Q. Mr Deveshwar, thank you for agreeing to meet us after all this time. My first question: may I ask how you yourself rate your performance in the 21 months that you have been the CEO of ITC?

A. I find it impossible to talk about my own achievements. ITC has performed well, and the evidence is there in the balance-sheet for everyone to see. I don't think there is any need for me to say anything beyond that.

When you took over as the chairman of the company, a fellow CEO remarked to me that you had inherited a board that resembled a nest of cobras. How did you sort out all those issues, many of which went beyond financial performance?

I didn't inherit the board; the board inherited me. And I don't think ITC's board of directors was a nest of cobras, or anything like that. At least, not to the best of my knowledge.

You know that I have never ever spoken against anyone even when ITC was going through its most difficult times. That has been a great source of strength for me. Since I never reacted to any provocation, there was always one variable less. I have always preferred to be a part of the solution than to be a part of the problem.

Let me put it another way. Does peace now prevail at ITC?

What do you mean by peace? Any board of directors with vitality will always have differences of opinion. To that extent, nothing more should be read into them--so long as every member of the board offers his, or her, comments in the best interests of the company and not because of an individual, or personal, agenda. I have always maintained that. We can always deBATe and, ultimately, resolve every issue in the interests of the company. Most of the decisions that the ITC board makes have been through unanimity.

If I may point out, as far as the process of decision-making in the boardroom is concerned, you have been part of the very same process as an executive director, and now, as its chairman. How is it so very different now?

I will not discuss what happened in the past. But I believe that my role as the chairman of the board is to elicit the views of the other directors, to ensure that every debate is kept on track, and to also see to it that, eventually, decisions are see to it that, eventually, decisions are taken after a complete understanding of all the issues that are being discussed.

You talk about a decision-making proces based on consensus. However, the decision to bail out ITC Classic by injecting a large amount of money into the ailing company did not find favour with your personally. Was that decision also based on a consensus?

How can you know that?...

Tell us if we are wrong.

It's like this. Ultimately, whatever is done must be done in the interests of the shareholders of ITC because I am a trustee of the shareholders of the company. There are many considerations that were weighed before we arrived at the decision. Initially, I may have been reluctant but, once a sustainable plan was brought before the board of directors, and the people who prepared the plan gave us an assurance that it was in the best interests of ITC, I went along with it. After all, at the end of the day, you have to rely on your people.

Still, no one is ready to touch ITC Classic with a barge-pole. How hopeful are you of ever recovering the money that ITC will pump into such a sick finance company?

(after a long pause) The people who are engaged in the revival process of ITC Classic hold a different view, and they have managed to convince the board of the company. The decision to assist ITC Classic with a substantial amount of funds is a major decision. As in any revival process, you hope to be better off if you put the money in the company than if you didn't fund it.

There are some critical elements in the revival process. One is to put in place a dedicated and competent management team. The second is to bring a partner on board, who has both the ability and the expertise to run this business as well as access to cost-effective funds. Over a period of time, if ITC Classic is taken over by such a partner, then ITC can hope to recover its investments.

Your stand vis-a-vis ITC Classic provides an interesting dimension about the role of the chairman of the board. Isn't an executive chairman supposed to take the final decision after he has heard all views in the boardroom?

A board's decision-making process does not work on the basis of one person. Decisions are taken on the basis of majority; it is not just the chairman's decision. There is a misconception about the role of the chairman. I believe that the chairman is only the first among equals. If any issue is put to vote and there is a tie, then the chairman has a casting vote--and that's all. Most of the board members in ITC are representatives of either BAT or the financial institutions, or are independent directors. None of them reports to me. That is the reform we have brought about; now, there are just three or four of us executive directors on the board.

Is this also responsible for the cordial atmosphere that appears to prevail within the ITC board as compared to the acrimony of the past?

Not necessarily. What happened in the last three years is something of an aberration. It hasn't happened even in ITC in the past before that.

How can you make sure that such a thing never happens again in ITC?

