Sustainability. The essence of our existence.

Corporate Governance

Company’s Philosophy on Corporate Governance GRI 102-18

Good corporate governance has been an integral part of our business since inception. We have been implementing sound management practices in compliance with the laws, adhering to the highest standards of transparency and business ethics. These are the drivers that will create value for all our stakeholders, and reinforce our vision to be the most sustainable and competitive company in our industry.

We engage meaningfully with the local communities through our corporate social responsibility initiatives. The Company places high emphasis on empowerment and integrity of employees, their safety and the safety of the communities surrounding our plants. Transparency in the decision making process, fair and ethical dealings with all, responsibility for a clean environment and accountability to all our stakeholders form an important part of our philosophy. It is these practices, inculcated since our inception, that have contributed to our sustained growth. The Company believes that scarce natural resources should be used optimally in its operations in order to promote sustainable development.

The Company’s governance structure is based on the principle that the Executive Management should be given the freedom, within a given framework, to exercise the powers vested in it with due care and responsibility, in order to meet the expectations of all stakeholders. The Company has created a three-tiered corporate governance structure that is in line with this principle:

  • The Board of Directors (BoD): The primary role of the Board is to protect the interest of and enhance value for all our stakeholders. It conducts overall strategic supervision and control by setting goals and targets, policies, governance standards, reporting mechanisms and accountability and decision making processes that are to be followed.
  • Committees of Directors: The committees of the Board such as Audit Committee, Compliance Committee, Nomination and Remuneration Committee, CSR Committee, Risk Management Committee, etc. are focused on financial reporting, audit and internal controls, compliance issues, appointment and remuneration of directors and senior management employees, and implementation and monitoring of CSR activities and the risk management framework.
  • Executive Management: The entire business including support services is managed with clearly demarcated responsibilities and authorities at different levels.
    • The Executive Committee (ExCo): The Executive Committee is headed by the Managing Director & CEO. The CFO and the Heads of Manufacturing, Marketing and HR are its other members and the heads of Technical and Procurement are permanent invitees. This is a brainstorming committee where all important business issues are discussed and decisions taken. The ExCo reviews and monitors monthly performances, addresses challenges faced by the business, draws strategies and policies and keeps the Board informed about important developments that have bearing on the operational and financial performance of the Company. The Committee members report to the Managing Director & CEO.
    • Managing Director & CEO: MD & CEO reports to the Board and is responsible for the entire operations of all the regions, achieving business strategies, project execution, overall performance and growth, achieving the Company’s vision and mission, mergers and acquisitions, significant policy decisions and all critical issues having significant business and financial implications. He provides strategic direction, policy guidelines and extends support to the Executive Committee members and other functional heads. He also ensures implementation of the decisions of the Board and its various committees.

The Board of Directors (BoD) has a very balanced structure, and primarily takes care of the business needs and stakeholders’ interests. The composition of the Board complies with the provisions of the Companies Act, 1956 and the Listing Agreement. At the end of corporate financial year 2015, the total Board strength was twelve, which included five independent, six non-independent non-executive members including the Chairman, and one non-independent executive (MD & CEO). The Board has eleven males and one female member. No member is under 30 years of age.

For more information, please refer to our Annual Report, 2016 at http://www.ambujacement.com/ investors/annual-reports

The Nomination and Remuneration Committee has approved a policy for the selection, appointment and remuneration of directors. The Committee assists the Board in the identification and selection of directors, who shall be of high integrity with relevant expertise and experience, and make up a diverse Board. The abstract of the said policy forms part of the Directors’ Report and is also available on our website.

The directors are appointed or re-appointed with the approval of the shareholders and shall remain in office in accordance with the provisions of the law and the retirement policy laid down by the Board from time to time. The current retirement age for the directors is 75 years. The independent directors are appointed for a fixed term of five years. The Managing Director is also appointed for a term of five years. However, he and all other non-executive directors (except independent directors) are liable to retire by rotation and are eligible for reappointment, unless otherwise specifically provided for under the Articles of Association or under any statute. As required under Regulation 46(2)(b) of the Listing Regulations, the Company has issued formal letters of appointment to the independent directors. The terms and conditions of their appointment are posted on the Company’s website and can be accessed at www.ambujacement.com.

