unfortunately for many."

Also read | How independent directors’ pay doubled in five years

Mittal added that it needs to be studied whether the women directors are truly independent or professional appointees, and whether their views and opinions are actually sought and considered before important decisions are made.

Directors in demand

Search firms have seen the hunt for independent directors get competitive over the past one year.

“Over the last nine months, we have worked on more than two dozen searches for independent directors, which is at least 50% more than what we did in the earlier one year," said Navnit Singh, chairman and managing director of India for KornFerry.

The search firm has realised that India Inc. is open to recruiting CXOs with relevant experience, but they may be a first-time board member. This is different from a few years ago when the directors were from a smaller talent pool who held board positions in multiple firms.

Demand for them has become urgent now, with more than 2,000 independent directors set to complete their tenures by FY24, sending companies on a frantic hunt to replace them.

Also read |  Wanted: Suitable board directors to help firms navigate global crises

But the right fit is not easy even though the number of applicants available for the job has increased.

“CXOs are taking certification programs to qualify as a director, but firms want those who can add to their brand image," said Pranshu Upadhyay, regional director and India head for technology hiring at search firm Michael Page. “At the same time, the candidates want to be part of a company’s board which will add prestige to the resume."

Upadhyay added that “almost all firms want more women candidates as directors".

Certification courses are offered by B-schools and consulting firms on how to become a director.