Pune: Owing to the mandate to have at least one woman member on the board of directors of listed companies, the percentage of women on such boards has seen a marginal rise in the past four years. The figure stood at four per cent in 2013, and now stands at around 13 per cent.
Managing Director and CEO of Terentia, an estate planning firm, Sandeep Nerlekar said that the rate at which the authority of a company is transferred to a women in percentage terms would be in decimals. “India may have progressed in many aspects with regards to gender equality but in this area I feel business families are still less inclined to pass on the baton to their female members, unless there is a compulsion. However, the scenario is gradually changing. Now, some progressive families are actively considering giving the management reins to female members,” he said.
Citing examples of young female members like Isha Ambani, Tanya and Nisa Godrej, Sullaja Firodia and Lakshmi Venu getting into family businesses, he said the decision on who will succeed should depend on capability and meritocracy rather than gender or age. “Families today in general are changing their approach and perspective. Also, most families today are nuclear in nature and it is imperative for them to rely on their next generation even if they are women. We have seen with time and example that today’s women are leading the way in becoming successful CEOs, entrepreneurs and next gen tycoons,” he said.
Nerlekar further said that business families are ready to consider the daughter being part of the family business.
“Women now recognise skill sets, education and perspectives as their strengths and value additions to the family business legacy. They bring in a wholesome and holistic growth-oriented approach having the natural abilities to do so as being nurturers and care givers,” he said.
Speaking about the transfer of authority in family businesses, Nerlekar said that over the next 15 years, 40 per cent of India’s large family businesses will be handing over the reins to the second generation and 35 per cent of them to the third or fourth generation. “Without doubt, generational change is one of the most critical challenges facing India Inc. The trends and mindsets in this regard are now evolving, unlike earlier when the patriarch would not leave the control at all. Now there are growing number of patriarchs who are ready to pass on the baton to the next generation which include female heirs,” Nerlekar said.
According to him, the bigger challenge shadowing large family businesses is succession planning and that only about 15 per cent of Indian family businesses have chalked out a robust documented succession plan. “It is estimated that 70 per cent of the family-owned businesses fail or are sold before they are passed on to the second generation, while at least 90 per cent don’t make it to the third generation. The estate and succession planning space in India faces many challenges such as lack of awareness about wills, trusts and other succession instruments, changing regulations and more importantly procrastination by the leaders,” he said.
He said the traditional approach of eldest son succeeding the business has hampered many families businesses. “This tradition still exists in about 25 per cent odd cases and needs to change. Again, families need to ask themselves if the business is more important than the family. If the business and family’s well-being is important then running the business efficiently becomes the priority and in this case, ability, attitude and the aptitude must be considered instead of seniority,” he said.