The non-executive directors including independent directors are experienced, competent and highly renowned persons in their respective fields. They take active part at Board and Committee meetings and play a critical role with regard to strategic issues. Their participation enhances transparency and adds value in the decision making process of the Board of Directors. According to the Company’s policy on Board diversity, there will be no discrimination or bias on grounds of age, ethnicity, gender, religion or other socio-cultural factors; the endeavour is to have a group of individuals with a diverse set of personalities and demographics, representing a wide cross-section of industries, professions, backgrounds, occupations and functions, and possessing a blend of skills, domain and functional knowledge, experience and educational qualifications, both individually and collectively. GRI 102-22 to 102-24

On appointment, the concerned director is issued a letter of appointment, setting out in detail the terms of appointment, duties, responsibilities and expected time commitment. Each newly appointed independent director is taken through a formal induction programme including a presentation from the MD & CEO on the Company’s manufacturing, marketing, finance and other important aspects. The Company Secretary briefs the director about her/his legal and regulatory responsibilities. The induction programme includes interactive sessions with ExCo members and functional heads, visits to manufacturing sites, etc.

The familiarisation programme aims to provide independent directors with the cement industry scenario, the socio-economic environment in which the Company operates, the business model, the operational and financial performance of the Company, and other significant developments so as to enable them to take timely and well-informed decisions. They are briefed about their roles, responsibilities, rights and duties under the Companies Act and other statutes. Details about the familiarisation programme can be accessed by clicking on the investor tab on the Company website at http://www.ambujacement.com/ Upload/PDF/familirisatin_programme_for-independent_ directordec2015.pdf

The Company engages outside experts or consultants when dealing with matters of specialised nature. They hold discussions and make presentations to the Board members. Presentations on health & safety, sustainability, performance updates of the Company, the industry scenario, business strategy, internal controls, risks involved and the mitigation plan are made at Board and Committee meetings on an ongoing basis. The Directors are provided with quarterly updates on relevant statutory changes, judicial pronouncements and important amendments. Performance of the Sustainability KPIs and major sustainability initiatives/ achievements during the quarter are reported to the Board. GRI 102-27

In compliance with the Companies Act, 2013, and Clause 49 of the Listing Agreement, the Board adopted a formal mechanism for evaluating its own performance and effectiveness, and also that of its committees and individual directors, including the Chairman of the Board. For the Board and its committees, the exercise was carried out through a structured evaluation process covering various aspects of the Board’s functioning such as the composition of the Board and committees, experience and competencies, performance of specific duties and obligations, governance issues, etc. In case of evaluation of the individual directors, each director had one-to-one meetings with the Chairman of the Board and the Chairman of the Nomination and Remuneration Committee. The directors were satisfied with the evaluation results, which reflected the overall engagement and effectiveness of the Board and its committees. GRI 102-28

Board Committees :

The following committees have been formed with specific objectives for controlling various operations within the system:

  • Audit Committee: The Audit Committee comprises all non-executive directors; majority of them, including the Chairman, are independent directors. The terms of reference of this Committee broadly include:
    • Approval of the annual internal audit plan;
    • Review of financial reporting systems;
    • Review of internal control systems;
    • Discussions on quarterly, half-yearly and annual financial results;
    • Interaction with statutory, internal and cost auditors;
    • Recommendations for appointment of statutory and cost auditors and their remuneration;
    • Overseeing the risk management framework concerning critical operations of the Company.
  • Compliance Committee: The rapid growth of the business, its rising complexity and the increasing number of regulatory complViances necessitated the setting up of a ‘zero noncompliance’ regime to ensure sustainable business operations. The Board established a structured mechanism to ascertain full compliance with statutes, rules and regulations, and constituted a ‘Compliance Committee’ comprising three independent and three non-independent directors including MD. The Chairman of the Compliance Committee is an independent director.
  • Corporate Social Responsibility (CSR) and Sustainability Committee: The CSR Committee of the Board, constituted as required under section 135 of the Companies Act, 2013, is headed by the Board Chairman and has two independent directors and four non-independent directors including MD & CEO as its members. The terms of reference of the CSR Committee are:
    • To frame the CSR policy and review it from time to time;
    • To ensure effective implementation and monitoring of CSR activities as per the approved policy, plans, and budget;
    • To ensure compliance with the laws, rules and regulations governing CSR and periodically report to the Board of Directors.

