ITC expands sustainable packaging offerings to replace plastic How ITC Infotech is well positioned to be the tech partner of choice for Middle East clients. How ITC Infotech is well positioned to be the tech partner of choice for Middle East clients.
Over the years, ITC has evolved from a single product company to a multi-business corporation. Its diverse businesses include fast moving consumer goods, hotels, paperboards, paper & packaging and agri business.
The Company's investments in its different businesses are structured in the nature of in-house divisions, subsidiaries, joint ventures, associate companies and trade investments.
The task of governing a corporation of ITC's size and diversity was rendered more complex in post liberalisation India, which began experiencing the intense impact of globalisation. In order to address its own unique organisational context and prepare itself for the global Indian market, ITC, as early as in 1999, fashioned an unique corporate governance model that would enable it to 'focus' on its multiple businesses, while maximising shareholder value.
This governance policy has not only stood the test of time, but also supported ITC's rapid growth in the last two decades since its formulation. In the intervening years, ITC has not only widened its diversity with the launch of several new businesses in its chosen strategic arena, but has also responded to the growth challenge by creating new internal structures like shared services and business verticals, designing broad-band roles like Line CMC Members, Chief Operating Officers of Business / Vertical, and enabling operating decision making powers at empowered levels.
ITC defines Corporate Governance as a systemic process by which companies are directed and controlled to enhance their wealth generating capacity. Since large corporations employ vast quantum of societal resources, ITC believes that the governance process should ensure that these companies are managed in a manner that meets stakeholders aspirations and societal expectations.
ITC's Corporate Governance initiative is based on two core principles. These are :
Management must have the executive freedom to drive the enterprise forward without undue restraints; and
This freedom of management should be exercised within a framework of effective accountability.
ITC believes that any meaningful policy on Corporate Governance must provide empowerment to the executive management of the Company, and simultaneously create a mechanism of checks and balances which ensures that the decision making powers vested in the executive management is not only not misused, but is used with care and responsibility to meet stakeholder aspirations and societal expectations.
From the above definition and core principles of Corporate Governance emerge the cornerstones of ITC's governance philosophy, namely trusteeship, transparency, empowerment and accountability, control and ethical corporate citizenship. ITC believes that the practice of each of these leads to the creation of the right corporate culture in which the company is managed in a manner that fulfils the purpose of Corporate Governance.
ITC believes that large corporations like itself have both a social and economic purpose. They represent a coalition of interests, namely those of the shareholders, other providers of capital, business associates and employees. This belief therefore casts a responsibility of trusteeship on the Company's Board of Directors. They are to act as trustees to protect and enhance shareholder value, as well as to ensure that the Company fulfils its obligations and responsibilities to its other stakeholders. Inherent in the concept of trusteeship is the responsibility to ensure equity, namely, that the rights of all shareholders, large or small, are protected.
ITC believes that transparency means explaining Company's policies and actions to those to whom it has responsibilities. Therefore transparency must lead to maximum appropriate disclosures without compromising the Company's strategic interests. Internally, transparency means openness in Company's relationship with its employees, as well as the conduct of its business in a manner that will bear scrutiny. ITC believes transparency enhances accountability.
Empowerment is an essential concomitant of ITC's first core principle of governance that management must have the freedom to drive the enterprise forward. ITC believes that empowerment is a process of actualising the potential of its employees. Empowerment unleashes creativity and innovation throughout the organisation by truly vesting decision-making powers at the most appropriate levels in the organisational hierarchy.
ITC believes that the Board of Directors are accountable to the shareholders, and the management is accountable to the Board of Directors. The Company believes that empowerment, combined with accountability, provides an impetus to performance and improves effectiveness, thereby enhancing shareholder value.
ITC believes that control is a necessary concomitant of its second core principle of governance that the freedom of management should be exercised within a framework of appropriate checks and balances. Control should prevent misuse of power, facilitate timely management response to change, and ensure that business risks are pre-emptively and effectively managed.
ITC believes that corporations like itself have a responsibility to set exemplary standards of ethical behaviour, both internally within the organisation, as well as in their external relationships. The Company believes that unethical behaviour corrupts organisational culture and undermines stakeholder value.
Flowing from the philosophy and core principles of governance, Corporate Governance in ITC shall take place at three interlinked levels, namely -
Strategic supervision by the Board of Directors.
Strategic management by the Corporate Management Committee.
Executive management by the Chief Executives / Chief Operating Officers of Divisions, SBUs, Business Verticals and Shared Services, assisted by their respective Management / Executive Committees.
It is ITC's belief that the right balance between freedom of management and accountability to shareholders can be achieved by segregating strategic supervision from strategic and executive management. The Board of Directors (Board) as trustees of the shareholders will exercise strategic supervision through strategic direction and control, and seek accountability for effective strategic management from the Corporate Management Committee (CMC). The CMC will have the freedom, within Board approved direction and framework, to focus its attention and energies on the strategic management of the Company. The Chief Executives / Chief Operating Officers of Divisions, SBUs, Business Verticals and Shared Services, assisted by their respective Management / Executive Committees will have the freedom to focus on the executive management of their respective business/ shared services.