It can happen in any boardroom. It happened in ITC because, I think, there were vested interests, and there was a period when some people had subordinated ITC's interests to their own agenda. Which was also encouraged by some quarters. That was sad.

You can prevent this by leading the team with the company's objectives--first, foremost, and ahead of anything else. It is performance that creates a better atmosphere. You have to empower people, and let them participate in the process of taking the company ahead. However, there is no surety with which one can say whether this will happen again or not. It can easily happen.

There are signs which make us believe that it will, perhaps, happen again in the not-so-distant future. For instance, BAT's move to raise its equity stake in VST came close on the heels of the brands deal it struck with ITC. If BAT has decided to allow ITC to market its brands, what will it launch through VST? What do you think will happen now?

I have no idea at all, and I won't guess. It does not concern ITC.

Don't you feel that it would have made more sense for BAT to pump money into the marketing of those brands that are to be launched through ITC rather than investing in increasing its stake in VST?

I have no opinions at all. BAT is a shareholder of VST, and what they do with that company is entirely their own business.

Has Operation Trout--the codename for BAT's gameplan to gain a 51 per cent stake in ITC--ended?

There is no Operation Trout that I know of. At least, at the moment.

Do you feel that BAT could, perhaps, be planning to merge VST with ITC after it has raised its stake in the former so that the end-result will mean another hike in BAT's stake in this company?

I don't know. There is no such proposal before the board of the company.

What would be your stand if BAT renews its demand for a controlling stake in ITC, which could be anything above 35 per cent--not necessarily 51 per cent?

I don't see it as a problem. It's an issue to be decided by all the shareholders of the company. I don't have a role in it, and why should I get involved? What should a shareholder expect from the management of a company? He should expect performance, and a course for the company that is good for him. I think it is unfair to expect anything else from a professional manager.

What are the broad areas of agreement that you have worked out with BAT in recent times?

There is complete agreement on corporate strategy between the two companies. It has been agreed that, fundamentally, we will focus on three business areas: cigarettes and tobacco, hotels, and paper and packaging. And we will find a way of exiting from every other business. However, hotels will cover the travels and tourism business. We are getting a bit into real estate by virtue of assisting ITC Classic. There's complete agreement on these strategic aspects.

The guiding principle of our strategy is to remain in only those businesses where we do, or can in the future, dominate the concerned industry; initially, in the Indian, and then, in the global context. We have no special love for any business, but whatever we choose, we will do so with a commitment to it.

What is the yardstick for selecting these businesses?

Wherever we have special capabilities, or competencies, to excel, and wherever we have demonstrated that we have the ability to get into a position of dominance in that business.

How does ITC's paper business figure in this classification?

Actually, if you take paper by itself, the answer will have to be that it doesn't fall in any of these categories. But we are in two kinds of paper. One is tissue paper for cigarettes, where we are the largest consumers and, in this part of the world, ours is the only such mill that exists. We are looking for a partner for this business because it is proprietary technology, and since we are the largest consumer, we would like to find international players who would like to partner us, and help us get into a position of leadership. Since we are the largest consumer, the strategy would be to create a good source of supply for us.

Insofar as ITC Bhadrachalam Paperboards is concerned, its focus is on paperboards. With the investments that have been made, that mill will be one of the few very large mills in the world and will be internationally competitive. This investment is yet to get operational but, in the next six months, you will know the purpose for which the investment was made. This is the strategy. First, try to dominate on your own. Otherwise, bring in a partner. If you still do not succeed, exit from the business. In hotels, we have every reason to believe that we are excelling. I must, however, point out that ITC's strategy has always been different; it has not necessarily been the same as BAT's.

But, Mr Deveshwar, most transnationals insist that their Indian subsidiaries mirror the strategies they have adopted globally, and not go in for country-specific strategies. Given this perspective, what does BAT think about your strategy?

BAT is now in agreement with ITC's strategy. BAT agrees that ITC now has the right strategy in place, and they will support it. They will support our investments in hotels. They agree that we should find a partner for edible oils in ITC Agro Tech and disengage from the business over a period of time. They are also in agreement with our plan to rescue ITC Classic, find a partner, and gradually exit from that business too...