      • Ambuja Cement Foundation (ACF) holds consultations with community stakeholders. The outcome of such consultations is reported to the highest governance body by MD & CEO as well as Director – ACF through the CSR Committee. The Board held a meeting on 28 April 2017, wherein it approved the expansion of the scope and mandate of the CSR Committee to work as a CSR and Sustainability Committee. All aspects of sustainability, including health & safety, environment (climate change, water, biodiversity, etc), energy, product innovation and development will now be part of this committee’s new mandate, in addition to its responsibility for the Company’s CSR work. GRI 102-21

  • Nomination and Remuneration Committee: This Committee and the BoD approve the remuneration policy for directors and senior management employees. More information is provided in the ACL Annual Report 2015. GRI 102-21, 102-22
  • Stakeholders’ Relationship Committee (Share Allotment and Investor Grievance Committee):This committee is responsible for transfer/ transmission of shares and satisfactory redressal of Investors’ complaints. It recommends measures for overall improvement in the quality of investor services. GRI 102-21, 102-22
  • Other Committees of Directors: In addition to the above committees which are mandatory under the Companies Act, the Listing Regulations and the SEBI Guidelines, the Board has constituted the Capex Committee and Management Committee to look into various business matters.

Although the Company has not appointed dedicated executive-level positions that report directly to the highest governance body on economic, environmental and social topics, these matters are channelized through the CSR Committee and Corporate Sustainability Steering Committee (CSSC) of the Board. Until the Board expanded the scope of the CSR Committee recently, it was responsible for sustainability issues; an update on sustainability performance is part of the agenda of every Board meeting. MD & CEO is the common factor in the Board, the CSR Committee and the CSSC. The CSSC monitors the sustainability endeavours of the Company at the corporate level. It reports to MD & CEO and comprises three permanent members who are Head -Corporate Environment and Sustainability (the convener), Head - CSR and Head - Health and Safety. In addition, corporate functional heads are invited whenever required. The CSSC reviews and approves the Sustainability Report and ensures that all material aspects are covered. It is in touch with the Unit Sustainability Steering Committee (USSC) at each plant location. ACF carries out site specific impact assessments and holds consultations with the communities in and around the plant locations. GRI 102 (19 to 21, 26, 32, 33)

Remuneration and Incentives

The Company has a remuneration policy for directors and senior management employees (available in Annual Report 2016). The policy is approved by the Nomination and Remuneration Committee and the Board. The remuneration of the MD & CEO is based on the Company’s size, industry practice, current trend and the overall performance of the Company. The Nomination and Remuneration Committee submits its recommendation to the Board, which after due consideration approves the remuneration (including annual increments and performance bonus) payable to the MD & CEO within the overall limits prescribed under the Companies Act, 1956. Shareholders’ approval is obtained wherever required. The non-executive directors are paid applicable sitting fees per meeting for attending the Board and other committee meetings except those of the Share Transfer Committee, for which no sitting fees are paid. In addition to the sitting fees, the Company also pays the non-executive directors a uniform commission for their overall engagement and contribution towards the Company’s business, to reinforce the principle of collective responsibility.