Strategic supervision (on behalf of the shareholders), being free from involvement in the task of strategic management of the Company, can be conducted by the Board with objectivity, thereby sharpening accountability of management.
Strategic management of the Company, uncluttered by the day-to-day tasks of executive management, remains focused and energised; and
Executive management of businesses assisted by respective Management / Executive Committee, free from collective strategic responsibilities for ITC as a whole, remains focused on enhancing the quality, efficiency and effectiveness of the business to achieve best in class performance.
The core roles of the various entities at the three levels of Corporate Governance will be as follows:
The primary role of the Board of Directors is that of trusteeship to protect and enhance shareholder value through strategic supervision of ITC, its wholly owned subsidiaries and their wholly owned subsidiaries. As trustees they will ensure that the Company has clear goals relating to shareholder value and its growth. They should set strategic goals and seek accountability for their fulfillment. They will provide direction, and exercise appropriate control to ensure that the Company is managed in a manner that fulfills stakeholder aspirations and societal expectations. The Board must periodically review its own functioning to ensure that it is fulfilling its role. The Board will also evaluate the performance of the individual Directors and Board Committees.
The ITC Board will be a balanced Board, consisting of Executive and Non-Executive Directors including Independent Directors. The Board will have a balance of skills, experience and diversity of perspectives appropriate to the Company. The Non-Executive Directors shall be drawn from amongst eminent professionals, with experience in business / finance / law / public administration & enterprises. Directors shall be appointed / re-appointed for a period of three to five years or a shorter duration, in accordance with the retirement guidelines as may be determined by the Board from time to time or by any applicable statutes, rules, regulations or guidelines, and in the case of Executive Directors up to the date of their retirement, whichever is earlier. The Board shall determine from time to time the retirement age for both Executive and Non-Executive Directors. The Board shall specify the maximum number of company Directorships which can be held by members of the ITC Board.
Non-Executive Directors, including Independent Directors, are expected to play a critical role in imparting balance to the Board processes by bringing an independent judgement to bear on issues of strategy, performance, resources, standards of Company conduct etc.
The Board shall meet at least five times a year. The tentative annual calendar of meetings shall be agreed upon at the beginning of each year. As laid down in the Articles of Association of the Company, the quorum for meetings shall be one third of members and decisions shall be taken by simple majority, unless statutorily required otherwise. Meetings shall be governed by a structured agenda. All major issues included in the agenda shall be backed by comprehensive background information to enable the Board to take informed decisions. Agenda papers, as far as practicable, shall be circulated at least seven days prior to the meeting. Normally items for the Board Agenda, except those emanating from Board Committees, shall have been examined by the CMC. Draft Minutes of Board Meeting shall be circulated within 15 days of the meeting and noted / confirmed at the next meeting. Board decisions shall record the related logic as far as practicable.
The Board shall have the following Committees whose terms of reference shall be determined by the Board from time to time:
Audit Committee: To provide reassurance to the Board on the adequacy of internal control systems and financial disclosures. The Company Secretary shall be the Secretary to the Audit Committee. The Head of Internal Audit shall be Co-ordinator of the Committee and shall be Permanent Invitee to the meetings of the Committee.
Nomination & Compensation Committee: To identify persons qualified to become Directors and to formulate criteria for evaluation of performance of the individual Directors and the Board as a whole. The Committee's role inter alia includes recommending to the Board the appointment, remuneration and removal of the Directors and senior management. The Committee also has the responsibility for administering the Employee Stock Option Schemes of the Company.
Securityholders Relationship Committee: To oversee redressal of shareholder and investor grievances and, inter alia, approve transmission of shares, sub-division / consolidation / renewal / issue of duplicate share certificates etc. and allotment of shares upon exercise of Options under the Company's Employee Stock Option Schemes.
CSR and Sustainability Committee: To review, monitor and provide strategic direction to the Company's CSR and sustainability practices towards fulfilling its triple bottom line objectives. The Committee shall guide the Company in integrating its social and environmental objectives with its business strategies and assist in crafting unique models to support creation of sustainable livelihoods. The Committee shall also formulate & monitor the CSR Policy and recommend to the Board the annual CSR Plan of the Company.
Independent Directors Committee: The role of the Committee would be such as may be prescribed under law.
Terms of Reference of the Board Committees shall include :
Objectives, Roles & Responsibilities
Authority / Powers
Membership & Quorum
Chairmanship
Tenure
Frequency of Meetings
The composition of the Board Committees will be as follows or as may be prescribed by law from time to time :-
Committee
Members
Chairman
Audit Committee
Three or more Directors of the Company, as may be decided by the Board with at least two-third of the members being Independent Directors. The Executive Director representing the Finance function, the Chief Financial Officer, the Head of Internal Audit and the representative of the Statutory Auditors shall be Invitees to the meetings of the Committee. The Company Secretary shall act as the Secretary.
One of the Independent Directors, to be appointed by the Board.
