Caste Diversity in Corporate Boardrooms
Caste Diversity in Corporate Boardrooms
Caste Diversity in Corporate Boardrooms
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four-fifths of market capitalisation systems foster social discrimination The term "caste" in English translates
of all companies listed in the and economic inequality (Srinivas 1962; into two distinct concepts - the varna
Beteille 1992,2012). Caste is an important and the jati (Deshpande 2011). The varna
major stock indices in India -
determinant of social, economic, corposystem divides Hindu society into four
measured by the Blau index rate and political power in contemporary distinct mutually exclusive and occupa
shows that their median score India. There are a number of studies on tion-specific varnas: brahmin (priests
caste differentials in consumption, income, and teachers), kshatriya (warriors and
for 2010 is zero, indicating that
education, occupation and developmentroyalty), vaishya (traders, merchants and
there is no diversity at all. Indian
indices (Deshpande 2011; Siddique 2011; moneylenders) and shudra1 (menial jobs).
corporate boards continue to Thorat and Newman 2007, 2010; MunshiThe operative category in India is the
remain "old boys clubs" based on and Rozenzweig 2006,2009). Meanwhile,jati which shares the basic characteris
caste affiliation rather than on there is little attention given to the influ tics of the varna but is more complex and
ence of caste on corporate boards and itshierarchical as there are more than
other considerations (like merit
network effects. The near consensus in 3,000 jatis in existence. Given the diffi
or experience). these studies is that the less privilegedculties associated with the classification
caste groups tend to be worse off thanof Hindu society based on the jati, it
others in terms of outcome indicators would be less controversial to classify
such as education level, employment, the population in India into the four
wages, consumption, etc, across India. broad varnas. In India, the term "lower
Studies have also shown that the wage caste" is used to refer to three broad
premium between non-scheduled castes/ groups which enjoy affirmative action -
tribes (scs/sts) and non-scs/sTs is around the scs, sts and Other Backward Classes
21% (Hnatkovska et al 2012). Apart from (obcs). The bottom of the social hierar
the discrimination in the hiring process, chy consists of a heterogeneous group of
the wage differentials between lower castes which were historically treated as
and forward castes, and intolerance "untouchable" - they were considered
and prejudice at work are matters of unclean and not permitted to use public
increasing concern. facilities.2 Similarly, there are also indig
Our study examines the caste-wise enous tribal groups, known collectively
composition of Indian corporate boards as the sts.
as these boards are the ultimate reposi The caste system and caste-based dis
tory of corporate power. The present crimination is officially outlawed and
study contributes to this literature by ex the government introduced "reserva
amining the caste-wise composition of tions" (the quotas imposed in govern
corporate boards in India in 2010 in ment jobs, educational institutions and
order to understand who controls corpo legislature) for the scs and sts shortly
rate India. This could provide evidence after Independence. Subsequently, the
D Ajit {dayanana@unbc.ca), Han Donker of its link with political power as many list of groups eligible for reservation was
(donker@unbc.ca) and Ravi Saxena (saxenar@ studies have shown the close and pro extended and other disadvantaged castes
unbc.ca) are associated with University of found influence of corporates in political categorised as obcs3 were added to the list
Northern British Columbia, Canada.
and economic decision-making (Gupta in 1990 based on the recommendations
Economic & Political weekly nrrn august 11, 2012 vol xlvii no 31 39
private sector to close the caste divideto lose out to other employers in com
the economy. The framework of Becker
(1971), Arrow (1972,1973), Akerlof (1976,
and promote inclusion and proposals topetitive industries that allow the easy
introduce sub-quotas (for the minorities)entry of new firms. 1980), and Phelps (1972) are insufficient
so as to equalise opportunities among Defending Becker's theory, Arrow to analyse caste-based discrimination.
the lower castes. (1972, 1973) defined discrimination The
in economic pursuit in the caste sys
Industrial and commercial activity terms of an employer's perception tem or is not based on individual choice.