The Company provides additional commission to each of the non-executive member-directors of the Audit and Compliance Committees in view of the level of accountability and the complexities of the issues handled by them. However, the maximum commission payable to each non-executive director has been capped. None of the directors holds any convertible instruments. Appointment of the MD & CEO is governed by a service contract for a period of five years and a notice period of three months. GRI 102 (35 to 39)

Values, Ethics and Integrity GRI 102 (16, 17, 25), 205 (1,2,3)

Managing the Risks of Fraud, Corruption and Unethical Business Practices: In view of the potential risk of fraud, corruption and unethical behaviour arising due to the rapid growth and geographical spread of our operations, the Company lays great emphasis on addressing these risks. To meet this objective, a comprehensive Ethical View Reporting Policy, akin to a vigilance mechanism or the Whistleblower Policy, has been laid down. More details about this policy are given in the Corporate Governance Report, which forms part of the Annual Report. The Ethical View Reporting Policy can be accessed on the Company website: www.ambujacement. com. All our operations are assessed for risks related to corruption. In addition, the Audit Committee has constituted an Ethical View Reporting Committee (EVC) that oversees the effective implementation of the Policy. The EVC comprises very senior executives/directors. The Company Secretary acts as the Response Manager and Secretary to the Committee.

In line with the Company’s philosophy of conducting business in an honest, transparent and ethical manner, the Board has laid down an Anti-Bribery and Corruption Directive (ABCD) as part of its Code of Business Conduct and Ethics. The policy, relating to ethics, bribery and corruption, covers the directors and employees of the Company. The Whistleblower Policy covers the directors, employees, vendors and customers of the Company. We take a zero-tolerance approach to bribery and corruption in any form and are committed to act professionally and fairly in all our business dealings. To spread awareness about the Company’s commitment to conduct business professionally, fairly and without bribery or corruption, employee training and awareness workshops were conducted across the organisation during 2015. As part of continuous education on ABCD to the employees, mandatory online training through a web-based application tool was imparted to approximately 4,000 employees. The above policies and their implementation are closely monitored by the Audit and Compliance Committees of Directors and are periodically reviewed by the Board. The Company received 34 complaints during 2016. Of these, five were pre-assessed by the EVC Committee and did not warrant further investigation. Twenty eight complaints were investigated and concluded. One complaint is still under investigation. The cases investigated were mainly of the nature of bribery/ kickbacks, theft, violation of Code of Conduct, etc. The financial impact of these cases was insignificant and caused no damage to the Company.

Ambuja Cements Limited requires that business decisions be made with the aim of performing jobs effectively and fairly in the best interests of the Company, and not based on personal interests. A conflict of interest may arise when personal interests interfere, or are perceived as interfering.

Anyone engaged with Ambuja Cements Limited is required to avoid any relationship or activity that might impair, or be seen to impair our ability to make objective and fair decisions when performing business on behalf of the Company. When such relationships or activities cannot be avoided, they must be disclosed promptly to the local compliance officer. Similarly, any personal interest that could be perceived as having a connection with the execution of professional duties must be disclosed. Property or information of the Group is not to be used for personal gain or to take personal advantage of any opportunity that arises in the course of any work for the Company. All related party transactions are entered into on an arm’s length basis and are compliant with the applicable provisions of the Companies Act, 2013 and the Listing Agreement. No materially significant related party transactions which may have potential conflict with the interest of the Company at large have been made by promoters, directors, key managerial personnel, etc. All related party transactions are presented to the Audit Committee and the Board. Omnibus approval is obtained for transactions which are foreseen and repetitive in nature. A statement of all related party transactions is presented before the Audit Committee on a quarterly basis, specifying the nature, value and terms and conditions of the transactions. The statement is supported by a certificate from MD & CEO and CFO. The Related Party Transactions Policy as approved by the Board is uploaded on the Company’s website. The details of the transactions with related parties are provided in the financial statements.

The total monetary value of financial and in-kind political contributions made directly and indirectly by ACL was zero. There was no expense towards political donations, campaigns or related spending. GRI 415-1

For more information on Corporate Governance, please refer to our Annual Report, 2016 (http://www. ambujacement.com/investors/annual-reports).

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