Nomination & Compensation Committee
Three or more Non-Executive Directors of the Company, as may be decided by the Board with at least one-half of the members being Independent Directors. The Chairman of the Company shall be a Member. The Company Secretary shall act as the Secretary.
One of the Independent Directors, to be appointed by the Board.
Securityholders Relationship Committee
Three or more Directors of the Company, as may be decided by the Board with at least one member being a Non-Executive Director. The Company Secretary shall act as the Secretary.
One of the Non-Executive Directors, to be appointed by the Board.
CSR and Sustainability Committee
Three or more Directors of the Company, as may be decided by the Board with at least one member being an Independent Director. The Company Secretary shall act as the Secretary.
Chairman of the Board.
Independent Directors Committee
All the Independent Directors of the Company.
One of the Independent Directors.
Normally meetings of the Board Committees shall be convened by their respective Chairmen. However, any member of the Committee may, with the consent of the concerned Chairman, convene a meeting of the Committee.
Signed minutes of Board Committee meetings shall be tabled for the Board's information. However, issues requiring Board's attention / approval should be tabled in the form of note(s) to the Board from the Committee Chairman.
The Risk Management Committee constituted by the Board comprises all the Executive Directors and some senior managers. The role of the Committee includes approval of the strategic risk management framework of the Company, review of the risk mitigation strategies and results of risk identification, prioritisation and mitigation plans for all businesses / functions, as also the measures taken for cyber security. The Chief Risk Officer of the Company shall act as the Secretary to the Committee.
The primary role of the CMC is strategic management of the Company's businesses within Board approved direction / framework and realisation of Company goals. The CMC will assess the performance of the businesses and allocate resources, and will operate under the superintendence and control of the Board. The composition of the CMC will be determined by the Board (based on the recommendation of the Nomination & Compensation Committee), and will consist of all the Executive Directors and some key senior members of management. Membership of the CMC shall be reviewed by the Nomination & Compensation Committee as and when necessary. Meetings of the CMC shall be convened and chaired by the Chairman & MD. The Company Secretary or such other person as may be decided by the Nomination & Compensation Committee / Board shall be the Secretary to the CMC.
The Chairman is also the MD of the Company. He is the Chairman of the Board and the CMC. His primary role will be to provide leadership to the Board and the CMC for realising Company goals in accordance with the charter approved by the Board. He will be responsible, inter alia, for the working of the Board and the CMC, for ensuring that all relevant issues are on the agenda and for ensuring that all Directors and CMC members are enabled and encouraged to play a full part in the activities of the Board and the CMC, respectively. He will keep the Board informed on all matters of importance. He will also be responsible for the balance of membership of the Board, subject to Board and Shareholder approvals. He will preside over General Meetings of Shareholders.
In respect of the Businesses and Corporate Functions which directly report to the MD, he will have the responsibility of Line Director.
As a member of the CMC, contribute to the strategic management of the Company's businesses within Board approved direction / framework.
As Director accountable to the Board for a business or shared services (Line Director), assume overall responsibility for its strategic management, including governance processes and top management effectiveness.
In the context of the multi-business character of the Company, an Executive Director is in the nature of a Managing Director for those businesses and functions reporting to him.
As Director accountable to the Board for a wholly owned subsidiary, or its wholly owned subsidiary (Line Director), at all times exercise independent judgement and application of mind in the interest of the company and its shareholder.
As Director accountable to the Board for a corporate function (Line Director), assume overall strategic responsibility for its performance including governance processes and senior management effectiveness.
As a member of the CMC, contribute to the strategic management of the Company's businesses within Board approved direction / framework.
As CMC Member accountable for a business or shared services (Line CMC Member), assume responsibility for its strategic management, including governance processes and top management effectiveness.
As CMC Member accountable for a wholly owned subsidiary, or its wholly owned subsidiary (Line CMC Member), at all times exercise independent judgement and application of mind in the interest of the company and its shareholder.
As CMC Member accountable for a corporate function (Line CMC Member), assume overall strategic responsibility for its performance including governance processes and senior management effectiveness.
Executive management of the Divisional business/ shared services to realise tactical and strategic objectives in accordance with CMC / Board approved plan. Composition of the DMC shall be determined by the Line Director with the approval of the CMC. The Divisional Chief Executive shall convene and chair the DMC meetings.
The CMC, in order to drive sharper focus, greater agility and responsiveness, may form Business Verticals within the Division / Business / Shared Services from time to time. Each of these Verticals will have its own EC led by the COO - Business Vertical with responsibility for delivering comprehensive business results under the overall direction and supervision of the Divisional Chief Executive supported by the DMC. Each such Vertical will be represented on the DMC.
Composition of EC for Business Vertical shall be determined by the Line Director with the approval of the CMC.
The DCE will have executive responsibility of the business and shall provide leadership to the Divisional Management Committee in its task of executive management of the Divisional business and of the Verticals within the Division.
COO-BV shall be responsible for providing leadership to the Vertical and realising the tactical and strategic objectives of their business area.
