Two proxy advisory firms have given divergent recommendations to minority shareholders of Tata Consultancy Services (TCS) in the run-up to its Extra-Ordinary General Meeting (EGM) in which the company will seek approval to remove former Tata Sons chairman Cyrus Mistry as director.
Stakeholders Empowerment Services (SES), in a report, said “The performance of TCS has been agnostic to different persons occupying the post of Chairman. TCS appears to be a company having matured, well-settled processes and systems and a competent work force and management team. Therefore, removal of Mr. Mistry as a director is not likely to impact the company's performance.”
Since there was ‘high probability’ that the continuance of Mr. Mistry could lead to a ‘divided board’, thus destroying value, “However there is a high probability that continuation of Mr. Mistry might lead to a ‘Divided Board’ which is a value-destroyer, for sure. Thus, keeping in mind the probable consequence of Mr. Mistry continuing on the Board and in the best interest of the future of the Company, “SES recommends that shareholders should vote for the resolution,” J.N. Gupta, MD, SES said. After removing Mr. Mistry as chairman of TCS, Tata Sons had asked the company to convene an EGM to remove him from the board. The EGM is scheduled for December 13.
‘Oppose’ recommendation
Meanwhile, advisory firm ISS has asked shareholders to oppose the resolution.Stating that under Mr. Mistry almost all Tata group companies had performed well, it said his removal from the TCS board was unwarranted.
“...neither Tata Sons nor the board of TCS has provided unaffiliated shareholders, who may be primarily concerned with Mr. Mistry’s impact at the company level rather than at the group level, with compelling evidence that the proposal to remove him will be beneficial for TCS or that his continued presence on the board is expected to have a material negative effect on the board governance or future performance; and, therefore support for the proposal is not considered warranted,” it said.
