rep corp gov

7/29/2019 Rep Corp Gov

1/13

REPORT ON CORPORATE GOVERNANCE

The Directors present the Companys Report on those of the shareholders, other providers of capital,

Corporate Governance. business associates and employees, have both an

economic and a social purpose, therebycastingITC Limited has been one of the frontrunners in the responsibility on the Board of Directors

toIndia to have put in place a formalised system of

protect and enhance shareholder value, as wellCorporate Governance.

as fulfil obligations to other stakeholders.Inherentin the concept of trusteeship is theresponsibility

THE COMPANYS

GOVERNANCEto ensure equity, namely, that the rights ofall

PHILOSOPH

Yshareholders, large or small, are

protected.ITC defines Corporate Governance as a systemicTransparenc

y

means explaining theCompanys

process by which companies are directed andpolicies and actions to those to whom ithas

controlled to enhance their wealth-generating

responsibilities. Externally, this meansmaximum

capacity. Since large corporations employ avast

appropriate disclosures withoutjeopardising

quantum of societal resources, ITC believes thatthe Companys strategic interests and

internally,the governance process should ensure that these

this means openness in the Companysresources are utilised in a manner that meetsrelationship with its employees and inthe

stakeholders aspirations and societalexpectations.

conduct of its business. ITC believes transparencyThis belief is reflected in the Companysdeep

enhances

accountability.commitment to contribute to the triple

bottomline, namely the development, nurture and Empowerment

is a process of unleashingcreativityregeneration of the nations economic, social

andand innovation throughout the organisation

byenvironmental

capital.truly vesting decision-making powers at the

mostappropriate levels and as close to the scene ofITC's Corporate Governance structure, systems

action as feasible, thereby helping actualisethe

and processes are based on two core

principles:potential of its employees. Empowerment isan(i) Management must have the executive

freedomessential concomitant of ITC's first core

principleto drive the enterprise forward without undue of governance that management must have the

freedom to drive the enterprise forward. ITCrestraints, andbelieves that empowerment combinedwith(ii) This freedom of management should

beaccountability provides an impetus to

performanceexercised within a framework ofeffective

and improves effectiveness, therebyenhancing

accountability.

shareholder value.

ITC believes that any meaningful policyon

Control ensures that freedom of management isCorporate Governance must empower the executive

exercised within a framework of checks and

balancesmanagement of the Company. At the same time,

and is designed to prevent misuse of power,Governance must create a mechanism of checks

facilitate timely management of change andensure

and balances to ensure that the decision-making

effective management of risks. ITC believes thatpowers vested in the executive managementare

control is a necessary concomitant of itssecond

used with care and responsibility to

meetcore principle of governance that the freedom of

stakeholders aspirations and societalexpectations.

management should be exercised within

aframework of appropriate checks and balances.From this definition and core principles of

CorporateGovernance emerge the cornerstones of ITC'sEthical Corporate Citizenship means

settinggovernance philosophy, namely

trusteeship,exemplary standards of ethical behaviour,

bothtransparency, empowerment and accountability,

internally within the organisation, as well as

incontrol and ethical corporate citizenship.

ITCexternal relationships. ITC believes thatunethical

believes that the practice of each of these createsbehaviour corrupts organisational cultureand

the right corporate culture that fulfils the

trueundermines stakeholder value.Governance

purpose of Corporate Governance.processes in ITC continuously reinforce and

Trusteeshi

p

recognises that large

corporations,

help realise the Companys belief in

ethicalwhich represent a coalition of interests,

namely

corporate

citizenship.

8

I0400_ITC-AR-07_Page-08


2/13

REPORT ON CORPORATE

GOVERNANCE

THE GOVERNANCE

STRUCTURE

The Board sets strategic goals and seeks

accountability for their fulfilment. The Board

also

The practice of Corporate Governance in ITC is

provides direction and exercises appropriatecontrolat three interlinkedlevels:

to ensure that the Company is managed in ai. Strategic supervision - by the Board ofDirectors

manner that fulfils stakeholders aspirationsandsocietal expectations. The Board, as part and parcelii. Strategic management - by the

Corporate of its functioning, also periodically reviews itsrole.

ManagementCommittee Corporate Management Committee (CMC): Theiii. Executive management - by the Divisional

/ primary role of the CMC is strategicmanagement

Strategic Business Unit (SBU) ChiefExecutive of the Company's businesses within Board approvedassisted by the respective Divisional /SBU direction / framework. The CMC operates underManagementCommittee. the strategic supervision and control of the

Board.The three-tier governance structure ensures that:

Chairman

:

The Chairman of ITC is the Chief(a) Strategic supervision (on behalf ofthe Executive of the Company. He is the Chairmanshareholders), being free from involvement

in of the Board and the CMC. His primary role isthe task of strategic management of the to provide leadership to the Board and the CMCCompany, can be conducted by the Boardfor realising Company goals in accordance

withwith objectivity, thereby

sharpening the charter approved by the Board. He isaccountability of management; responsible, inter alia, for the working of the

