What women want: Reservation or Egalitarianism?

A call for reserving one-third of the seats for women in Parliament is not unique to India alone. Similar demands have been made and laws passed to that effect in Europe. Viviane Reding, the EU’s Justice Commissioner hopes to have 30% women on European Boards by 2015 and 40% by 2020. French Law requires 40% seats to be reserved on the Board by 2017 for women.  Norway has a quota since 2006. Similar quotas are expected to come across all EU countries soon as European Parliament has passed a directive to that effect.  With this sudden wave of quotas in Boards and Parliament, an economic and socio-legal analysis of their effect becomes important.

It is rather true that women are grossly underrepresented in legislatures and boards of companies. This under-representation on grounds of equity and a call for a more egalitarian society calls for reservation. From an economic perspective, the question arises if it is efficient. More importantly, from an egalitarian lens too (the goal that the legislation seeks to promote), is it good for women themselves in the long run.

 The emerging power of women in the workforce is a recent phenomenon. Earlier more confined to the safe precincts of home or traditionally occupied in women-friendly jobs such as a teachers, nurses and doctors; women found it convenient to synchronize their work-life balance in these traditional women-oriented set-ups & professions. Even today, it is not uncommon in a typical household(an Indiand home for sure!), to expect the women to perform all household chores and work at the same time. So to create the work-family life balance (though one often wonders why it is more emphatically expected of  women alone), women resort to the safer havens of un-ambitious, steady professions.

With changing attitudes, more liberal families and parental support; the outlook has begun to drift. And women are taking increasingly challenging and time-demanding professions. A male-dominated structure of the corporate set-up & legal profession makes it difficult and extra long for women to attain the same stature and pay levels. It is often a common complaint and is a proven fact that women are under-paid, under-promoted and are struck somewhere in the middle of the ladder. Reservations are an oft-suggested panacea for the problem. But the question emerges if it is the best available remedy? There are two important problems that arise with this. Women, who will make their way to the top; even with a little help of reservation or even on their own merits completely, will be seen as incompetent figure-heads who simply got an important promotion or board stature, by virtue of being women.

An important aspect of leadership is the respect and acceptance that one has because of their merits, competence or charisma. With reservation, this opportunity to gain acceptance is lost at once for women. Secondly, from an economic perspective, it might be inefficient. Often just to fill up the posts, in-competent people (women in the present instance); might be promoted to important positions. This affects the efficiency, the productivity and bottom line of the company. At the Board level, important strategic decisions need to be taken. A lack of exposure, an inexperience in the corporate grinding and the missing struggle, which competent people have to go through to earn their positions will get reflected in such reserved representation. This will affect the stakeholder and shareholder fortunes. Moreover, some competent people, who would have otherwise occupied the positions will miss it just because they are from the wrong gender, male gender in case of a reservation loving society. Exactly the same way, as competent women almost always lost it, just because they were women;  apprehensively and undesirably now it will indeed be a case of reverse-discrimination.

No matter how skewed is the representation, a catapulation to the top should be based on meritocracy. Reservations will tilt the shift towards mediocracy. Economically speaking, it is inefficient for the company, the parliament, as the case may be and certainly for the society as a whole.

The problem however is that in the present backdrop, without any legal or social mechanism, the meritocracy based competition will be meaningless. The question then arises is if reservation is not a solution, then what is. A good solution perhaps is to create a boardroom conducive to women. Simply put, this means a gender-neutral corporate world. Look at the corporate world. The language derived from the military is sexist and alpha-male. How we talk about competition, predatory pricing and shareholder wealth clearly reflects; that this definitely is not a women’s world. A women’s world would focus more on the stakeholders’, be more feminine with an approach to sustainability rather than the bottom-line. And that is indeed desirable in the present context with increased focus on sustainability as a means to attain the goal of triple bottom line: the people, the planet and the profits.

