Corporate Governance of ITC Limited

Overall, ITC Limited places a strong emphasis on corporate governance and is committed to maintaining the highest standards of transparency, accountability, and ethical conduct in all its operations.

ITC Limited is an Indian multinational company with a diversified business portfolio, including Fast Moving Consumer Goods (FMCG), Hotels, Paperboards and Packaging, and Agri Business. The company is headquartered in Kolkata, West Bengal, and is listed on the Bombay Stock Exchange and National Stock Exchange of India.

In terms of corporate governance, ITC Limited is committed to the highest standards of transparency, accountability, and ethical conduct. The company has a well-defined corporate governance framework in place, which is designed to ensure the fair and equitable treatment of all stakeholders, including shareholders, employees, customers, and society at large.

The Board of Directors of ITC Limited is responsible for providing overall direction and guidance to the company. The Board comprises highly experienced and qualified individuals from diverse backgrounds, who bring a wide range of expertise and perspectives to the table. The Board meets regularly to review the company’s performance, strategy, and risks, and to provide guidance and oversight on key decisions.

In addition to the Board of Directors, ITC Limited has several committees that are responsible for specific areas of the company’s operations. These committees include the Audit Committee, which is responsible for overseeing the financial reporting process and the internal control system, and the Nomination and Remuneration Committee, which is responsible for determining the compensation and benefits of the Board members and senior executives.

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ITC Limited also has a robust system of internal controls and risk management in place, which is designed to ensure the integrity and reliability of the company’s financial reporting and business operations. The company has a dedicated Internal Audit function, which is independent of the company’s business units and reports directly to the Audit Committee.

Overall, ITC Limited places a strong emphasis on corporate governance and is committed to maintaining the highest standards of transparency, accountability, and ethical conduct in all its operations.

ITC Limited is known for its strong commitment to corporate governance. The company has implemented a formal system to ensure that its business practices are ethical and responsible, and that value is created for all stakeholders. ITC’s governance framework sets high standards for the company to follow.

ITC defines corporate governance as a way to manage and control companies in order to maximize their wealth-generating potential. As large corporations often utilize significant societal resources, ITC believes that the governance process should ensure that these resources are used in a way that satisfies stakeholders’ expectations and societal norms. This belief is reflected in the company’s commitment to contributing to the “triple bottom line” of economic, social, and environmental development.

ITC’s Corporate Governance structure, systems and processes are based on two core principles:

(i) Management must have the executive freedom to drive the enterprise forward without undue restraints, and
(ii) This freedom of management should be exercised within a framework of effective accountability.

According to ITC, effective corporate governance must empower the executive management of the company, while also establishing mechanisms of checks and balances to ensure that decision-making powers are used responsibly and in line with stakeholders’ expectations and societal norms. The company’s governance philosophy is based on the principles of trusteeship, transparency, ethical corporate citizenship, empowerment and accountability, and control. ITC believes that the practice of these principles creates the right corporate culture and fulfills the true purpose of corporate governance.

Trusteeship

Trusteeship is the recognition that large corporations, representing the interests of shareholders, capital providers, business associates, and employees, have both an economic and social purpose. This places the responsibility on the Board of Directors to protect and enhance shareholder value, as well as fulfill obligations to other stakeholders. The concept of trusteeship also includes the responsibility to ensure equity, protecting the rights of all shareholders, regardless of size.

Transparency

Transparency is the practice of explaining the company’s policies and actions to those it has responsibilities to. Externally, this means making the maximum appropriate disclosures without jeopardizing the company’s strategic interests. Internally, it means being open and transparent in the company’s relationships with employees and in its business conduct. ITC believes that transparency leads to accountability.

Ethical Corporate Citizenship

Ethical corporate citizenship means setting high standards of ethical behavior within the organization and in external relationships. ITC believes that unethical behavior undermines stakeholder value and corrupts organizational culture. Governance processes within ITC reinforce and support the company’s commitment to ethical corporate citizenship.

Empowerment

Empowerment is the process of fostering creativity and innovation throughout the organization by vesting decision-making power at the most appropriate levels and as close to the scene of action as possible. This helps to realize the potential of employees. Empowerment is closely linked to ITC’s first core principle of governance, which states that management must have the freedom to drive the enterprise forward. ITC believes that the combination of empowerment and accountability drives performance and improves effectiveness, ultimately enhancing shareholder value.

Control

Control ensures that management’s freedom is exercised within a framework of checks and balances. This is intended to prevent the misuse of power, facilitate the management of change, and ensure effective risk management. ITC believes that control is a necessary aspect of its second core principle of governance, which states that the freedom of management must be exercised within a framework of appropriate checks and balances.

Skills, expertise and competencies of Directors

ITC believes that the skills, experience, and diversity of perspectives of its board members impact the company’s performance. Therefore, the board should have a balance of these qualities. Given the company’s size and diverse businesses, the directors should possess one or more of the following skills, expertise, and competencies:

Organizational Purpose

Understanding of the socio-economic, political, regulatory, and competitive environment in which the company operates and the ability to identify opportunities and threats for the company’s businesses. Contributing to creating an inspiring vision for the company with superordinate societal goals and understanding of the company’s triple bottom line philosophy of building synergy between serving society and creating economic value.

Strategic Insight

Evaluating competitive corporate and business strategies and refining the company’s strategies to fulfill its goals. Understanding the strategy of a diversified company like ITC and its unique sources of competitive advantage, as well as assessing its strengths and weaknesses.

Organizational Capacity Building

Evaluating organizational capacity and readiness across relevant parameters and providing guidance on bridging gaps in capacity building. Understanding the talent market and the company’s talent quotient to help fine-tune strategies to attract, retain, and nurture competitively superior talent. Appreciating and critiquing the need for specialization across business-critical areas, as well as general management capabilities.

Stakeholder Value Creation

Understanding processes for shareholder value creation and its contributory elements and critiquing interventions for value creation for other stakeholders.

Commercial Acumen

Critiquing the company’s financial performance and evaluating the company’s strategies and action plans in the context of their financial outcomes.

Risk Management and Compliance

Appreciating key risks impacting the company’s businesses and contributing to the development of systems and controls for risk mitigation and compliance management, as well as reviewing and refining these periodically.

Policy Evaluation

Understanding the company’s governance philosophy and contributing to its refinement. Evaluating policies, systems, and processes in the context of the company’s businesses and reviewing them periodically.

Culture Building

Contributing to the board’s role in promoting an ethical organizational culture, eliminating conflicts of interest, and setting and upholding the highest standards of ethics, integrity, and organizational conduct.

Board Cohesion

Understanding the statutory roles and responsibilities of a director and the board as a whole. Encouraging and sustaining a cohesive working environment and listening to multiple views and thought processes to synergize a range of ideas for organizational benefit.

(Report based on information available in ITC Limited Annual Report)

(India CSR)