CORPORATE GOVERNANCEREPORT

ON

TATA MOTORS HUL ITC

By, Anand B. Aditi M. Dilpreet S. Rabisankar M. Sushil C. Swapnil K.

COMPANY'S PHILOSOPHY ON CORPORATE GOVERNANCE As part of the Tata group, the Companys philosophy on Corporate Governance is founded upon a rich legacy of fair, ethical andtransparent governance practices, many of which were in place even before they were mandated by adopting highest standards ofprofessionalism, honesty, integrity and ethical behaviour. As a global organisation the Corporate Governance practices followed by theCompany and its subsidiaries are compatible with international standards and best practices. Through the Governance mechanism in theCompany, the Board along with its Committees undertake its fiduciary responsibilities to all its stakeholders by ensuring transparency, fair play and independence in its decision making.

BOARD OF DIRECTORS The Board of Directors along with its Committees provide leadership and guidance to the Company's management and directs, supervisesand controls the performance of the Company. The Board currently comprises 13 Directors out of which eleven Directors (84.62%) areNon-Executive Directors. The Company has a Non-Executive Chairman and the seven Independent Directors comprise more than halfthe total strength of the Board. None of the Directors on the Company's Board is a Member of more than ten Committees and Chairman of more than five Committees(Committees being, Audit Committee and Investors' Grievance Committee) across all the companies in which he is a Director.

THE COMMITTEES OF THE BOARD

AUDIT COMMITTEE The Audit Committee functions according to its Charter that defines its composition, authority, responsibility and reporting functionsin accordance with the Companies Act, 1956, listing requirements and US regulations applicable to the Company and is reviewed fromtime to time REMUNERATION COMMITTEE The Remuneration Committee of the Company is empowered to review the remuneration of the Managing Director and the Executive Director, retirement benefits to be paid to them under the Retirement Benefit Guidelines approved by the Board, recommending on theamount and distribution of commission to the non-executive directors based on criteria fixed by the Board and to deal with matterspertaining to Employees Stock Option Scheme, if

any.The Remuneration Committee comprises two Independent Directors (including the Chairman of the Committee) and two Non-ExecutiveDirectors. Remuneration Policy a) The remuneration of the Managing Directors is recommended by the Remuneration Committee based on criteria such asindustry benchmarks, the Companys performance vis--vis the industry, responsibilities shouldered, performance/track record, macro-economic review on remuneration packages of heads of other organisations and is decided by the Board of Directors.The Company pays remuneration by way of salary, perquisites and allowances (fixed component), incentive remuneration and/orcommission (variable components) to its Managing Directors. Annual increments are decided by the Remuneration Committeewithin the salary scale approved by the Members and are effective from April 1, annually. b) A sitting fee of `20,000/- for attendance at each meeting of the Board, Audit Committee, Executive Committee RemunerationCommittee and Nominations Committee and `5,000/- for Investors Grievance Committee, Ethics & Compliance Committee and RightsCommittee is paid to its Members (excluding Managing Directors). The sitting fees paid/payable to the non-whole-time Directorsis excluded whilst calculating the above limits of remuneration in accordance with Section 198 of the Act. The Company alsoreimburses out-ofpocket expenses to Directors attending meetings held at a city other than the one in which the Directorsreside.

c)

The remuneration by way of commission to the non-executive directors is decided by the Board of Directors and distributedto them based on their participation and contribution at the Board and certain Committee meetings as well as time spent onmatters other than at meetings. The Members had, at the Annual General Meeting held on July 24, 2008, approved the paymentof remuneration by way of commission to the non-whole-time directors of the Company, of a sum not exceeding 1% per annumof the net profits of the Company, calculated in accordance with the provisions of the Act, for a period of 5 years commencingApril 1, 2008. Remuneration of employees largely consists of basic remuneration, perquisites, allowances and performance incentives. Thecomponents of the total remuneration vary for different employee grades and are governed by industry patterns, qualificationsand experience of the employee, responsibilities handled by him, his individual performances, etc. The annual variable pays ofsenior managers is linked to the Companys performance in general and their individual performance for the relevant year ismeasured against specific major performance areas which are closely aligned to the Companys objectives.

d)