Secondly, on a more social front; there needs to be a change in the mental set-up, the outlook and the perceptions.  On a personal front, a women undoubtedly(and in a sense pleasantly) has more responsibilities towards the family. She is a mother, a wife, a daughter. All the roles are demanding. Motherhood perhaps is the most taxing in terms of time that a women has to talk off from her career life to give birth to her baby and through all his/ her childhood years and thereafter. Except for certain periods, when a women really needs to take a leave to bring a new life to the world; most women desire to work with flexible working hours with increased commitment to work once the child starts growing up. On a professional front, such special needs of women deserve particular attention; considering that a women delivers not just a child; but by bringing a well-groomed individual; she contributes a value ‘human resource’ to the society. Moreover, it is a well proven fact that well-educated, working and independent women bring up their children well. This then is a women’s special contribution that deserves special social recognition in the form of mother-friendly laws to help her create a work-life balance. For single mothers, this can be even more demanding. And for mothers bringing up a child with her partner; she needs greater cooperation from him. The point is some women might want to get back to work immediately or after some time after giving birth to a child; depending on individual case and personal preferences. In such a case, the laws should enable either of the parents (and not just the mother), to take time off from work without any prejudice to their future career prospects. Socially, there needs to be an acceptance of this ‘feminity’(as opposed to feminism) and ‘family life’, a celebration of the same instead of creating hiccups for a mother to get back to work.  

An imprisoned 'talented' women duty-bound in the traditional stereotypes will only lead to an imbalanced society; society with women making it to top through reservation or a society without sufficient opportunity to help women create sufficient work-life harmony are all dangerous trends leading to an imbalanced society. 

‘Antitrust’ and ‘IPR’: A tumultuous tie

Patents, according to Shapiro confer partial property rights. These rights are an important incentive for a company to invest in Research and Development as it gives the desired assurance to reap benefits from these investments once a socially beneficial product or service is produced. Intellectual Property(hereinafter referred to as ‘IP’),  also has a prominent public good characteristic as the information so generated is of great social relevance. However, these partial property rights can be a source of expected monopoly power ex-ante. Informational asymmetries thus, exist at the time when IP rights are awarded to the moment when Competition Law(in some jurisdictions referred to as the ‘Antitrust’ Law; the term will there be used interchangeably in our discussion) steps in. Thus, there are these tender opportune moments when IP rights become a source of monopoly power and thereby create a dynamic interaction between two important domains of Law: the IP and Competition Law.

An interesting case throwing light on this dynamic interaction is the ‘Inter-operability of servers’ as emerged in the case of Microsoft. The case is interesting for two reasons. First, the kind of protection offered that is the software in case of Microsoft has been protected through both patents and copyrights. Secondly, the almost simultaneous treatment of the issue of abuse of dominant position across two important jurisdictions of the US and EU.

Interoperability of servers is one of the attractive and challenging domains where law and economics dynamically interact. Microsoft was tried across both sides of the Atlantic: the USA and the EU. The diverging approach has been succinctly summed by John Vickers when he states, ‘When contemplating Competition Law and Policy, many economists I suspect, are somewhere in the Atlantic Ocean’. Notwithstanding, the similarity in the legal principles across two jurisdictions, Microsoft was confronted with two different treatments on either side. Whereas the US approach is often criticized to be too lenient, the EU attitude was called to be too strict.

In the US, the Federal Trade Commission started its inquiry in the early 1990’s trying to investigate if Microsoft’s pricing policies thwarted competition. The Justice Department meanwhile in the year 1997 charged Microsoft with trying to leverage its dominant position in the operating system market, through Windows,  by bundling its Windows OS with the Internet Explorer. Through this bundling, it was alleged that Microsoft threatened to wipe its competitor and the then lead player in the web browser market, the Netscape Navigator. 

Meanwhile, in the Europe, in its September 15, 1998 letter, Sun Microsystems requested Microsoft to ‘provide complete information’ that would aid Sun make its operating system compatible with Window’s operating system. Microsoft’s refusal to cooperate prompted Sun Microsystems to complain to the European Commission (hereinafter referred to as Commission). The Commission carried its investigation against Microsoft as regards two issues: First, if the refusal to supply information to the Sun Microsystems was an abuse of dominant position by Microsoft. And secondly, whether the tying of the products, its windows operating system with the Windows media player was again an abuse. The common thread in both the cases was the Commission’s finding that ‘Windows’ was the dominant PC(‘client’) Operating System(hereinafter referred to as ‘OS’)  with a market share of 90% and thereby, was a defacto standard for client OS.