Board(b) Strategic management of the Company,

and the CMC, for ensuring that all relevantissues

uncluttered by the day-to-day tasks of executiveare on the agenda and for ensuring that all

Directorsmanagement, remains focused andenergised;

and CMC members are enabled and encouragedand

to play a full part in the activities of the

Board(c) Executive management of a Division orBusiness,

and the CMC. He keeps the Board informed onfree from collective strategicresponsibilities

all matters of importance. He is alsoresponsiblefor ITC as a whole, focuses on enhancing the for the balance of membership of the Board,

quality, efficiency and effectiveness of

the

subject to Board and Shareholder approvals. He

business. presides over General Meetings ofShareholders.The core roles of the key entities flow from this Divisional Management Committee (DMC) / SBU

structure. The core roles, in turn, determine the Management Committee (SBU MC): The primarycore responsibilities of each entity. In order

torole of the DMC / SBU MC is executive

discharge such responsibilities, each entity

ismanagement of the Divisional / SBU businesstoempowered formally with requisite

powers.realise tactical and strategic objectives in

accordancewith Board approved plan.The structure, processes and practices of governance

enable focus on the Corporate purpose while ExecutiveDirector:

The Executive Directors, assimultaneously facilitating effectivemanagement

members of the CMC, contribute to the strategicof the wider portfolio of

businesses.management of the Company's businesseswithinBoard approved direction / framework. AsDirectors

The Governance Document that sets out theaccountable to the Board for a business / corporatestructure, policies and practices of governance

of function, they assume overall responsibility forits

the various entities within the organisationis strategic management, including its

governanceavailable on the Companys corporatewebsite processes and top management effectiveness. Aswww.itcportal.com for generalinformation. Directors accountable to the Board for a

whollyROLES OF VARIOUS

ENTITIESowned subsidiary or its wholly owned

subsidiary,they act as the custodians of ITC's interests andBoard of Directors (Board): The primary role ofare responsible for their governance inaccordance

the Board is that of trusteeship to protect andwith the charter approved by the Board.enhance shareholder value through

strategicsupervision of ITC, its wholly ownedsubsidiaries

Non-Executive

Director:

Non-ExecutiveDirectors,and their wholly owned subsidiaries. As

trustees,including Independent Directors, play acriticalthe Board ensures that the Company has clear role in imparting balance to the Board

processesgoals relating to shareholder value and its

growth.

by bringing an independent judgement on

issues

9



3/13

REPORT ON CORPORATE

GOVERNANCEof strategy, performance, resources, standards of Director Category No. of No.

ofCompany conduct etc. other

Membership(s)/Directorship(s)Chairmanship(s)Divisional / SBU CEO: The Divisional / SBUCEO (*) of

Boardis the Chief Operating Officer for a businesswith Committee

sexecutive responsibility for its day-to-day

operations ofother

and provides leadership to the DMC / SBU MCcompanie

sin its task of executive management ofthe (**)business.

Executive

DirectorsBOARD OF

DIRECTORSY. C. Deveshwar Chairman 3

NilIn terms of the Companys Corporate GovernanceS. S. H. Rehman 8

NilPolicy, all statutory and other significantand

A. Singh 2Nil

material information are placed before theBoard K. Vaidyanath 6

4to enable it to discharge its responsibility ofstrategic (including

3

supervision of the Company as trustees of the

asChairman)

Shareholders.Non-Executive

DirectorsComposition

S. H. Khan*** Independent Director 6

7The ITC Board is a balanced Board, comprising

(including

4Executive and Non-Executive Directors.The as

Chairman)Non-Executive Directors includeindependent B. Sen Independent Director 5

4professionals. Executive Directors, including

the (including1

Chairman, do not generally exceed one-third

of asChairman)

the total strength of the Board.

Ram S. Tarneja Independent Director 116

The Governance Policy requires that the(including

2Non-Executive Directors be drawn fromamongst as

Chairman)eminent professionals with experienceinbusiness / finance / law / public

enterprises.

B. Vijayaraghavan Independent Director Nil

NilDirectors are appointed / re-appointed withthe

S. B. Mathur Independent Director - 13

2approval of the Shareholders for a period of three Representative of (including 1to five years or a shorter duration in accordance Life Insurance asChairman)with retirement guidelines as determined by

theCorporation ofIndiaBoard from time to time. All Directors are

liableas

Investorto retire by rotation unless otherwise approved by P. B. Ramanujam Independent Director - 2Nil

the Shareholders. One-third of the Directors whoRepresentative

ofare liable to retire by rotation, retire every

yearGeneral

Insuranceand are eligible for re-election. In terms ofthe

Corporation of

IndiaArticles of Association of the Company, thestrength

and itserstwhileof the Board shall not be fewer than five nor more subsidiaries asInvestor

than eighteen. The present strength of the BoardD. K. Mehrotra**** Independent Director - 2

Nil

is thirteen, of which four are Executive

Directors. RepresentativeofThe following is the composition of the Board

asSpecified

Undertakingon 31st March, 2007: of the Unit Trust ofIndiaCategory No. of Percentage to as

InvestorDirectors total no.

ofJ. P. Daly Nil

NilDirectorsC. R. Green Nil

NilExecutive Directors 4

31 * Excludes Directorship in Indian Private Limited Companies, ForeignNon-Executive 7

54Companies, Membership of Managing Committees of Chambers of

Independent

DirectorsCommerce / Professional Bodies and Alternate Directorship.