Retirement Policy for Directors The Company has adopted the Guidelines for retirement age wherein Managing and Executive Directors retire at the age of 65 yearswhilst all the Non-Executive Directors retire

at the age of 75 years. The Company has also adopted a Retirement Policy for Managing andExecutive Directors which has also been approved by the Members of the Company, offering special retirement benefits including pension,ex-gratia, and medical and other benefits. In addition to the above, the retiring Managing Director is entitled to residential accommodationor compensation in lieu of accommodation on retirement. The quantum and payment of the said benefits are subject to an eligibilitycriteria of the retiring director and is payable at the discretion of the Board in each individual case on the recommendation of theRemuneration Committee. OTHER COMMITTEES The Executive Committee of Board reviews capital and revenue budgets, long-term business strategies and plans, the organizationalstructure of the Company, real estate and investment transactions, allotment of shares and/or debentures, borrowing and other routinematters. The Committee also discusses the matters pertaining to legal cases, acquisitions and divestment, new business forays anddonations. The Nominations Committee of the Board was constituted with the objective of identifying independent directors to be inducted onthe Board and to take steps to refresh the constitution of the Board from time to time.

The Ethics and Compliance Committee was constituted to formulate policies relating to the implementation of the Tata Code ofConduct for Prevention of Insider Trading (the Code), take on record the monthly reports on dealings in securities by the SpecifiedPersons and decide penal action in respect of violations of the applicable regulations/the Code.

Code of Conduct: Whilst the Tata Code of Conduct is applicable to all Whole-time Directors and employees of the Company, the Boardhas also adopted a Code of Conduct for NonExecutive Directors, both of which are available on the Companys website. All the Boardmembers and senior management of the Company as on March 31, 2011 have affirmed compliance with their respective Codes ofConduct. A Declaration to this effect, duly signed by the CEO and Managing Director is annexed hereto.

SUBSIDIARY COMPANIES The Company does not have any material non-listed Indian subsidiary company and hence, it is not required to have an IndependentDirector of the Company on the Board of such subsidiary company. The Audit Committee also has a meeting wherein the CEO and CFOof the subsidiary companies make a presentation on significant issues in audit, internal control, risk management, etc. Significant issuespertaining to subsidiary companies are also discussed at Audit Committee meetings. Apart from disclosures made in the Directors'Report there

were no strategic investments made by the Companys non-listed subsidiaries during the year under review.The minutes of the subsidiary companies are placed before the Board of Directors of the Company and the attention of the Directors is drawn to significant transactions and arrangements entered into by the subsidiary companies. The performance of its subsidiaries isalso reviewed by the Board periodically.

The status of compliance in respect of non-mandatory requirements of Clause 49 of Listing Agreement is as follows: Chairman of the Board: Being the Group Chairman, the Company does not reimburse expenses incurred by the Non-Executive Chairman for maintenance of a separate Chairmans office.At its meeting held on July 25, 2006, the Board of Directors has adopted the Revised Guidelines (2006) regarding the retirement age of Directors. In line with best practice to continuously refresh the Boards membership, the Board is encouraged to seek a balance between change and continuity. At tenure of 9 years may be considered a threshold for granting further tenure for independent directors based, inter alia, on the merit and contribution of each Director. The Nomination Committee takes into consideration criteria such as qualifications and expertise whilst recommending induction of non-executive directors on the Board. Remuneration Committee: Details are given under the heading Remuneration Committee. Shareholder Rights: Communications. Details are given under the heading Means of

Audit Qualifications: During the year under review, there was no audit qualification in the Companys financial statements. The Company continues to adopt best practices to ensure a regime of unqualified financial statements. Training of Board Members: The Directors interact with the management in a very free and open manner on information that may be required by them. Orientation and factory visits are arranged for new Directors. The Independent Directors are encouraged to attend training programmes that may be of relevance and interest to the Directors in discharging their responsibilities to the Companys stakeholders.

