Tata Sons on Thursday said its board had to remove Cyrus Mistry from the chairman’s post as he “failed to show results” despite being at the helm for five years, including a year as executive vice-chairman, a period long enough to prove his credentials.
During Mr. Mistry’s tenure, the dividend from 40 companies, other than TCS, declined from Rs. 1000 crore in 2012-13 to Rs. 780 crore in 2015-16, according to a nine-page statement from Tata Sons. There was no profit from the sale of investments, and impairment provisions increased 12 times to Rs. 2,400 crore during Mr. Mistry’s tenure, it said.
Stating that Mr. Mistry failed to deliver as per commitment made during his selection process, the letter noted that during the interview, Mr. Mistry had made “relevant comments and submitted a detailed note setting out his views on how the Tatas should be managed.”
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“After four years, it is unfortunate that hardly any of his major views on the management structure have been implemented,” it stated, adding that he was selected because of his recorded views and plans.
‘Deliberately dismantled’
The group’s century-old management structure was ‘consciously dismantled’ by Mr. Mistry resulting in the drifting away of operating companies from the promoter company. “Now, we have an unacceptable new structure where the Chairman alone is the only common director across several companies. This situation could not be allowed to go on.” Tata Sons alleged there were some significant issues of conflict of interest involving the Sharpoorji Pallonji Group which Mr. Mistry did not address.
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Mr. Mistry constantly highlighted the major problem areas in the group as ‘legacy issues’ to discredit and run-down previous Chairman Ratan Tata, the statement said.
Mr. Mistry continuously harped on the ‘past versus present’ and hardly did anything to address the major problems, it said. “He voluntarily took this position and he took on as a challenge for ‘turning around’ those difficult situations,” according to the letter.
“After four years of full-time involvement, we continue to be told how these legacy problems are a major drag.”
Even after four years there was no improvement at Tata Steel Europe, Tata Teleservices-Docomo and Indian operations of Tata Motors, the three major ‘problem companies.’
‘Two jewels’
Stating that Mr. Mistry could not take credit for the good performance of TCS and JLR, it said these ‘two jewels’ were inherited from Ratan Tata, who, the statement reiterated, was responsible for the acquisition of JLR and turning it around.
‘Half-truths’
During Mr. Mistry’s tenure, the Group’s indebtedness increased by Rs. 69,877 crore to Rs. 225,740 crore.
The letter also criticised Mr. Mistry’s approach in divesting ‘bad acquisitions’ saying that the Tatas were known to stand by their companies in difficult times.
Mr. Mistry should have gracefully resigned as chairman of operating companies the moment he was sacked, it said. Mr. Mistry had ‘ulterior objectives’ and the recent development at Indian Hotels Company Ltd (IHCL) has revealed his ‘true colours.’
“He has cleverly ensured that he would be the only Tata Sons director on IHCL board to frustrate Tata Sons’ ability to exercise control,” according to the letter. Tata Sons did not anticipate such ‘devious moves”.
“We will now do whatever required to deal with this situation.”
In response, Mr. Mistry’s camp said the claims by Tata Sons were unsubstantiated and half-truths and failed to address why Mr. Mistry was removed without an explanation. His public relations agency, in a statement, dismissed the allegation of conflict of interest. “To allege ‘ulterior motive’ of taking over control of companies, demonstrated true independence is not there in keeping with Tata governance standards.”
“The Tata Sons statement reflects desperation,” it added.
All the “reasons” in the letter would and should have been tabled and recorded in the minutes of the many Tata Sons board meetings over four years of Mr. Mistry’s chairmanship, said the statement, adding, “unfortunately for the Tatas, no such record existed because these allegations are simply not true.” The “reasons” were not tabled even on October 24. That after 17 days, this is the best that can get said is heart-warming, the note ended.
This article has been corrected for a factual error.