In the US, the dispute ended in a settlement with namesake punishment for the Microsoft; whereas in the Europe, the Commission concluded an abuse of dominant position by Microsoft. Microsoft went on appeal in the Court of First Instance which was annulled by the Court and the company finally decided not to pursue the case further. In the EU, heavy fines were imposed on Microsoft. The software giant was also required to have a version of Windows without the Windows Media Player. According to the decision, Microsoft could not charge more for the unbundled version then for the bundled version; however, Microsoft is not required to charge less for the unbundled version then for the bundled version. To this, the Microsoft complied by offering a ‘Windows N’ which is without the media player. As for the second important issue of ‘interoperability’, Commission required Microsoft to license the protocol at a reasonable and non-discriminatory royalty. Initially, Microsoft refused to comply with the last demand; however, when the Court of First Instance rejected its appeal, Microsoft agreed to license the protocol at three different terms.

Commission’s insistence to make Microsoft license its protocol reflects the partial nature of these property rights. If exclusivity is the incentive to innovate; then the exclusivity in certain cases can be taken away as a rationale to uphold an innovative environment. As the Commission in its decision argued that disclosure of information would increase the rivals incentive to innovate; while at the same time not reducing the incentives for Microsoft. In other words, there is a need for an economics based approach in the enforcement of Antitrust Law. Article 82 was eventually replaced by the Article 102 of the Treaty for European Union. 

Poverty of International Law in ‘Unsustainable’ Supply Chains

With increased incidence of human & environmental rights violation, by outsourced activities either directly or through their suppliers, the value chain management of manufacturing companies particularly transnational enterprises has come under a scanner. Global reach of multinational enterprises creates global impacts and visibility of their activities to a larger audience. Increased visibility led to greater protests worldwide in case of violations. To shield from the continued criticism, companies increasingly adopt the United Nations’ Global Compact principles. Over 5000 companies across 130 companies are signatory to the principles. The principles encompass the important domains of Human Rights, Labour, Environment and anti-corruption. Inspired from the Universal Declaration of Human Rights, ILO’s Declaration of Fundamental Principles and Rights at Work, Rio Declaration on Environment and Development and the United Nations Convention against Corruption ; these principles are voluntary in nature and very importantly cover the important ills that plague the supply chain relationships.


Notwithstanding the wide adoption of these principles, unabated violations continue. Electronics industry is highly criticized for its laxity in supply chain audits and thereby, obliquely permitting these violations. From Microsoft to Apple, Dell to Hewlett Packard the problem subsists. Increased public scrutiny of Apple due to its media trial and its subsequent tightening of supply chain regulations is anticipated to bring a positive ripple affect across the industry. These are impacts driven by media campaigns and consumer awareness. There is also a need for a more stringent legal backdrop to ensure innovation-loving consumers do not unwittingly find themselves hold another Nike shoe or Apple i-pad with a pang of remorse.

The United Nations Human Rights Council in 2008 adopted the United Nations Protect, Respect, Remedy Framework wherein it categorically laid down that the business everywhere has the responsibility of protecting human rights. But such an occasional communication from the global organizations, without any corresponding acceptance of the same in legal jurisdiction is meaningless. The guiding light notwithstanding its toothlessness, is laudatory, considering the beacon of light it provides to companies that aspire for sustainability. The responsibility to respect is believed to a baseline activity. Companies should therefore, take responsibility for activities that visibly have a direct impact such as the production process; product or services that the company provides; labour and employment practices; provision of security for personnel and assets and company’s lobbying and other political activities. To ensure this the company must conduct a due diligence of its activities. The report further stipulates a Human Rights management framework which shall consist of four elements: First, a statement of policy. This statement can be integrated into the company charter or it can be a stand-alone policy. Second, it should have a framework for assessing the impact of its activities on human rights. Third, the human rights policies should be integrated with the companies objectives and integrated into the companies policies and Finally, there should be a tracking system to observe if policies have been implemented successfully and reporting of the same to ensure accountability in operations. The 2008 framework with these four steps, provides a broad outline skeleton for a human rights management framework.

Like the United Nations Global Compact laws, other significant international standards for corporate responsibility on human rights are the OECD Guidelines for MNEs(2000), the ILO Tripartite Declaration of Principles concerning MNE & Social Policy(2000) and the IFC Performance Standards on Social & Environmental Sustainability(2006). However, all of these, like the Global Compact itself are good and provide a framework for corporate responsibility but none of them is legally binding.