Mechanism for evaluating non-executive Board members: The performance evaluation of non-executive members is done by the Board annually based on criteria of attendance and contributions at Board/Committee Meetings as also for the role played other than at Meetings. Whistle Blower Mechanism: The Company has adopted a Whistle-Blower Policy. Please refer to DISCLOSURES given above. MEANS OF COMMUNICATION The Quarterly, Half Yearly and Annual results are regularly submitted to the Stock Exchanges in accordance with the Listing Agreement and are generally published in Indian Express, Financial Express and Loksatta (Marathi). The information regarding the

performance of the Company is shared with the shareholders every six months through a half yearly communiqu and the Annual Report. The official news releases, including on the quarterly and annual results and presentations made to institutional investors analysts are also posted on the Companys website www.tatamotors.com. The Investors section on the Companys website keeps the investors updated on material developments in the Company by providing key and timely information like Financial Results, Annual Reports, Shareholding Pattern, presentations made to Analysts etc. A brief profi le of Directors is also on the Companys website. Members also have the facility of raising their queries/complaints on share related matters through a facility provided on the Companys website. The Annual Report, Quarterly Results, Shareholding Pattern of the Company are posted through Corporate Filing and Dissemination System (CFDS), a portal which is a single source to view information filed by listed companies. Hard copies of the said disclosures and correspondence are also fi led with the Stock Exchanges.

LISTING The Companys securities are listed on the Bombay Stock Exchange Ltd. (BSE) and National Stock Exchange of India Ltd. (NSE). The following are the details of the Company's shares:

For details on listings of Non-Convertible Debentures on the Wholesale Debt market segment of the NSE, please refer to Outstanding Securities section of this Report.

INTERNATIONAL LISTING There are two separate programs for the Companys Depositary Receipts. - The American Depositary Shares (ADSs) (through the conversion of its International Global Depositary Shares into American Depositary Shares (ADSs) are listed on the New York Stock Exchange (NYSE) since September 27, 2004. - The Global Depositary Shares (GDSs) issued in October 2009 are listed on the Luxembourg Stock Exchange since then. The said GDSs are also traded on London Stock Exchange on IOB platform. Please also refer to the section on Outstanding Depositary Receipts and Convertible Instruments for details pertaining to international listing of Foreign Currency Convertible Notes.

Two-way Fungibility of Depositary Receipts The Company offers foreign investors a limited facility for conversion of Ordinary Shares into American Depositary Receipts/Global Depository Receipts within the limits permissible for two-way Fungibility, as announced by the Reserve Bank of India vide its operative guidelines for the limited two way fungibility under the "Issue of Foreign Currency Convertible Bond and Ordinary Shares (through Depository Receipt Mechanism) Scheme 1993", circular dated February 13, 2002.

Corporate Governance Score for Transport Equipment Sector

Pts Statement of Company's philosophy on code of governance Structure and Strength of board

Ashok Hero L BhFL Bosch CumIL H

M& M

Maruti S

TATA MOTORS

2 2

2 2

2 2

2 2

2 2

2 2

2 2

2 2

2 2

Chairman & CEO Duality Disclosure of Tenure and Age limit of directors Disclosure of : Post Board meeting follow up system and compliance of the board procedures Appointment of lead independent director Disclosure of other provision as to the boards and committees Disclosure of : Code of Conduct Board committee Disclosure and Transparency General Body Meetings Means of communication and General shareholder information Means of communication and General shareholder information Compliance of Corporate Governance and Auditors' Certificate Disclosure Disclosure of Stakeholders' interests : Total

2 3

2 0

2 0

2 0

2 0

2 0

2 0

2 0

2 0

1 2 25 25 3

1 2 17 18 3

1 1 10 16 3

1 1 16 18 3

1 1 10 16 3

1 2 14 18 3

1 2 16 18 3

1 2 19 18 3

1 1 10 24 3

10 10

10 2

10 4

10 8

10 4

10 4

10 4

10 4

10 8

98

66

56

70

56

63

69

71

70

CORPORATE GOVERNANCE-HUL
HUL believes that for a Company to be successful, it must maintain global standards of Corporate Conduct towards all its stakeholders . The Company's foundation has therefore been rooted to stringent Corporate Governance principles. At Hindustan HUL, we believe that the principles of fairness, transparency and accountability are the cornerstones for good governance. The HUL Code of Business Principles reflects the Company's commitment to these principles. It is the Company's endeavour to continue to achieve highest governance levels. As regards the compliance with the requirements of Clause 49 of the Listing Agreement with the Stock Exchanges, the Company is in full compliance with the norms and disclosures. Board of Directors The Board of Directors of the Company represents an optimum mix of professionalism, knowledge and experience. The total strength of the Board of Directors of the Company is 10 Directors comprising a Non-Executive Chairman, four Executive Directors and five NonExecutive Independent Directors. The Board of Directors is entrusted with the ultimate responsibility of the management, general affairs, direction and performance of the Company and has been vested with the requisite powers, authorities and duties. The Management Committee of the Company is headed by the Managing Director and Chief Executive Officer and has business / functional heads as its members, which looks after the management of the day-to-day affairs of the Company. Committees of the Board The Board Committees play a crucial role in the governance structure of the Company and have been constituted to deal with specific areas / activities which concern the Company and need a closer review. The Board Committees are set up under the formal approval of the Board to carry out clearly defined roles which are considered to be performed by members of the Board, as a part of good governance practice. The Board supervises the execution of its responsibilities by the Committees and is responsible for their action. The minutes of the meetings of all the Committees are placed before the Board for review. The Board Committees can request special invitees to join the meeting, as appropriate. The Board has currently established the following statutory and non-statutory Committees:

