REPORT ON CORPORATE GOVERNANCE FOR THE YEAR ENDED DECEMBER 31, 2015
NESTLE'S PHILOSOPHY ON CODE OF GOVERNANCE
Nestle India Limited, as a part of Nestle Group, Switzerland has over the years followed best practices of Corporate Governance by adhering to practices of the Nestle Group. The significant documents from Nestle Group, which define the standard of behaviour of Nestle India, are "Nestle Corporate Business Principles", "The Nestle Management and Leadership Principles" and "Nestle Code of Business Conduct".
Nestle India's business objective and that of its management and employees is to manufacture and market the Company's products in such a way as to create value that can be sustained over the long term for consumers, shareholders, employees, business partners and the national economy. Nestle India is conscious of the fact that the success of a corporation is a reflection of the professionalism, conduct and ethical values of its management and employees. In addition to compliance with regulatory requirements, Nestle India endeavours to ensure that highest standards of ethical and responsible conduct are met throughout the organisation.
BOARD OF DIRECTORS
Composition and Category of Directors, attendance of the Directors at the Board Meetings and the last Annual General Meeting, Outside Directorships and other Membership or Chairmanship of Board Committees
As at 31st December, 2015, in compliance with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations"), the Company's Board of Directors headed by its Chairman and Managing Director, Mr. Suresh Narayanan comprised six other directors, out of which four directors are Independent Non-Executive Directors including a woman director. None of the Independent Directors of the Company serve as an Independent Director in more than seven listed companies and where any Independent Director is serving as whole-time director in any listed company, such director is not serving as Independent Director in more than three listed companies.
During the year, the shareholders at the 56th Annual General Meeting held on 15th May, 2015 approved appointment of Mr. Rajya Vardhan Kanoria as Independent Director to hold office for five consecutive years for a term up to 12th May, 2019. The Company issued letter of appointment to the Independent Director as per Schedule IV to the Companies Act, 2013 and the terms and conditions of their appointment have been disclosed on the website of the Company (web-link <http://www.nestle.in/investors/directorsofficers>).
During the year, the Board met six times on 13th February, 2015, 15th May, 2015, 8th June, 2015, 29th July, 2015, 29th October, 2015 and 4th December, 2015. The maximum gap between any two Board Meetings was less than one hundred and twenty days. All material information was circulated to the directors before the meeting or placed at the meeting, including minimum information required to be made available to the Board as prescribed under Part A of Schedule II of Sub- Regulation 7 of Regulation 17 of the Listing Regulations. During the year, separate meeting of the Independent Directors was held on 13th February, 2015 without the attendance of non-independent directors and members of the management. All Independent Directors attended the said meeting except Mr. Michael W. O. Garrett who participated over the phone.
The Company has proper systems to enable the Board to periodically review compliance reports of all laws applicable to the Company, as prepared by the Company as well as steps taken by the Company to rectify instances of non-compliances on a half-yearly basis.
The Company has familiarisation programme for Independent Directors with regard to their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, the business model of the Company etc. The familiarisation programme alongwith details of the same imparted to the Independent Directors during the year are available on the website of the Company (web-link <http://www>. nestle.in/investors/directorsofficers).
None of the Non-executive Directors held any equity shares or convertible instruments of the Company during the financial year ended 31st December, 2015. None of the Directors had any relationships inter-se.
Compliance with the Code of Conduct
The Company has adopted the "Nestle India Code of Business Conduct" (Code). The updated Code incorporate the duties of Independent Directors. The Code is available on the website of the Company (web link <http://www.nestle.in/investors/policies>).
The Chairman and Managing Director has given a declaration that the members of the Board of Directors and Senior Management Personnel have affirmed compliance with the Code during the year 2015.
The powers, role and terms of reference of the Audit Committee covers the areas as contemplated under Regulation 18 of the Listing Regulations and Section 177 of the Companies Act, 2013, as applicable, besides other terms as referred by the Board of Directors.
The powers include investigating any activity within its terms of reference as specified by the Board and seeking information from any employee, obtain professional advice from external sources and have full access to information contained in the records of the Company.
