Could the board of Tata Sons have handled the exit of Cyrus Mistry from the chairmanship of Tata Sons better?
Yes, if one were to go by Nirmalya Kumar, a close associate of Mr. Mistry and a former member of the Tata Group executive council.
Blog post
In a blog,Mr. Kumar said, “by eschewing the public humiliation of Cyrus Mistry, the bloody aftermath that followed could have been avoided.’’ According to him, the initial contract under which Mr. Mistry was serving as the chairman had been passed via a shareholder resolution of Tata Sons. That contract was due to expire on March 31, 2017, he added. “Instead of a sudden, no warning dismissal, the board could have just let the clock run out in five months,’’ he said. “Unfortunately, instead there was the subsequent public airing of the underbelly of the Tata Group as well as the deleterious impact on the reputations of Ratan Tata, Cyrus Mistry and the Tata brand. The only winners as far as one could see were the public relations companies and lawyers, who are still having a field day.’’
Mr. Kumar said only two Tata CEOs, Bhaskar Bhat and Harish Bhat, had anything negative to say about Mr. Mistry in the press. “And even they were remarkably muted in their criticism.’’
Mr. Kumar gave a blow-by-blow account of the day (October 24,2016) that eventually saw the ouster of Mr. Mistry as the chairman of Tata Sons. He recounted how Mr. Tata and Nitin Nohria, a board member of Tata Sons, visited Mr. Mistry just prior to the board meeting. Mr. Mistry, he said, was given the option of either resigning or face the removal resolution. He also narrated how the members proposed Vijay Singh to chair the board meeting of the day brushing aside the legal objections raised by Mr. Mistry. “Venu Srinivasan then proposed the inclusion of additional matters on the agenda which was seconded by Ronen Sen,’’ he said.
“Each of these resolutions was voted on in turn. It was all over in minutes, no explanations and no opportunity for Cyrus Mistry to prepare a rebuttal,’’ he added.
“CEOs being fired is always news, despite it not being a terribly uncommon occurrence. What made the firing of Cyrus Mistry so unusual was that Tata Group had a history of only six chairman over 148 years! Cyrus Mistry was selected after a careful process that took over a year, and by assuming the role at the age of 46, he was expected to serve between 20-30 years.
“In general, the Tata Group is renowned for its values, which did not encompass a “hire and fire” policy. Most senior Tata executives were consummate insiders, having usually served their entire career with the group,’’ Mr. Kumar said.