Audit Committee The Audit Committee of the Company is entrusted with the responsibility to supervise the Companys internal control and financial reporting process . The Audit Committee also looks into controls and security of the Companys critical IT applications. The Audit Committee of the Company is entrusted with the responsibility to supervise the

Companys internal controls and financial reporting process and inter alia performs the following functions: overseeing the Companys financial reporting process and disclosure of financial information to ensure that the financial statements are correct, sufficient and credible; recommending the appointment and removal of external auditors, fixation of audit fee and approval for payment of any other services; reviewing with management the quarterly financial results before submission to the Board; reviewing with management the annual financial statements before submission to the Board; reviewing with management the annual financial statements of the subsidiary companies; reviewing with management, external auditors and internal auditors, the adequacy of internal control systems; reviewing the adequacy of internal audit function; discussing with internal auditors any significant finding and reviewing the progress of corrective actions on such issues; reviewing the findings of any internal investigations by the internal auditors in matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and then reporting such matters to the Board; discussing with external auditors, before the audit commences, on the nature and scope of audit as well as having post-audit discussion to ascertain area of concern, if any; reviewing the Companys financial and risk management policies; examining reasons for substantial default in the payment to members (in case of non-payment of declared dividends) and creditors, if any; and reviewing the progress made on cases that are reported under the Code of Business Principles of the Company and implication of these cases, if any, under the UK Bribery Act, 2011. In addition to quarterly meetings for consideration of financial results, special meetings of the Audit Committee are convened for review of various businesses / functions of the Company, business risk assessment, internal audit and control assurance reports of all the major divisions and controls and security of Companys critical IT applications. The Audit Committee also reviews the functioning of the Code of Business Principles and Whistle Blower Policy of the Company and cases reported there under

Remuneration and Compensation Committee The Remuneration Committee is vested with all the necessary powers and authority to ensure appropriate disclosure on the remuneration of whole-time Directors and to deal with

all the elements of remuneration package of all such Directors within the limits approved by the members of the Company. The Compensation Committee administers the stock option plan of the Company. The Remuneration Committee deals with all elements of remuneration package of all the Executive Directors i.e. salary, benefits, bonus, stock options, pension etc. including details of fixed component and performance linked incentives, along with the performance criteria. The Compensation Committee administers the Stock Option Plan and Performance Share Plan of the Company and determines eligibility of employees for Stock Options.

Shareholder/Investor Grievances Committee The Committee specifically looks into redressing of investors complaints with respect to Transfer of shares, non-receipt of shares, non-receipt of declared dividends and ensure expeditious share Transfer process. The Committee also monitors and reviews the performance and service standards of the Registrar and Share Transfer Agents of the Company and provides continuous guidance to improve the Service levels for investors. The Committee is entrusted with the responsibility of addressing the shareholders and investors complaints 56 Hindustan Unilever Limited with respect to transfer of shares, non-receipt of annual report, non-receipt of declared dividend, etc. and ensuring an expeditious share transfer process in line with the proceedings of the Share Transfer Committee. The Committee also evaluates performance and service standards of the Registrar and Share Transfer Agent of the Company and also provides continuous guidance to improve the service levels for the investors