The role includes oversight of Company's financial reporting process and disclosure of financial information to ensure that the financial statements are correct, sufficient and credible; recommending the appointment, re-appointment, remuneration and terms of appointment of auditors and approval of payment for any other services rendered by statutory auditors; reviewing with the management quarterly results and annual financial statements before submission to the Board for approval; approval or any subsequent modification of any transactions of the Company with related parties; review and monitor the auditor's independence and performance and effectiveness of audit process; scrutiny of inter corporate loans and investments, if any; evaluation of internal financial controls and risk management system; and reviewing the functioning of the whistle blower mechanism.
The committee mandatorily reviews information such as internal audit reports related to internal control weakness, management discussion and analysis of financial condition and result of operations, statement of significant related party transactions and such other matters as prescribed.
Mr. Ashok Kumar Mahindra, an Independent Non-Executive Director, is the Chairman of the Audit Committee. Mr. Rajya Vardhan Kanoria and Mr. Ravinder Narain, Independent Non-Executive Directors are members of Audit Committee. Mr. Michael W.O. Garrett ceased to be member of the Committee with effect from 15th May, 2015 upon relinquishment of his Office as a Director of the Company. All members of the Audit Committee are financially literate and Mr. Ashok Kumar Mahindra and Mr. Rajya Vardhan Kanoria have related financial management expertise by virtue of their comparable experience and background. The Company Secretary acts as the Secretary to the Committee. The Director-Finance & Control and CFO, Head of Internal Control and Costing, Head of Financial Accounting and Reporting and Deputy Company Secretary are permanent invitees to the Meetings of the Audit Committee. The Chief Internal Auditor, the concerned partners/ authorised representatives of Statutory Auditors and Cost Auditors are also invited to the meetings of the Audit Committee.
During the year, the Audit Committee met four times on 12th February, 2015, 14th May, 2015, 29th July, 2015 and 29th October, 2015 and all members of the Committee attended the aforesaid meetings except for one meeting held on 12th February, 2015 where Mr. Michael W.O. Garrett participated over the phone and one meeting held on 29th October, 2015 where Mr. Ravinder Narain was granted leave of absence. The maximum gap between any two meetings was less than one hundred and twenty days.
NOMINATION AND REMUNERATION COMMITTEE
The powers, role and terms of reference of the Nomination and Remuneration Committee covers the areas as contemplated under Regulation 19 of the Listing Regulations and Section 178 of the Companies Act, 2013, besides other terms as referred by the Board of Directors. The role includes formulation of criteria for determining qualifications, positive attributes and independence of a director and recommending to the Board a policy relating to the remuneration for the directors, key managerial personnel and other employees; formulation of criteria for evaluation of Independent Directors and the Board; devising a policy on diversity of Board of Directors; and identification of persons who are qualified to become directors and who may be appointed in senior management in accordance with the criteria laid down, and recommend to the Board of their appointment/noting and removal.
Mr. Rajya Vardhan Kanoria, Independent Non-Executive Director, is the Chairman of the Committee with effect from 15th May, 2015, Mr. Ravinder Narain and Mr. Ashok Kumar Mahindra are the members of the Committee. Mr. Michael W.O. Garrett ceased to be member of the Committee upon relinquishment of his Office as a Director of the Company with effect from 15th May, 2015. The Managing Director and Head of Human Resources are permanent invitees to the Committee meetings. The Company Secretary is the Secretary of the Committee.
During the year, the Nomination and Remuneration Committee met four times on 12th February, 2015, 14th May, 2015, 29th July, 2015 and 29th October, 2015 and all members of the Committee attended the aforesaid meetings except for one meeting held on 12th February, 2015 where Mr. Michael W.O. Garrett participated over the phone and for one meeting held on 29th October, 2015 where Mr. Ravinder Narain was granted leave of absence.
The above remuneration of Executive Directors does not include provision for incremental liability on account of pension, gratuity, compensated absences and long service awards since actuarial valuation is done for the Company as a whole. The appointment of executive directors is by virtue of their employment with the Company as management employees and therefore, their terms of employment are governed by the applicable policies at the relevant point in time. Commission is subject to adequate profits being earned. A fair portion of the Executive Director's Performance Linked Incentive is linked to Company's performance. This creates alignment with the strategy and business priorities to enhance shareholder value. The total reward package for Executive Directors is intended to be market competitive with strong linkage to performance in line with Company's Remuneration Policy. During 2015, due to MAGGI Noodles crisis, the financial performance of the Company was significantly impacted. While determining the total Commission of the Directors, factors such as efforts of the Company to withdraw, rebuild and re-launch MAGGI Noodles portfolio before the end of the year was taken into consideration.