** Represents Membership / Chairmanship of Audit Committee and InvestorsOther Non-Executive 2

15 Grievance Committee of Indian Public Limited Companies.Director

s *** Appointed a Director w.e.f. 30th October, 2006.Total 13 100 **** Appointed a Director w.e.f. 26th May, 2006.

10



4/13

REPORT ON CORPORATE

GOVERNANCEMeetings and Attendance authorities which are considered

materiallyimportant, including any exposure that

exceeds

During the financial year ended 31st March,

2007, 1% of the Company's net worth, andfive meetings of the Board took place as againstsix, their outcome.as per the Companys Governance Policy. The sixth

meeting, scheduled for the last week of March, Default, if any, in payment of interest and2007, could be held only on 4th April, 2007. The repayment of principal on any public

deposit,intervening period between two Boardmeetings

dues to any major creditor or Financial

Institution.was well within the maximum gap of four

months Product liability claims of a substantialnature,

prescribed under Clause 49 of the ListingAgreement. if any.The annual calendar of meetings is

broadlydetermined at the beginning of eachyear.

Information on strikes, lockouts, retrenchment,

fatal accidents etc., if any.Board Agenda

Significant court judgement or orderpassing

Meetings are governed by a structured agenda. Thestrictures, if any, on the conduct of the Company

Board members, in consultation with theChairman, or a subsidiary of the Company or anymay bring up any matter for the consideration ofemployee, which could negatively impactthe

the Board. All major agenda items are backed byCompany's image.comprehensive background information to

enablethe Board to take informed decisions. Agendapapers

Terms of reference of Board Committees.are generally circulated seven working days

prior Policy on Shareholder Disclosures.

to the Board meeting.

Incident of theft / fraud / dishonesty of a

significantInformation placed before the Board

nature, if any.Apart from the items that are required to be

Write-offs / disposals (fixed assets,

inventories,placed before the Board for its approval, both

receivables, advances etc.) on a half-yearlybasis.

under the statutes and the Governance Policy, thefollowing are also tabled for the Board's

periodic Post-meeting follow-up systemreview /information: The Governance processes in the Company include

Quarterly performance against plan,including an effective post-meeting follow-up, review

andbusiness-wise financials in respect ofrevenue, reporting process for action taken / pending

onprofits, cash flow, balance sheet, investments

decisions of the Board, the Board Committees,and capex.the Corporate Management Committee and the

Half-Yearly summary of all long-term

borrowingsDivisional / SBU Management

Committees.made, bank guarantees issued and investments

made. Details of Board Meetings during the financial

yearTreasury Policy, both domestic & forex, as and

when changes take place. During the financial year ended 31st March,2007,five meetings of the Board were held, as

follows:

Internal Audit findings and External

AuditManagement Reports (through the

AuditCommittee). Sl. Date Board No. of

No. Strength

DirectorsStatus of safety, security and legalcompliance. presentStatus of business risk exposures, itsmanagement 1 26th May, 2006 12

11and related action

plans. 2 21st July, 2006 1211

Companys management development

processesand succession of senior management

(through3 21st July, 2006 1211the Nominations

Committee). 4 30th October, 2006 1311Show Cause, demand, prosecution and

adjudication notices, if any, from revenue 5 31st January, 2007 1311

11



5/13

REPORT ON CORPORATE

GOVERNANCEAttendance at Board Meetings and at Annual reliability of financial and other

managementinformation and adequacy of disclosures;

General Meeting (AGM) during the financial year

compliance with all relevantstatutes.

Director No. of BoardAttendance Meetings at last

The Audit Committee is empowered, pursuantattendedAGM to its terms of reference, inter alia, to:

Y. C. Deveshwar 5

Yes investigate any activity within its terms

ofS. S. H. Rehman 5

Yes reference and to seek any information it requiresA. Singh 5Yes

from any employee;K. Vaidyanath 5

Yes obtain legal or other independentprofessional

J. P. Daly 3

Yes advice and to secure the attendance of outsidersC. R. Green 3No with relevant experience and expertise,

whenS. H. Khan* 1

NA considered necessary.S. B. Mathur 5Yes The role of the Committee includes the

following:

D. K. Mehrotra** 3

YesP. B. Ramanujam 5

Yes(a) Overseeing the Companys financial

reportingprocess and the disclosure of itsfinancial

B. Sen 5Yes information to ensure that the

financialRam S. Tarneja 5Yes statements are correct, sufficient and

credible;T. S. Vijayan*** NA

NAB. Vijayaraghavan 5Yes

(b) Recommending the appointment and

removalof external auditors, fixation of audit fee

and* Appointed a Director w.e.f. 30th October, 2006.

approval of payment of fees for any other** Appointed a Director w.e.f. 26th May, 2006.services rendered by the auditors;*** Ceased to be a Director w.e.f. 26th May, 2006.