Other Functional Committees Apart from the above statutory committees The Board of Directors have constituted other functional committees such as committee for Approving disposal of surplus assets of the Company, committee for allotment of shares under ESOP to raise the level of governance as also to meet the specific business needs. Whistle Blower Policy The Company has adopted a Whistle Blower Policy to provide appropriate avenues to the employees to bring to the attention of the Management any issue which is perceived to be in violation of or in conflict with the fundamental business principles of the Company. The Company has provided a dedicated e-mail address whistleblowing.hul@unilever.com for reporting such complaints. Alternatively, employees can also send written communications to the Company. The employees are encouraged to raise any of their concerns by way of whistle blowing and none of the employees have been denied access to the Audit Committee. The Company Secretary is the designated officer for effective implementation of the policy and dealing with the complaints registered under the policy. All cases registered under the Code

of Business Principles and the Whistle Blower Policy of the Company are reported to the Committee of Executive Directors and are subject to the review of the Audit Committee. Share Dealing Code In accordance with SEBI (Prohibition of Insider Trading) Regulations, 1992, as amended, the Company has established systems and procedures to restrict insider trading activity and has framed a Share Dealing Code. The Share Dealing Code of the Company is an important governance code to prevent any insider trading activity by dealing in shares of the Company. The Code restricts the Directors of the Company and other specified employees to deal in the securities of the Company on the basis of any unpublished price sensitive information available to them by virtue of their position in the Company. The objective of this Code is to protect the interest of shareholders at large, to prevent misuse of any price sensitive information and to prevent any insider trading activity by dealing in shares of the Company by its Directors and employees. The Code also prescribes sanction framework and any instance of breach of code is dealt with in accordance with the same. A copy of the Share Dealing Code of the Company is made available to all the employees of the Company and the compliance of the same is ensured. Alternative Dispute Redressal Shareholders The Company in the year 2004 had pioneered the mechanism of providing the alternate dispute redressal for shareholders to resolve the shares related disputes pending before the courts / authorities by amicable settlement. The Company had started this unique initiative of organising Alternative Dispute Redressal meetings wherein aggrieved investors come face to face and get a chance to settle their disputes, some of which were pending for years. Such long pending litigations involve significant investment as monetary value of the disputed shares and at the same time accrued dividends / other benefits are locked up unutilised till the dispute is settled. Further, in terms of the requirements of the Companies Act, 1956, such dividends / other specified incomes remaining unclaimed / unpaid for a period of seven years are to be credited to the Investor Education and Protection Fund and the shareholders are not entitled to claim the same thereafter. The first of such meeting was held in Ahmadabad in the year 2005 wherein 14 cases were resolved by amicable settlement. Similar such meetings were held in other cities like Mumbai and Kolkata wherein 31 more cases were resolved to the satisfaction of the parties to the dispute. The Company had engaged the services of retired Judges to preside over the meeting in order to give a fair view to each case. A number of shareholders have availed the benefit of this process and the Company through its various initiatives keeps exploring the possibilities of settling such issues. The process helps the investor in releasing the locked up investment and save their time consumed in contesting legal proceedings. The objective of this process is to facilitate quick resolution between the parties. The shareholders who are willing to avail the benefits of Alternative Dispute Redressal mechanism may approach the Investor Service Department of the Company at the address mentioned below. Consumers / Customers In line with one of the Companys key tenets of Consumer and Customer Centricity, the Company commenced a process of resolving consumer and customer disputes and grievances through an alternative

disputes redressal mechanism. The Company appointed four retired Judges of different High Courts, one in each region, to act as Ombudsman to hear the Companys consumers and customers in a bid to resolve long pending disputes. The Ombudsman independently reviews the merits of the complaint and decides on the issue. The Company has taken the view that the decision arrived at such dispute resolution meetings, while being fully binding on the Company, may not be binding on its consumers and customers and if they choose to continue with litigation, they are free to do so. These meetings were held in all the four regions and achieved reasonable success. Your Company believes that such independent dispute resolution mechanism will further reinforce its commitment and credibility with consumers and also set new benchmarks for the industry. During the year the Company has resolved 86 disputes, including consumer complaints, customer / supplier issues, and shareholder disputes through the institution of Ombudsman. The Company has also set a consumer care helpline Lever care, to help consumers reach the Company for their grievances, suggestions, ideas and to help brands reach out to consumers.