The principle of individual choice is vio
reality. To him, employers discriminate
continues to be dominated by the vaishya
caste (Damodaran 2008). Ownership ofnot because of their "taste to discriminate"
lated in the caste system insofar as it ap
industry and trade in India has historibut because of uncertainty. Other expla points an individual to perform a task
cally been concentrated in the hands of nations
a for discrimination that do not selected not on the basis of training or
few caste groups and the top jobs weredepend on racial prejudice include imcapacity, but on the basis of the social
always kept within the "small world".perfect information as theorised by status of his/her parents. The caste system
Earlier research in India has shown that
statistical discrimination models (Phelps
also puts a low value on "physical" work,
substantial discrimination exists in the 1972). Phelps prefers to call his theory aas compared to "mental" work, with the
labour market with regard to recruit "statistical theory of discrimination".result that the dignity of physical labour
ment (Thorat and Newman 2007, 2010).Arrow and Phelps developed the theory is nearly absent in the work ethics of the
There is very little evidence on caste of discrimination on the basis of an caste system. In view of the above, a
more holistic framework needs to be
wise ownership of private enterprises. employer's lack of information about job
Available evidence shows that the sc/st
own only a small proportion of private MIRA SINHA BHATTACHARJEA AWARD
enterprises (especially in the urban areas)
and operate more household enterprises The Institute of Chinese Studies (ICS, Centre for the Study of Develop
(Thorat and Sadana 2009). Proposals Societies, CSDS) Delhi, has instituted an annual award in memory of M
for prescribing quotas in the private Sinha Bhattacharjea (1930-2009), eminent academician, noted schola
corporate sector have attracted a hostile India-China relations and also one of the founder members of the ICS.
reaction from industry and commerce.
This annual award was instituted to encourage original, insightful and well
1 Review of Literature researched writing on Chinese foreign policy by young scholars. It consists
of a cash prize of Rs. 20,000, a certificate from the Institute of Chinese
The framework most widely used to an
Studies and publication of the article in the Institute's journal, China Report.
alyse job market discrimination is Beck
Submissions can vary in length from 6000-7000 words and must be sent
er's (1957) seminal The Economics of Dis
to the Director, Institute of Chinese Studies (CSDS), 8/17 Sri Ram Road,
crimination. Becker's analysis focused
(Near Civil Lines Metro Station), Delhi 110054, by 15th November 2012 for
on the relationship between racial preju
consideration for the 2012 prize which will be announced in December
dice among whites and discrimination
against racial minorities in a competitive
2012. Scholars must be under 35 years of age (as of 31st October 2012)
model. In contrast to much of the con and have completed a Ph.D within the last five years (2007-2012). The
temporaneous literature, Becker formal jury will be drawn from the Advisory Board of China Report. Its decision
ised the definition of racial preferences, will be final and will be posted on the ICS website. Interested applicants
depicting them as an aversion to cross are directed to check the ICS website for further details.
racial interaction. Using a series of models,
40 august li, 2012 vol xlvii no 31 Rim Economic & Political weekly
and obc) for software jobs, but signi licly listed. The data obtained from Caste Numbers %to Total
1 Forward caste 8,387 92.6
ficant (lower) call back rates for call osiris were cleaned for duplicates (same
Of which
centre jobs. Siddique's (2011) study ofperson occupying more than one posi
(a) Brahmin 4,037 44.6
white collar jobs in Chennai, India alsotion in the board using a unique (b)identi
Vaishyas 4,167 46.0
corroborated the conclusions of Thorat fier provided by the database). Similarly
(c) Kshatriya 43 0.5
There are also some studies on wealth board were also removed as most of 2 Other Backward Classes 346 3.8
enjoy a wealth advantage over obc and normally refers to the caste affiliation.