(c) Reviewing with the management thefinancial

COMMITTEES OF THE

BOARD statements before submission to the Board,Currently, there are four Board Committees the focusing primarily

on:Audit Committee, the Compensation

Committee, Any changes in accounting policiesand

the Investor Services Committee and thepracticesNominations Committee. The terms of reference of

the Board Committees are determined by the Board Major accounting entries based onexercisefrom time to time. Meetings of each Board of judgement by management

Committee are convened by the respective Qualifications in draft audit

reportCommittee Chairman. Signed minutes ofBoardCommittee meetings are placed for theinformation

Significant adjustments arising out of

auditof the Board. Matters requiring the Board's The going concernassumption

attention / approval are generally placed in theformof notes to the Board from the respective Committee Compliance with Accounting

StandardsChairman. The role and composition of these Compliance with Stock Exchange and

legalCommittees, including the number ofmeetings requirements concerning financial

statementsheld during the financial year and the

relatedattendance, are provided below. Related party transactions;

(d) Reviewing with the management, externaland

I. AUDIT

COMMITTEE internal auditors, the adequacy of internalcontrolThe Audit Committee of the Board, inter alia, systems and the Companys statement on the

provides reassurance to the Board on the existence same prior to endorsement by the Board;of an effective internal control environment

that (e) Reviewing the adequacy of the internalaudit

ensures:function, including the structure of the

internalefficiency and effectiveness of operations,

bothaudit department, staffing and seniorityof

domestic and overseas;the official heading thedepartment,safeguarding of assets and adequacy of

provisionsreporting structure, coverage and frequency

for all

liabilities;

of internal

audit;

12



6/13

REPORT ON CORPORATE

GOVERNANCE(f) Reviewing reports of internal auditand

Meetings and Attendance

discussion with internal auditors on

any

Details of Audit Committee Meetings during

significant findings and follow-upthereon; the financial year(g) Reviewing the findings of anyinternal

During the financial year ended 31st March,

2007,investigations by the internal auditorsand

nine meetings of the Audit Committee wereheld,the executive managements response

onasfollows:matters where there is suspected fraud or

Sl. Date Committee No.

ofirregularity or failure of internal controlsystems No. Strength

Membersof a material nature and reporting the matter

presentto the Board;

1 15th May, 2006 33

(h) Discussion with the external auditors,

before 2 26th May, 2006 33

the audit commences, on nature and scope

of audit, as well as after conclusion of the 3 29th June, 2006 33audit, to ascertain any areas of concern and 4 21st July, 2006 3

3review the comments contained intheir

5 5th October, 2006 3

3management

letter;6 30th October, 2006 3

3(i) Reviewing the Companys financial andrisk

7 26th November, 2006 33management

policies;8 31st January, 2007 33(j) Looking into the reasons for

substantial9 28th March, 2007 33defaults, if any, in payment to the depositors,

debentureholders, shareholders (in case ofAttendance at Audit Committee Meetings during

non-payment of declared dividends)

and the financial yearcreditors;

Director No.

of(k) Considering such other matters as may be

meetingsrequired by the Board; attende

d(l) Reviewing any other areas which may

beP. B. Ramanujam9specified as role of the Audit Committee

underS. B. Mathur

9the Listing Agreement, Companies Act

andB. Vijayaraghavan9

other statutes, as amended from time to time.

Composition

II. REMUNERATION

COMMITTEEThe Audit Committee comprised

threeNon-Executive Directors, all of whomare

The Remuneration Committee of the Board, underIndependent Directors. The Director responsible the nomenclature Compensation Committee,

interfor the Finance function, the Head of Internal alia, recommends to the Board the compensationAudit and the representative of the Statutory terms of Executive Directors and the

seniormostAuditors are Invitees to the Audit Committee.

The

level of management immediately below

theHead of Internal Audit is the Co-ordinatorand Executive Directors. This Committee also hasthethe Company Secretary is the Secretary to the responsibility for administering the EmployeeStockCommittee. The representative of the Cost Auditors Option Scheme of the Company.

is invited to meetings of the AuditCommittee Compositionwhenever matters relating to cost auditareconsidered. All members of the Committeeare

The Compensation Committee comprisedfivefinancially literate; two members, including

theNon-Executive Directors, three of whom are

Chairman of the Committee, have

accounting

Independent Directors. The Chairman of the

and financial managementexpertise.

Committee is a Non-Executive IndependentDirector.

The names of the members of the Audit The names of the members of the Compensation

Committee, including its Chairman, are

provided


providedelsewhere in the Report and Accounts. elsewhere in the Report and Accounts.