The Non-executive directors are paid remuneration based on their contribution and current trends. Sitting fees is paid for attending each meeting of the Board and Committees thereof. Additionally, the non-executive directors are entitled to remuneration up to an aggregate limit of one percent per annum of the net profits of the Company, provided that none of the directors shall receive individually a sum exceeding ?10,00,000/- (Rupees ten lakhs), as approved by the members at the Annual General Meeting held on 12th May, 2014. Within the aforesaid limit, the commission payable is determined by the Board and equal amount of commission is payable to Independent Non-Executive Directors on a pro-rata basis. During the year under review, remuneration of non-executive directors was approved by the Board of Directors with the interested non-executive directors, not participating or voting, as per the terms approved by the shareholders at the Annual General Meeting.
The Company does not have any stock option scheme. The Company participates in the Nestle Performance Share Unit Plan ('Plan') of Nestle S.A., whereby select employees are granted non-tradable Performance Share Units of Nestle S.A. Perquisites of the Whole-time/ Managing Director include, inter-alia, Leave Travel and payments for the Performance Share Units of Nestle S.A. vested during the year equal to the market value of the underlying shares on the date of vesting.
As required, a brief profile and other particulars of the Director seeking reappointment is given in the Notice of the 57th Annual General Meeting and forms part of the Corporate Governance Report.
STAKEHOLDERS RELATIONSHIP COMMITTEE
The Stakeholders Relationship Committee oversees, inter-alia, redressal of shareholder and investor grievances, transfer/ transmission of shares, issue of duplicate shares, exchange of new design share certificates, recording dematerialisation/ rematerialization of shares and related matters.
Mr. Ravinder Narain, Independent Non-Executive Director, is the Chairman of the Stakeholders Relationship Committee. Mr. Rajya Vardhan Kanoria and Mr. Shobinder Duggal are the members of the Committee. Mr. B. Murli, Senior Vice President - Legal & Company Secretary acts as the Compliance Officer to the Committee.
The Committee met four times during the year on 12th February, 2015, 14th May, 2015, 29th July, 2015 and 29th October, 2015. All members of the Committee attended the aforesaid meetings except one meeting held on 29th October, 2015 where Mr. Ravinder Narain was granted leave of absence.
During the year, 6 complaints were received from shareholders and investors. All the complaints have been resolved to the satisfaction of the complainants and no investor complaint was pending at the beginning or at the end of the year. The Company has acted upon all valid requests for share transfer received during 2015 and no such transfer is pending.
Mr. Shobinder Duggal, Director - Finance & Control and CFO is the Chairman of the Committee and Mr. Aristides Protonotarios, Director - Technical and Mr. Anurag Dikshit, Head of Treasury and M&A are the other members of the Committee. The Company Secretary acts as the Secretary to the Committee. The roles and responsibilities of the Risk Management Committee are as prescribed under Regulation 21 of the Listing Regulations and includes monitoring and review of risk management plan on a quarterly basis and reporting the same to the Board of Directors periodically as it may deem fit, in addition to any other terms as may be referred by the Board of Directors, from time to time. During the year, the Committee met four times on 2nd February, 2015, 27th April, 2015, 8th September, 2015 and 1st December, 2015 and all the members of the Committee attended the meetings.
CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITY COMMITTEE
The Committee oversees corporate social responsibility, corporate governance and other business related matters referred by the Board or the Chairman, as and when deemed necessary, for the consideration and recommendation of the Committee. This Committee also discharges the role of Corporate Social Responsibility Committee under Section 135 of the Companies Act, 2013 which includes formulating and recommending to the Board, a Corporate Social Responsibility (CSR) Policy indicating the activities to be undertaken by the Company, as per Schedule VII to the Companies Act, 2013; recommending the amount of expenditure to be incurred; and monitoring the CSR Policy of the Company. The other powers and duties of the Committee include acting as a consulting body to the Board on various matters related to company's financial, commercial or industrial policy, corporate governance matters and making recommendations, if any, to the Board.
The Committee comprises Mr. Suresh Narayanan, as the Chairman of the Committee, Dr. Swati A. Piramal and Mr. Ravinder Narain, Independent Non-Executive Directors as other members of the Committee. During the year, Mr. Michael W.O. Garrett ceased as a member and Mr. Antonio Helio Waszyk ceased as Chairman of the Committee upon relinquishment of their offices as Director of the Company with effect from 15th May, 2015 and 1st October, 2015, respectively. The Company Secretary acts as the Secretary to the Committee.