But aren't financial services an obvious area of interest for BAT

It is a mistaken notion that it is the ITC chairman who determines what the company should be doing. The chairman may influence decisions, and to a large extent, but he too has to be able to convince the board of directors about what the correct strategy is, and how it will bring the best value to the ITC shareholder.

Let us now shift to another subject: the show-cause notice from the Enforcement Directorate alleging violations of the Foreign Exchange Regulation Act by ITC, which has been served on all the directors of the company--including you although you weren't in the company when the violations took place

Well, it's what they called a vicarious responsibility. Just before the incident, and just after that, I was a director of the company. If there is any alleged infringement of the laws, and if those allegations are pertinent to a period before I left for Air India, and then continued for a period after I returned from Air India, it is for that reason that they have asked why the adjudication process should not be initiated against me.

All the directors on the board--including the nominees of BAT and the financial institutions--have been asked the same question. In any case, the chairman of the company will always receive a show-cause notice. The significant thing is that, so far, I do not see in the show-cause notices anything about personal corruption, which was earlier made out to be the case. But I do not wish to comment on all this since it is sub judice.

By the end of this year, ITC will be left with only three executive directors as all the others would have resigned or retired by then. What will be the structure of your board thereafter?

That is something I have first shared with my board. The governance structure that the board has adopted says that the number of executive directors should not exceed one-third of the total number of directors on the board, and should not exceed five in any event. Second, we have decided that, as far as possible, our businesses should be run by the respective CEOs, and that they need not be on the board of the company. Whoever is on the board should have sufficient time and resources to oversee the functioning of the entire company. This is the change we brought about. Earlier, a director would be in charge of the day-to-day functioning of a particular business and so, more often than not, he would not be involved, psychologically, with the governance of other businesses. Nor would other directors participate in the functioning of his business.

So, what we have said now is that the executive directors of the company should not be engaged in the day-to-day operations of the business so that they can devote their energies to the effective supervision of ITC as a whole since they carry a specific responsibility on behalf of the board to oversee certain aspects of the company's businesses. There would be functional, or business, No. 1s who will carry the day-to-day responsibilities of that business. That's how we will be able to deal with this large diversified company with fewer directors. We used to have 10 directors; now, we will make do with four, or a maximum of five, executive directors.

The other aspect, of course, is the splitting of the chairman's post into that of a managing director and a non-executive chairman. Why are you not in agreement with that?

I am not in agreement with that. The chairman should have executive powers, and most certainly so in a multi-product company. All over the world, both systems work. You will find in ITC's group companies that wherever there has been lack of performance, there has been a non-executive chairman and a managing director. There cannot be a general prescription that everyone should work with that structure. American companies do not follow that system; about 47 of the 50 top Fortune-500 companies have chairmen who are also CEOs.

But how, then, is it possible to prevent the chairman from amassing unfettered powers?

That depends on the composition of the board. We also have an audit committee, a nominations committee, and a compensations committee. I am not a member of the audit committee, all the non-executive directors are members of this committee, basically to look at the functioning of the company from the control angle.

Are you in favour of proportional representation on the board?

I am in favour of a competent board, and I am not necessarily in favour of people filling quotas. Whoever comes on the board should have no agenda other than the well-being of ITC wherever he may have come from.

ITC has encountered problems in the past due to inadequate succession planning. How will you ensure that this won't happen again?

That was actually politicised. What was the problem earlier? If I got on the board of ITC in 1984, and became the chairman in 1996, wasn't that succession planning? Of those 12 years, I spent three years at Air India running it successfully. It is the Press that said that there was a succession planning problem in ITC. The media said that I was an outsider who was brought in at the top. Actually, I am the senior-most executive at ITC.

Where do you want to see ITC by the time you are ready to hand it over to your successor?

At the moment, I am settling some of the problems I have inherited which, in effect, are those that the company has inherited: ITC Global, ITC Classic, and the Enforcement Directorate's charges. But I think ITC should become a global leader in all the businesses we are focusing on.