Mean 0.12
scs/sts in both the rural and urban areBased on the surnames, we classified Median
the 0.00
as. The study also found a disturbing corporate board members into (a) Maximum
for 1.00
trend - that the relative median wealth ward caste (brahmins, kshatriyas andMinimum 0.00
Skewness 1.16
2002 compared to 1991. However, a re (c) scheduled caste and schedule tribe,
Kurtosis -0.28
cent study by Hnatkovska et al (2012) and (d) others (foreign directors). In cases
Economic & Political weekly B3Q august 11, 2012 vol xlvii no 31 41
exclusion of those from other ethnic o.oi to 0.25 and 24.7% greater than 0.25 companies listed in the Indian stock ex
groups. The diversity index typically to 0.50. Only one company had a Blau changes for 2010. The empirical results
caste index of 1. These findings pose
used in social science and policy analysis show that caste diversity is non-existent
is known as the Blau index, which meas an important question as to whether in the Indian corporate sector and nearly
ures the probability of two individuals Indian corporate boards should reflect 65% of the Indian corporate board mem
chosen at random from the population its broad clientele (nearly three-fourths bers are from one caste group - the for
of
of different races or ethnicity. Blau (1977) the Indian population is from a ward caste - indicating that it is a small
lower caste).
proposed the measure in a study devot and closed world. In the corporate world,
ed to sociological theory. The Blau index social networking plays an important
Table 3: Caste Diversity (Blau Index) of Indian
is constructed as Corporate Boards (2010) role. Still, Indian corporate boards be
Blau Index Frequency % to Total
long to the "old boys club" based on
0 = 1-1^ 0 697 69.7
caste affiliation rather than on other
0.1 to 0.25 56 5.6
where D is diversity and p} is the propor considerations (like merit or experience).
0.26 to 0.50 246 24.7
tion of the total population from group j. It is difficult to fathom the argument
More than 0.51 1 0.0
If the entire population (in our case, the that lack of merit is the cause for under
Total 1,000 100
corporate board) is from one single representation. Caste is an important
group (caste), D will equal o. In theWe also examined the caste diversity factor in networking. The small world of
extreme case of corporate board withinaterms of industrial classification (using corporate India has interaction only
diverse caste population, D will ap the sic code of each firm) and the results within their caste kinship. This raises
proach 1 in value. So a higher D means
are provided in Annexure 1 (p 43). The important questions about the possibili
more caste diversity. industries for which we found the lowest ty of interlocking of directors within the
(below 0.10) diversity are the basic met same caste among Indian companies. Is
3 Empirical Results als, iron and steel products, rubber and this small world of corporate director
plastic products, chemicals, natural gas ships reflected in the selection of audi
This section presents the empirical results
of the study. The average board size transmission
of and construction materials. tors as well? These are some of the im
The trade and services firms generally portant questions which are in the ambit
the top 1,000 companies in India was
have a low diversity compared to the of our future investigation.
found to be nine members; nearly 88%
of them were insiders and 12% were manufacturing sector. In the area of bank
independent directors. The distribution
ing, the caste Blau index is very low. NOTES
42 august li, 2012 vol xlvii no 31 ranm Economic & Political weekly
groups that are eligible for the benefit of P M (1997): Inequality and Heterogeneity
Blau, Social Insurance, Inequality and Growth",
affirmative action. (New York: The Free Press). NBER Working Paper 14850.
3 The estimates of OBC population range Borooah,
from V K (2005): "Caste, Inequality, and Nafziger,
Pov E W (1975): "Class, Caste and Community
25% to 52% of the total population, See Ramierty in India", Review of Development Econo of South Indian Industrialists: An Examination
ah (1992), Yadav (2002), Desai (2010J. Accord
mics, 9: 399-414 of the Horatio Alger Model", Journal of Deve
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Borooah, V K and S Iyer (2005): "Vidya, Veda, and
Sample Survey of the Central Statistical Or
Varna: The Influence of Religion and CastePhelps,
on E S (1972): "The Statistical Theory of Rac
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4 The Mandal Commission recommended that
Borooah, Vani K, Amaresh Dubey and SriyaSiddique,
Iyer Z (2011): "Evidence on Caste-based Dis
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Damodaran,
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