ITC – Corporate Governance Report Rachana Gadekar, PG Finance, 110

ITC – Corporate Governance Report

Investor Grievances

The Investors Grievance Committee of the Board, under the nomenclature ‘Investor Services
Committee’, oversees redressal of shareholder and investor grievances, and approves sub-
division / transmission of shares, issue of duplicate share certificates and issue & allotment
of shares upon exercise of Options by employees under the Company’s Employee Stock
Option Schemes etc. The Investor Services Committee presently comprises five Directors,
four of whom are Independent Directors. The Chairman of the Committee is a Non-
Executive Independent Director.

The Company attends to Shareholder / Investor complaints and other correspondence

generally within a period of five working days except where constrained by disputes or legal
impediments. There are some pending cases relating to disputes over title to Shares in
which the Company has been made a party. These cases however are not material in nature.

The Company received just one complaint relating to non-receipt of share certificates during
the financial year ended 31st March, 2010. The said complaint has been resolved.

32 meetings were held of this committee in the financial year 2009-2010 out of which an
average of 3 members was present per meeting.

ITC sets the standards for other companies and follows the highest standards of corporate
governance. This indicates sufficient attention given to investor grievances.

Board of Directors
Number of directors (Independent and dependent)

The composition of the Board of Directors at ITC is as follows:-

Chairman -1
Executive Directors – 4 (including the Chairman)
Non- Executive Directors - 11

Effectiveness of the board (Qualitative Analysis based on factual

information)

The Board of Directors comprise 6 subcommittees- audit committee, compensation

committee, nominations committee, investor services committee, sustainability committee
and corporate management committee all of which have non executive directors in majority
to ensure fairness with the exception of the corporate management committee which
requires executives to be in majority as they understand the management better than
anyone else.

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The Board has a Company Secretary and a General Counsel at its disposal.

The board had 6 meetings in the financial year 2009-2010 with strong attendance in each
meeting of 10-12 members. In addition each of the sub-committees had 6+ meetings with
good attendance in each meeting indicating an interested Board who is interested in the
well being of the company.

Remuneration of Chairman and other Executive Directors is determined by the

Compensation Committee comprising only Non-Executive Directors. Non-Executive
Directors are entitled to remuneration by way of commission for each financial year, up to a
maximum of Rs. 6,00,000/- individually, as approved by the Shareholders.

ITC Code of Conduct for Prevention of Insider Trading (‘ITC Code’), as approved by the Board
of Directors, inter alia, prohibits purchase / sale of securities of the Company by Directors
and employees while in possession of unpublished price sensitive information in relation to
the Company.

Whistle-Blower Policy: The Company encourages an open door policy where employees
have access to the Head of the Business / Function. In terms of The ITC Code of Conduct,
any instance of non-adherence to the Code / any other observed unethical behaviour is to
be brought to the attention of the immediate reporting authority, who is required to report
the same to the Head of Corporate Human Resources.

Thus there are strong accountability and responsibility systems in place.

Type of board members (Whether they are family members of

qualified/experienced professionals)

All the directors have excellent educational qualifications and a lot of industry experience.
They can bring on board a wide variety of perspectives and force deep thinking before any
decision making by the Board. These are people with strong character and strong opinions
and will help the company move in the right direction.

Dividend Policy
How is the dividend paid

ITC has paid a dividend every year in the past decade. They have tried to increase the
dividends paid out every year. In 2005-06, ITC issued bonus shares in the ratio 1:2 and in the
financial year 2009-10 it paid an extra Special Centenary dividend of Rs. 5.50 as it was
celebrating 100 Inspiring Years.

Nature of profits

The Company has excellent reputation and has shown strong profits in all years as it is a well
diversified- from cigarettes to FMCG to apparel to Hotels and paper mills.

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Financial Statements
Auditor and Investor Views

In the opinion of the auditors, the auditors to the best of their knowledge believe that the
accounts give the information required by the Companies Act, 1956, in the manner so
required and give a true and fair view in conformity with the accounting principles generally
accepted in India. They also express that there are adequate internal control systems
commensurate with the size of the Company and the nature of its business for the purchase
of inventory, fixed assets and for the sale of goods and services.

Out of the total disputed dues aggregating Rs. 460.38 Crores as above, Rs. 233.39 Crores has
been stayed for recovery by the relevant authorities.

Disclosures by the Company for Investor Protection

Materially significant related party transactions which may have potential conflict with the
interests of the Company at large: None

Details of non-compliances, penalties, strictures by Stock Exchanges / SEBI / Statutory

Authorities on any matter related to capital markets during the last three years: None

Material non-listed subsidiary companies as defined in Clause 49 of the Listing Agreement

with Stock Exchanges: None

Inter-se relationships between Directors of the Company: None