13



7/13

REPORT ON CORPORATE

GOVERNANCEMeetings and Attendance approved by the Shareholders. Non-

ExecutiveDirectors commission is determined by the

Board

Details of Compensation Committee Meetings

based, inter alia, on the Companys performanceduring the financial yearand regulatory provisions. Such commission

isDuring the financial year ended 31st March,

2007,payable on a uniform basis to reinforce the

three meetings of the Compensation

Committeeprinciple of collective responsibility. Non-

Executivewere held, asfollows:

Directors are also entitled to sitting feesforSl. Date Committee No. of attending meetings of the Board andCommitteesNo. Strength

Membersthereof, the limits for which have been approved

present by the Shareholders. The sitting fees, as1 25th & 26th May, 2006 54

determined by the Board, are presently

Rs.15,000/-, Rs.10,000/- and Rs.5,000/- for each2 21st July, 2006 54 meeting of the Board, Audit Committee and

other3 29th & 30th October, 2006 55 Board Committees, respectively. Non-

ExecutiveDirectors are also entitled to coverageunderAttendance at Compensation Committee Meetings Personal Accident Insurance.during the financial year

Director No.

ofDetails of Remuneration of the Directors for the

meetings financial year ended 31st March, 2007attende

d(Rs. in

Lakhs)B. Sen

3Director Consolidated Perquisites Performance Sitting Total

J. P. Daly

2

Salary and other Bonus / Fees

Benefits CommissionC. R. Green

2 Y. C. Deveshwar 204.00 28.51 204.00

436.51S. B. Mathur3 S. S. H. Rehman 94.50 21.10 80.33

195.93Ram S. Tarneja3 A. Singh 94.50 15.80 80.33

190.63Remuneration Policy K. Vaidyanath 79.50 12.84 67.58 159.92

ITCs remuneration strategy aims at attractingand

J. P. Daly 4.00 *

4.00@

retaining high calibre talent. Theremuneration

C. R. Green 4.00 *

4.00@

policy, therefore, is market-led and takes intoaccount

S. H. Khan** 1.68 0.151.83the competitive circumstance of each business

soS. B. Mathur 4.00 * 1.85

5.85as to attract and retain quality talent and

leverageD. K. Mehrotra*** 3.40 * 0.45 *

3.85performance

significantly. P. B. Ramanujam 4.00 * 2.156.15Remuneration of Directors B. Sen 4.00 2.55 6.55

Remuneration of Executive Directors isdetermined

Ram S. Tarneja 4.00 0.95

4.95by the Compensation Committee comprisingonly

T. S. Vijayan+ 0.60 * 0.60Non-Executive Directors. The recommendations

ofB. Vijayaraghavan 4.00 1.70

5.70

the Compensation Committee are considered

andapproved by the Board subject to the approval of @ Waived entitlement to sitting fees.

the Shareholders. The Chairman and Executive * Payable to the Institution / Company the Director represents.

Directors are entitled to Performance Bonus for each ** Appointed a Director w.e.f. 30th October, 2006.*** Appointed a Director w.e.f. 26th May, 2006.financial year up to a maximum of 100% and

85%+ Ceased to be a Director w.e.f. 26th May, 2006.

of their consolidated salary, respectively, subjectto Note: Disclosure with respect to Non-Executive Directors the approval of the Shareholders, and as may be

Pecuniary relationship : None.determined by the Board on the recommendation

Employee Stock Option Schemeof the Compensation Committee.

Non-Executive Directors are entitled to

remuneration

The Company granted 60,95,625 Options during

by way of commission for each financial year,up

the financial year to the eligibleemployeesto a maximum of Rs.4,00,000/- individually,

asof the Company and some of its subsidiary companies.

14



8/13

REPORT ON CORPORATE

GOVERNANCEEach Option entitles the holder thereof toapply

Service Contracts, Severance Fee and Notice

for and be allotted ten Ordinary Shares of the Period

Company of Re.1/- each upon payment of the The appointment of the Executive Directorsis

exercise price during the exercise period.

Thegoverned by resolutions passed by the Board

exercise period commences from the date ofand the Shareholders of the Company, which

vesting of the Options and expires at the end

ofcover the terms and conditions of such

five years from the date of grant of the Options.appointment read with the service rules of the

Exercise of Options is permitted during theperiod

Company. A separate Service Contract is notfrom the 1st to the 10th day of each month, entered into by the Company with thoseexcept from April to August duringwhich

elevated to the Board from the managementperiod exercise is permitted from 21st June

tocadre, since they already have a Service Contract

10th August. with the Company.

The vesting period for conversion of Optionsis

There is no separate provision for payment ofas

follows: severance fee under the resolutionsgoverningOn completion of 12 months from the appointment of Executive Directors

whothe date of grant of the Options : 30% vests have all been drawn from amongst the

management cadre. The statutory provisionsOn completion of 24 months fromwill however apply. In terms of the Articlesof

the date of grant of the Options : 30% vestsAssociation of the Company, a notice of one

On completion of 36 months frommonth is required to be given by a

Directorthe date of grant of the Options : 40% vests

seeking to vacate office and the

resignationtakes effect upon the expiration of such noticeShares and Options of Directorsor its earlier acceptance by the Board.

