The Tata Cyrus Mistry case; have a look!

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Introduction

  • Tata Sons are holding the Tata Group of Companies. The Chairman of the board of Tata Sons is typically the Chairman of Tata Group of Companies. Considering the Tata operating companies like Tata Steel, Tata Motors, Tata Sons decides to allocate capital to different firms.
  • The Tata Trusts controls more than 66 percent of Tata Sons and are represented by Ratan Tata. However, the Chairman and the Trusts are the same people. Mistry was an exception. The Chairman of Tata Sons was Ratan Tata from 1991 until his retirement on December 28, 2012. Cyrus Mistry succeeded to be the sixth Chairman of Tata Group.
  • It seems that a new parallel trust structure is created which is used to empower new trust and its functionalities. Different companies were being asked to form their own foundations of different philanthropic works which they are engaged in. Mistry has controlled both the operation and information flow.
  • Sir Dorbaji Trust and Sir Ratan Tata Trust are the two trustees chaired by Ratan Tata, who has the power to appoint or remove a chairman. Mistry’s family Shaproo Ji and Pallon Ji Group holds an 18.6% stake in Tata Sons and is considered to be the largest shareholder.

What was Tata Cyrus Mistry Case?

  • On October 24, 2016, the Tata group surprised everyone; when Cyrus Mistry was appointed as the Chairman. Tata sons simply mentioned growing trust depict and repeated departures from the culture and ethics of Tata Group was the reason behind the removal of Mistry. The board also said Ratan Tata to take over as the interim chairman of Tata sons for four months. That’s the time given by boards to find a new chairman.
  • The decision was collectively taken by Tata sons in the long-term interest of the company. The independent directors of the company include Deepak Parekh, Gautam Banerjee, Ireena Vittal, Keki Dadiseth and Vibha Paul Rishi. Those independent directors unanimously expressed their confidence in Cyrus Mistry.
  • However, Shaproo Ji and Pallon Ji Group, the major shareholders of Tata group, has found the ouster of Cyrus Mistry as the chairman to be illegal. Mistry, the son of Pallonji Mistry who heads the group.

Cyrus Mistry case had become a real mystery, but there are some possible reasons for Ouster of Cyrus Mistry

  • Reports say that ouster needs to do with performance issues. The turnover of largest conglomerate had dropped to $103 billion in 2015-2016 from $108 billion the previous year. Net debt had been raised to $24.5 billion in March from $23.6 billion the previous year.
  • Tata Sons were unhappy with Mistry’s business tactics, including the conglomerate’s steel business, and concentrating only on cash cows. The Tatas were present in 100 businesses ranging from Steel to retail to automobiles to software.
  • There was a clash between Mistry and Ratan Tata. Sources claimed that there is an ice between Mistry and Ratan Tata and it’s becoming more and more obvious with the passing time. They were different in revelation, perception, ethos, principles the way they were supposed to be led. There was a logic which was given that there are iron ore deposits in the state. But Ratan Tata nominees argued against the idea, citing the long practice of Tata only contributing to Parliamentary polls. The idea didn’t pass and Ratan Tata was unhappy with the proposal.
  • Ratan Tata wants the business to grow, but under Mistry’s rule, the group had been stagnating. However, Cyrus didn’t take Ratan Tata’s suggestions seriously as he was the former Chairman of Tata Group. As per the reports, he claimed about the business issues he used to face, indirectly blaming Ratan Tata for all these.
  • Even after his retirement, Ratan Tata was still looking towards the future of the company. He was constantly in touch with the big names, while Mistry was busy with daily affairs, not concerning about the future. Tata Sons decided for the removal of Mistry and finding a new Chairman.

Discontentment between Ratan Tata and Mistry

  • Firstly, Cyrus’s Irish citizenship, which he had not renounced despite repeated requests from Tata.
  • Then, comes the second dust-up when it was revealed to the Chairman emeritus of Rs 2,926.35 crore paid to Shaproo Ji and Pallon Ji Group for the host of Civil work, including construction of TCS buildings, assignments in Tata Motors, Indian Hotels, Tata Housing, Indian Rotorcraft Limited and Advance Systems.
  • The third one that happened, when the supremacy of Tata Sons was violated by Group Executive Council (GEC) that was set up by Mistry.

Allegations by Mistry after boards decided to sack him

  • Mistry said that the two members of the nominations and remuneration committee had recently lauded his performance voted for his removal. He emailed this to the directors of boards. Perhaps, the two biggest bombshells in his email.
  • Mistry’s letter has taken some the gloss off the Tata reputation for being a well-governed India corporate group. Tata’s need to answer Mistry’s claim publicly.

Expert opinions on removal of Cyrus Mistry

  • After the fight between Ambani brothers, the news of the removal of Mistry from Tata group has become the biggest face-off in this corporate world.
  • And of course, expert opinions are divided. For Examples, Darius Pandole, the independent director with Tata Global beverages said that Cyrus Mistry has been implacable as the chairman. His professionalism, values, dedication had made a positive contribution to India’s most reputed and corporate world.
  • On the other hand, Abhishek Manu Singhvi, Ratan Tata’s counsel, said “Did he think that the entire board (Tata Sons) is insane? Had they lost confidence in him?”
  • Deepak Parekh, the Chairman of HDFC Ltd. That they are getting calls for overseas investors removing Mistry. The issue can be handled in a more proper and better manner.”

 

 

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