The Committee met two times during the year on 13th February, 2015 and 29th October, 2015. All the members attended the above meetings except for the meeting held on 13th February, 2015 where Mr. Michael W.O. Garrett and Dr. Swati A. Piramal participated over phone and for the meeting held on 29th October, 2015 Mr. Ravinder Narain was granted leave of absence.
CEO/ CFO CERTIFICATION
The Chairman and Managing Director; and the Director- Finance & Control and CFO of the Company have certified to the Board of Directors, inter alia, the accuracy of financial statements and adequacy of internal controls for the financial reporting as required under Regulation 17(8) of the Listing Regulations for the year ended 31st December, 2015.
MEANS OF COMMUNICATION
The quarterly results of the Company was widely published in leading newspapers such as Financial Express and Jansatta and also displayed at the Company's website www.nestle.in All official press releases, presentations to analysts and institutional investors and other general information about the Company are also available on the Company's website.
The presentations made to the institutional investors or analysts, if any, are not communicated individually to the shareholders of the Company. However, in addition to uploading the same on the website of the Company, the presentations are sent to the Stock Exchange for dissemination.
GENERAL SHAREHOLDER INFORMATION
Annual General Meeting
Day, Date and Time : Thursday, 12th May, 2016 at 10:00 a.m.
Venue : Air Force Auditorium, Subroto Park, New Delhi - 110 010.
Financial Calendar, 2016 (tentative)
First Quarter Results :Second week of May, 2016
Second Quarter and Half-yearly Results :Last week of July, 2016
Third Quarter Results :Last week of October, 2016
Annual Results : February / March, 2017
Financial Year*: 1st January to 31st December
Annual Book Closure 18th May, 2016 to 19th May, 2016 (both days inclusive)
*During the year, the Company Law Board has granted approval for continuation of the period of January to December as the Financial Year of the Company, in terms of Section 2(41) of the Companies Act, 2013.
Dividend payments: Final dividend of ? 18.50 per equity share has been recommended by the Board of Directors and subject to the approval of the shareholders at the ensuing Annual General Meeting is proposed to be paid on and from 31st May, 2016.
The First and Second interim dividends for the year 2015, at the rate of ? 14/- per share and ? 16/- per share respectively were paid on/ from 2nd June, 2015 and 23rd December, 2015, respectively.
Listing on Stock Exchanges and Stock Code
Shares of the Company are listed at BSE Limited, Mumbai. The Company's Stock Code is 500790. The ISIN Number of Nestle India Limited on both the NSDL and CDSL is INE239A01016. Market Price Data
Registrar and Share Transfer Agents
M/s Alankit Assignments Limited, 1E/13, Jhandewalan Extension, New Delhi -110 055.
Share Transfer System
Share transfers are registered and returned in the normal course within a period of 15 days from the date of receipt. Requests for dematerialisation of shares are processed and confirmation thereof is given to the respective depositories i.e. National Securities Depository Ltd. (NSDL) and Central Depository Services India Limited (CDSL) within the statutory time limit from the date of receipt of share certificates provided the documents are complete in all respects.
Outstanding ADRs / GDRs / Warrants or any convertible instruments, conversion date and likely impact on equity
Commodity price risk or foreign exchange risk and hedging activities
During the year 2015, the Company had managed the foreign exchange risk and hedged to the extent considered necessary. The Company enters into forward contracts for hedging foreign exchange exposures against exports and imports. The details of foreign currency exposure are disclosed in Note No. 47 to the Annual Accounts.
The Company's plants are located at Moga, Samalkha, Nanjangud, Choladi, Ponda, Bicholim, Pantnagar and Tahliwal.
Address for correspondence
Shareholder Services, M - 5A, Connaught Circus, New Delhi - 110 001. Phone No.: 011-23418891, Fax. No.:011-23415130 E-mail for investors: firstname.lastname@example.org
SEBI toll-free helpline service for investors: 1800 22 7575 (available on all days from 9:30 a.m. to 5:30 p.m. excluding declared holidays). SEBI investors' contact for feedback and assistance: tel. 022-26449188, e-mail : email@example.com