Director No. of Ordinary No. of

Options Shares of granted

during III. INVESTORS GRIEVANCE

COMMITTEE

Re.1/- each the

financialheld singly and /

yearThe Investors Grievance Committee of the

or jointly as

onBoard, under the nomenclature Investor

31st March, 2007 Services Committee , oversees redressal of

shareholder and investor grievances,and

Y. C. Deveshwar 11,62,575

1,50,000 approves sub-division / transmission ofshares,S. S. H. Rehman 1,09,925

75,000issue of duplicate share certificatesetc.A. Singh 3,08,164

75,000 CompositionK. Vaidyanath 2,88,890

75,000 The Investor Services Committee comprised threeJ. P. Daly NilNil Directors, two of whom are IndependentC. R. Green Nil

Nil Directors. The Chairman of the Committee is aS. H. Khan Nil

NilNon-Executive Independent

Director.S. B. Mathur 500 10,000* The names of the members of the InvestorD. K. Mehrotra Nil

NilServices Committee, including itsChairman,are provided elsewhere in the ReportP. B. Ramanujam Nil 10,000

* and Accounts.B. Sen 1,90,600 10,000

Ram S. Tarneja 3,76,020

10,000Meetings and Attendance

B. Vijayaraghavan 1,11,300

10,000Details of Investor Services Committee

Meetings during the financial year* Not acceptedNote: The Options were granted at the market price as defined under the

During the financial year ended 31stMarch,

Securities and Exchange Board of India (Employee Stock Option Scheme

2007, thirty-three meetings of the Investorand Employee Stock Purchase Scheme) Guidelines, 1999.

15



9/13

REPORT ON CORPORATE

GOVERNANCEIV. NOMINATIONS

COMMITTEE

Services Committee were held, asfollows:

The primar y role of the Nominations CommitteeSl. Date Committee No.

of of the Board is to make recommendations onNo. StrengthMembers appointments to the Board, the Corporatepresent

Management Committee and theseniormost

1 13th April, 2006 32 level of executive management below the

Board.2 19th April, 2006 32

The Committee also clears succession plansfor3 2nd May, 2006 3

2these levels.

4 8th May, 2006 3

3 Composition5 15th May, 2006 33 The Nominations Committee comprised

the6 26th May, 2006 33 Chairman and all the Non-Executive Directors

of7 12th June, 2006 32 the Company. The Chairman of the Company is8 19th June, 2006 32

the Chairman of the Committee.9 29th June, 2006 3

3 The names of the members of the Nominations10 6th July, 2006 32


provided11 13th July, 2006 32

elsewhere in the Report and Accounts.12 25th July, 2006 33 Meetings and Attendance13 7th August, 2006 32 Details of Nominations Committee Meetings14 14th August, 2006 32 during the financial year15 18th August, 2006 32 During the financial year ended 31st March,

2007,16 5th September, 2006 3

2 one meeting of the Nominations Committeewas

17 18th September, 2006 32 held, as

follows:18 27th September, 2006 3219 5th October, 2006 32

Sl. Date Committee No.

of20 16th October, 2006 3

2

No. Strength

Members present21 30th October, 2006 3

322 6th November, 2006 3

21 26th May, 2006 9723 16th November, 2006 3

224 28th November, 2006 3

2 Attendance at Nominations Committee Meetings25 7th December, 2006 32 during the financial year26 13th December, 2006 32 Director No.

of27 20th December, 2006 32 meetings28 9th January, 2007 3

2attende

d29 22nd January, 2007 3

2 Y. C. Deveshwar

130 7th February, 2007 3

2 J. P. Daly

Nil31 19th February, 2007 3

2 C. R. Green132 6th March, 2007 3

2S. H. Khan*

NA33 28th March, 2007 32

S. B. Mathur

1D. K. Mehrotra**

NAAttendance at Investor Services Committee Meetings P. B. Ramanujam1

during the financial yearB. Sen1Director No.

ofRam S. Tarneja1meetings T. S. Vijayan***

Nilattended B. Vijayaraghavan

1B. Sen

32 * Appointed a Member w.e.f. 30th October, 2006.P. B. Ramanujam

9** Appointed a Member w.e.f. 26th May, 2006.

A. Singh

31***Ceased to be a Member w.e.f. 26th May, 2006.