Corporate Governance - ITC

Preamble Over the years, ITC has evolved from a single product company to a multi-business corporation. Its businesses are spread over a wide spectrum, ranging from cigarettes and tobacco to hotels, packaging, paper and paperboards and international commodities trading. Each of these businesses is vastly different from the others in its type, the state of its evolution and the basic nature of its activity, all of which influence the choice of the form of governance. The challenge of governance for ITC therefore lies in fashioning a model that addresses the uniqueness of each of its businesses and yet strengthens the unity of purpose of the Company as a whole. Since the commencement of the liberalisation process, India's economic scenario has begun to alter radically. Globalisation will not only significantly heighten business risks, but will also compel Indian companies to adopt international norms of transparency and good governance. Equally, in the resultant competitive context, freedom of executive management and its ability to respond to the dynamics of a fast changing business environment will be the new success factors. ITC's governance policy recognises the challenge of this new business reality in India. 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, we believe 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 jeopardising 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. We believe 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 decisionmaking 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. We believe that empowerment, combined with accountability, provide 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. We believe that unethical behaviour corrupts organisational culture and undermines stakeholder value.

Preamble Over the years, ITC has evolved from a single product company to a multi-business corporation. Its businesses are spread over a wide spectrum, ranging from cigarettes and tobacco to hotels, packaging, paper and paperboards and international commodities trading. Each of these businesses is vastly different from the others in its type, the state of its evolution and the basic nature of its activity, all of which influence the choice of the form of governance. The challenge of governance for ITC therefore lies in fashioning a model that addresses the uniqueness of each of its businesses and yet strengthens the unity of purpose of the Company as a whole. Since the commencement of the liberalisation process, India's economic scenario has begun to alter radically. Globalisation will not only significantly heighten business risks, but will also compel Indian companies to adopt international norms of transparency and good governance. Equally, in the resultant competitive context, freedom of executive management and its ability to respond to the dynamics of a fast changing business environment will be the new success factors. ITC's governance policy recognises the challenge of this new business reality in India. 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, we believe 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 jeopardising 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. We believe 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 decisionmaking 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. We believe that empowerment, combined with accountability, provide 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. We believe that unethical behaviour corrupts organisational culture and undermines stakeholder value. Roles The core roles of the various entities at the three levels of Corporate Governance will be as follows: Board of Directors (Board): 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 fulfilment. They will provide direction, and exercise appropriate control to ensure that the Company is managed in a manner that fulfils stakeholder aspirations and societal expectations. The Board must periodically review its own functioning to ensure that it is fulfilling its role. The ITC Board will be a balanced Board, consisting of Executive and Non-Executive Directors, the latter including independent professionals. Executive directors, including the Executive Chairman, shall not generally exceed 1/3rd of the total strength of the Board. The Non-Executive Directors shall comprise eminent professionals, drawn from amongst persons with experience in business / finance / law / public enterprises. Directors shall be appointed / re-appointed for a period of three to five years, 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 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 six times a year and as far as possible meetings will be held once in two months. The 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 three working days prior to the meeting. Normally items for the Board Agenda, except those emanating from Board Committees, shall have been examined by the CMC. Minutes shall be circulated within 15 working days of the meeting and 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 assurance to the Board on the adequacy of internal control systems and financial disclosures. The Head of Internal Audit will act as co-ordinator to the Audit Committee, but will be administratively under the control of the Director accountable to the Board for the Finance function. Compensation Committee: To recommend to the Board compensation terms for Executive Directors and the senior most level of management below the Executive Directors. Nominations Committee: To recommend to the Board nominations for membership of the CMC and the Board, and oversee succession for the senior most level of management below the Executive Directors. Investor Services Committee: To look into redressed of shareholder and investors grievances, approval of transmissions, sub-division of shares, issue of duplicate shares, etc. Sustainability Committee: To review, monitor and provide strategic direction to the Company's sustainability practices towards fulfilling its triple bottom line objectives. Terms of Reference of the Board Committees shall include:

Objectives, Role, Responsibilities Authority / Powers Membership & Quorum Chairmanship Tenure Frequency of Meetings

The composition of these Committees will be as follows:Committee Audit Committee Members Chairman Non-Executive Directors of the Company, as may be One of the decided by the Board. The Director responsible for Independent the Finance function, Head of Internal Audit and Directors, to be representative of Statutory Auditors shall be Invitees determined by the with the Company Secretary as the Secretary. Committee. One of the Independent Non-Executive Directors of the Company, as may be Directors, to be decided by the Board. determined by the Board. The Executive Chairman and Non-Executive Directors of the Company, as may be decided by the Executive Chairman. Board. One of the NonDirectors of the Company, as may be decided by the Executive Directors, Board, with the Company Secretary as the Secretary. to be determined by the Board.