From a somewhat cynical perspective, councils meet and announce a guiding principle; but without a strict enforcement mechanism there is nothing forcing the company from violating or ignoring a violation of the same. In other words, such resolutions are at best toothless tigers. It may be interesting to note that the Universal Declaration of Human Rights were codified into International Law through two 1966 treaties that is the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights and are collectively referred to as the Bill of Rights. With more Corporate flutter globally, it may likewise be relevant to consider codification of a global accepted level of responsibility for Multinationals such as the UN Global Compact Principles, into International Law. The point is even though these principles derive form International Law, they are themselves not International Law and the time such as present is an important moment to give them the same level of explicit recognition.

India's Emerging Diamond n Automobile Industry

Volvo-Eicher Vehicles'(VEV) decision to invest Rs 288 crore at its present facility in Pithampur, Madhya Pardesh augurs as more then an FDI investment. The investment would position India as the global manufacturing hub for Volvo's new medium-duty engine platform. The plant would be integrated with Swedish automaker's global supply chain and would be the country's largest commercial vehicle engine manufacturer and is expected to meet the global requirements for European and Asian markets(except Japan).

India would be second country after Japan to have such a manufacturing hub. This could well be the beginning of India being looked upon as a 'global manufacturing hub'. Does that mean that the relational comparative advantage in terms of competitive costs is shifting to India from her neighbouring China, fondly referred to as the world's factory.

According to the model, for a country to sustain competitive advantage in a particular industry, it must develop a dynamic advantage that is through is through broadening and extending the basis of its competitive advantage by innovation and upgrading. This dynamic set up is more influential then the initial resources that a Nation State is naturally endowed with, in determining its Sustainable Competitive Advantage.

The four factors in the Porter's Diamond model contemplating Nation's sources of Competitive advantage are: 1. Factor Conditions 2. Related and Supporting Industries 3. Demand Conditions and 4. Strategy, structure and rivalry.

In the light of Porter's Diamond model, an analysis of the Volvo-Eicher's investment decision would be insightful to know if India is inching a step closer to developing as the hub for global manufacturing in the Automobiles industry.

1. Factor Conditions: Factor conditions refers to the presence of factors that are important for the growth of a particular industry. The y could be 1. Home grown resources or 2. Highly specialized resources. It may be the presence or the lack of factor conditions that can contribute to the model. Japanese specialization in zero defect manufacturing and miniaturization is attributed to her lack of sufficient natural resources.
2. Related and Supporting Industries: A value chain involves many steps in the stage of production. A highly complicated product like automobile would requires thousands of parts as raw materials. The presence of relating and supporting industries provides incentive for growth of related industries. The reasons are not far to seek. Logistical and time efficiencies, increased co-ordination amongst related industries spur the growth of “cluster” industries. Clusters contribution to growth of sustainable competitive advantage for nations has been an important subject of study for Policy makers and Strategists. The Silicon Valley in USA or India's Silicon Valley 'Bangalore' and Silicon Glen in UK are great case studies of techno clusters of the IT industry. There is already an existing set up Pithampur and the investment is to increase production from the plant and integrate into the global supply chain giving it Economies of scale.
3. Demand Conditions: Supply is to meet the demand. That is the simple law of Economics and no rocket science to fathom. India is the second largest growing market for automobiles. This as explicitly articulated is one of the important reasons for VEV's investment.
4. Strategy, structure and rivalry: Competition is the best way to make an industry Competitive!! Rewind the clock of time to twenty-five years and Maruti Suzuki the only manufacturer of cars in India with efficient technology. It fed the nation endlessly with its Maruti 800 cc cars. There was time when cars was synonymous with Maruti 800 in India. Shift the focus to Japan. Intense domestic competition in the Japanese automobile industry due to the presence of 9 national major competitors Honda, Toyota, Suzuki, Isuzu, Nissan, Mazda, Mitsubishi, Subaru and Dastan, The competition in the Japanese markets was so strong that it acted as an impetus for world class innovation and efficiency and the Japanese cars became synonymous with the 'latest world class technology'.
   Likewise, India with an ever increasing demand, developing industry and increased FDI investment that is poised to bring not just financial investment but also technological breakthroughs as in the present VEV case, India could well be on her way to develop a sustainable advantage in the industry. The Government, as has been the Chinese case, can play an important catalyst role to encourage companies to higher levels of competitive performance. This can be through monetary and fiscal policy, incentives for FDI, tax breakthroughs, focus on creation of clusters, SEZs and strong anti-trust laws to encourage competition.