16



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REPORT ON CORPORATE

GOVERNANCECORPORATE MANAGEMENT

COMMITTEESl. Date Committee No. of

No. Strength Members

&

The primar y role of the Corporate Management

(includingInviteesCommittee is strategic management ofthe

Invitees) presentCompany's businesses within Board approved

6 13th & 14th September, 2006 88

direction / framework.7 25th & 26th September, 2006 88Composition 8 11th & 12th October, 2006 88The Corporate Management Committee comprised9 13th November, 2006 8

8all the Executive Directors and four key

senior 10 29th & 30th December, 2006 87

members of management. The Chairman of the11 1st February, 2007 88

Company is the Chairman of the Committee. The

composition of the CorporateManagement


8Committee is determined by the Board based on 13 20th February, 2007 88the recommendation of the

Nominations


8Committee. 15 27th February, 2007 88The names of the members of the Corporate 16 27th February, 2007 88Management Committee, including its

Chairman,17 27th February, 2007 88are provided elsewhere in the Report and Accounts.18 5th March, 2007 88Meetings and Attendance 19 5th March, 2007 88The meetings of the Corporate Management 20 6th March, 2007 88Committee are convened and chaired by the 21 6th March, 2007 88Chairman of the Company. Minutes of Corporate 22 7th March, 2007 88Management Committee meetings are placed

before 23 7th March, 2007 88

the Board for its information. Moreover, matters24 8th March, 2007 8

8requiring the Board's attention / approval are

placedin the form of notes from the relevant Executive 25 8th March, 2007 88Director / Corporate Management

Committee26 14th March, 2007 88Member / Invitee, backed by comprehensive27 14th March, 2007 8

8background information, alongwith Divisional /

SBU28 14th March, 2007 8

8Management Committeesrecommendation / 29 15th March, 2007 8

8approval, where applicable. Agenda papersare 30 15th March, 2007 8

8generally circulated at least three days priortothe meeting. 31 26th March, 2007 8

832 27th March, 2007 8

8Details of Corporate Management Committee

33 27th March, 2007 8

8Meetings during the financial year

During the financial year ended 31st March,2007,

Attendance at Corporate Management Committeethirty-three meetings of the Corporate

Management

Meetings during the financial year

Committee were held, asfollows:

Member / Invitee No. of meetings

attende

dSl. Date Committee No. ofY. C. Deveshwar33

No. Strength Members

& (including

Invitees

S. S. H. Rehman

32Invitees) present A. Singh

331 24th April, 2006 8

8K. Vaidyanath

332 16th, 17th & 18th May, 2006 87

K. S. Vaidyanathan

323 19th June, 2006 87

R. G. Jacob

334 10th July, 2006 8

8A. Nayak 32

5 14th August, 2006 87

R. Srinivasan

32

17



11/13

REPORT ON CORPORATE

GOVERNANCEDISCLOSURE

S

Relations serve to inform andserviceShareholders, allowing them toaccess

Materially significant related party

transactions information at their convenience. Theentirewhich may have potential conflict withthe Report and Accounts as well as quarterly andinterests of the Company atlarge: half-yearly financial results are available

inNone ; confirmation was placed before the

Auditdownloadable formats under thesection

Committee and the Board that all related party Shareholder Value on the Companyswebsitetransactions during the year under reference as a measure of added convenience to investors.

were in the ordinary course of business and onThe Newsroom section includes all major

pressarms length

basis.releases from the Company and relevant press

Details of non-compliances, penalties,strictures

clippings. Clarifications as and when

providedby Stock Exchanges / SEBI / Statutory

Authoritiesto institutional investors and analysts,includingon any matter related to capital markets

duringpresentations made to them, are also posted

the last three years: on the Companys website.

None The Report of the Directors, forming part of the

Report and Accounts, includes all aspects ofthe

Material non-listed subsidiary companiesasdefined in Clause 49 of the Listing

Agreement

Management Discussion and Analysis

Report.with Stock Exchanges: ITC CODE OF

CONDUCTNone

The ITC Code of Conduct, as adopted by the BoardMEANS OF

COMMUNICATIONof Directors, is applicable to Directors,seniormanagement and employees of the Company. TheTimely disclosure of consistent, comparable,

relevant Code is derived from three interlinked

fundamentaland reliable information on corporatefinancial principles, viz. good corporate governance,

goodperformance is at the core of good governance.

corporate citizenship and exemplarypersonal

Towards this end -conduct. The Code covers ITCs commitment to

The quarterly results of the Company weresustainable development, concern foroccupational

announced within a month of completion of thehealth, safety and environment, a gender

friendlyquarter. Audited annual results alongwiththe workplace, transparency and auditability,legal

results for the fourth quarter were announcedcompliance, and the philosophy of leading

bywithin two months of the end of thefinancial personal example. The Code is available on

theyear; such results were published, inter alia,in Companys corporate website. The Times of India and Aajkal from Kolkata,

and on an all India basis in majornewspapers.

Declaration as required under Clause 49 of the

ListingAll these results, including the entire Reportand

Agreemen

tAccounts, were posted on SEBIs Electronic Data

All Directors and senior management of the Company

haveInformation Filing And Retrieval system(EDIFAR) affirmed compliance with The ITC Code of Conduct for

thewebsite. As in the past, the Company will

publish financial year ended 31st March,2007.

its quarterly, half-yearly and annualfinancialresults in newspapers on an all India basisand

Y. C.

Deveshwarwill also post the same on SEBIs EDIFAR

website.