Compensation Committee

Nominations Committee Investor Services Committee

Sustainability Committee

The Executive Chairman and Non-Executive Directors of the Company, with the Company Executive Chairman. Secretary as the Secretary.

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. The Chairmanship of Board Committees shall be for two years at a time. Signed minutes of Board Committee meetings shall be tabled for the Board's information as soon as possible. However, issues requiring Board's attention / approval should be tabled in the form of a note to the Board from the Committee Chairman. In the event there are no issues to be brought before the Board by the Audit Committee, the Committee Chairman shall submit a 'NIL' report to the Board. Executive Chairman of ITC: The Executive Chairman of ITC shall operate as the Chief Executive for ITC as a whole. He shall be the Chairman of the Board and the CMC. His primary role is to provide leadership to the Board and CMC for realising Company goals in accordance with the charter approved by the Board. He shall be responsible for the working of the Board, for its balance of membership (subject to Board and Shareholder approvals), for ensuring that all relevant issues are on the agenda, for ensuring that all directors are enabled and encouraged to play a full part in the activities of the Board. He shall keep the Board informed on all matters of importance. He shall preside over the General Meetings of shareholders. As Chairman of the CMC he will be responsible for its working, for ensuring that all relevant issues are on the agenda, for ensuring that all CMC members are enabled and encouraged to play a full part in its activities. Executive 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 / function (Line Director), assume overall responsibility for the strategic management including governance processes and top management effectiveness for businesses / functions reporting to him. It is clarified that 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), act as the custodian of ITC's interest and be responsible for their governance in accordance with the charter approved by the Board. As Director accountable to the Board for a particular corporate function (Line Director), assume overall strategic responsibility for its performance.

Divisional Management Committee (DMC):

Executive management of the divisional business 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 CEO shall convene and chair the DMC meetings. If the Divisional CEO, for any reason, is not in a position to convene a required DMC meeting, he shall in writing delegate the power to convene and chair the required meeting to one of the DMC members identified by name. Such delegation should be either for a specific meeting or for meetings to be held during a specific period of time. It cannot be a general, open-ended delegation. The key functions of the Division shall be represented on the DMC. Normally the Divisional Financial Controller, in addition to being a member, shall act as the Secretary to the DMC and will be responsible for circulation and custody of agenda notes and minutes. The DMC shall generally meet at least once a month to review Divisional performance and related issues. Quorum for meetings shall be 50% of the members subject to a minimum of three members. Decisions will be taken by simple majority. Minutes of meetings shall be tabled before the CMC for its information. Agenda items shall be backed by comprehensive notes from the relevant member / invitee. Agenda papers, as far as practicable, shall be circulated at least three days prior to the meeting. Divisional CEO: The Divisional CEO shall function as the Chief Operating Officer with executive responsibility for day-to-day operation of the Divisional business, and shall provide leadership to the Divisional Management Committee in its task of executive management of the Divisional business.

Corporate governance score for the FMCGIndustry Corporate Governance Score for FMCG Sector No. Governance Parameters Points HUL ITC Nestle T TL USL

Statement of Company's philosophy on code of governance Structure and Strength of board Chairman & CEO Duality Disclosure of Tenure and Age limit of directors Disclosure of Definitions of experts and directors Post Board meeting follow up system and compliance of the board procedures Appointment of lead independent director Disclosure of other provision as to the boards and committees Disclosure of: Code of Conduct 11 Board Committee 12 Disclosure and Transparency 13 General Body Meetings Means of communication and General shareholder information 15 CEO / CFO Certification Compliance of Corporate Governance and Auditors' Certificate 17 Disclosure of Stakeholders' interests : TOTAL COMPANY RANK Appendix 1) www.hul.co.in 2) www.tatamotors.com 3) www.itcportal.com

2 2 5 2 3

2 2 3 2 0

2 2 2 2 0

2 2 1 0 0

2 2 3 0 0

2 2 3 0 0

2 2

0 0

2 0

0 0

0 0

0 0

1 2 2 25 25 3

0 2 2 15 18 3

0 2 2 15 24 3

0 2 2 10 23 3

0 2 2 19 21 3

0 2 2 16 15 2

2 2

2 2

2 2

2 2

2 2

2 2

10 10 100

10 8 71 3

10 8 78 1

10 8 67 4

10 8 76 2

10 4 62 5