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Corporate Governance

 

Definition and Purpose The Governance Structure Roles Board Committees

Preamble

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.

Definition And Purpose

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.

Core Principles

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.

Cornerstones

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.

Trusteeship :

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.

Transparency :

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 and 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.

Control :

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.

Ethical Corporate Citizenship :

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.