Kolkata, 25th May, 2007.

ChairmanInformation relating to shareholdingpattern,compliance with corporate governancenorms ITC CODE OF CONDUCT FOR

PREVENTIONetc. is also posted on SEBIs EDIFAR website.

OF INSIDER

TRADINGThe Companys corporate website

www.itcportal.com providescomprehensive

ITC has a Code of Conduct for Prevention of InsiderTrading (ITC Code) in the shares and securities ofinformation on ITCs portfolio of

businesses,including sustainability initiatives

comprising

the Company. The ITC Code, inter alia, prohibits

CSR activities and EHS performance. The website purchase / sale of shares of the Company by

has entire sections dedicated to ITCs profile, employees while in possession of unpublishedpricehistory and evolution, its core values,

corporatesensitive information in relation to theCompany.governance and leadership. Two

exclusive

The ITC Code is available on the Companys

sections on Shareholder Value and

Investor

corporate website.

18



12/13

REPORT ON CORPORATE

GOVERNANCENON - MANDATORY REQUIREMENTS

UNDER

assessment & minimisation procedures, andnewCLAUSE 49 OF THE LISTING

AGREEMENT

initiatives proposed by the Company.

Directorsare also briefed on changes / developmentsinThe status of compliance with the non-mandatory the domestic / global corporate and

industryrequirements of Clause 49 of the ListingAgreement scenario including those pertaining to

statutes /is provided

below: legislation and economicenvironment.1. Non-Executive Chairmans

Office:

The Chairman7. Mechanism for evaluation of Non-Executiveof the Company is the Executive Chairman

and Directors:

The role of the Board of Directors ishence this provision is notapplicable. to provide direction and exercise control to

ensure2. Tenure of Independent

Directors:

In terms ofthat the Company is managed in a manner that

the Governance Policy of the Company, allfulfils stakeholders aspirations andsocietal

Directors, including Independent Directors,are expectations. The Board has so far evaluatedappointed / re-appointed for a period of three

Non-Executive Directors collectively to

reinforceto five years or a shorter duration in accordance

the principle of collectiveresponsibility.

with retirement guidelines as determined by

theBoard from time to time. No maximum tenure 8. Whistle-BlowerPolicy:

The Companyfor Independent Directors has been

specificallyencourages an open door policy where

employeesdetermined by the Board. have access to the Head of the Business / Function.

In terms of The ITC Code of Conduct, any instance3. Remuneration Committee: The Companyof non-adherence to the Code / any otherhas a Remuneration Committee underobserved unethical behaviour is to be

broughtthe nomenclature Compensation

Committee, to the attention of the immediate

reportingthe details of which are provided in this

Report authority, who is required to report the same tounder the section Committees of thethe Head of Corporate Human Resources.Board - Remuneration Committee.

4. ShareholderRights:

The quarterly, half-yearlyGENERAL SHAREHOLDER

INFORMATIONand annual financial results of the Companyarepublished in newspapers on an all India

basisProvided in the Shareholder Informationsectionand are also posted on the Companys corporate of the Report and Accounts.

website. Significant events are also posted

on ICSI NATIONAL AWARD FOR EXCELLENCE

INthis website under the Newsroom section. The

CORPORATE

GOVERNANCEcomplete Annual Report is sent toeveryShareholder of the Company. ITC was awarded the coveted ICSI National Award

5. Audit Qualifications: It is always the Companys for Excellence in Corporate Governance2006,endeavour to present unqualified

financialinstituted by the Institute of CompanySecretariesstatements. There are no audit qualifications

inof India. The award was conferred on the Company

the Companys financial statements for the year for its strong corporate governancemodel,under reference. commendable performance along the triple

bottom6. Training of Boardmembers:

The Governance line and visionary leadership. The AwardwasPolicy casts on the Board of Directors the adjudicated by an eminent jury headed by Former

responsibility of strategic supervision of

the

Chief Justice of India, Hon'ble Mr. V. N. Khare.

Company. Towards this, the Governance Policy,COMPLIANCE CERTIFICATE OF THE

AUDITORSinter alia, requires the Board to undertake

periodicreview of various matters including business-wise

The Statutory Auditors Certificate, as stipulated

inperformance and related matters, risk Clause 49 of the Listing Agreement with

Stockmanagement, borrowings, internal &external

Exchanges, that the Company has compliedwith

audit findings etc., as detailed in this

Reportthe conditions of Corporate Governance is

annexedunder the section Board of Directors. In order

to the Report of the Directors & Managementto enable the Non-Executive Directors tofulfil

Discussion and

Analysis.the Governance ordained role, comprehensive

This Certificate will be forwarded to theStock

presentations are made on the working of the

various businesses of the Company. Directors are Exchanges alongwith the Annual Reportoffully briefed on all business related matters,

riskthe Company.

19



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rep corp gov

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