Escalating the boardroom battle at India’s largest conglomerate, Tata Sons on Sunday charged Cyrus P Mistry of misleading to get selected as Chairman, retracting on his promises, concentrating powers and using free-hand given to him to weaken management structures. Days ahead of meetings of shareholders of group companies to consider removing Mistry from board of key listed companies, Tata Sons said it is bringing out “key facts” that resulted “in the loss of confidence” in him and leading to his removal.
Tata Sons said that Mistry “misled” the Selection Committee set up in 2011 for selecting a Chairman of Tata Sons to succeed Ratan Tata, by “making lofty statements about his plans for the Tata Group and more importantly indicated an elaborate management structure for managing the Tata Group, given its diversity of business, by suggesting a management structure aimed at dispersal of authority and responsibility.”
“These statements and commitments from Mr Cyrus Mistry played an important role in the Selection Committee’s final selection of Mr Mistry as Chairman. After waiting for a period of four years, almost none of these management structures and plans have been given effect to. Clearly, in our opinion, the Selection Committee was misled in its choice of Mr Mistry,” it said. It charged Mistry of “inappropriate” conduct by retracting from his promise to distance himself from his family enterprise – Shapoorji Pallonji & Company to create “a sense of breach of trust” and posing “significant challenge to the high corporate governance principles Tata Sons strived for.”
“This retraction, created grave concerns on Mr Mistry’s ability to lead the Tata Group devoid of personal conflicts and put to risk the high standards of self-less governance, that lies at the core of the Tata philosophy,” it said. Mistry, it said, had over the past 3-4 years concentrated all power and authority only in his own hands as Chairman in all the major Tata Group operating companies and “gone about systematically diluting the representation of Tata Sons on the Boards of various Tata Companies.”
Mistry took advantage of the “free hand” and trust “to weaken management structures in Tata Companies acting contrary to his fiduciary duties,” Tata Sons said in the appeal to shareholders. Tata Sons said its Board has been concerned for some time about the financial performance as the holding company’s dividend income (other than from TCS) declined continuously and staff costs more than doubled.
“All this would have resulted in losses but for the TCS dividend. Mr Mistry did not show concern about these issues and the increasing dependence of Tata Sons on TCS. The Board could not accept this any further as it had the potential to risk the financial viability of Tata Sons,” it said.
Reacting strongly to the Tata’s appeal, Cyrus Mistry said Ratan Tata’s conduct has eroded the Tata brand and values materially. In a statement released, Mistry said, “Repeat a lie thousand times and hope it becomes a truth seems to be Ratan Tata’s last-ditch effort to overcome a monumental disaster his actions unleashed.”