Cyrus Mistry, who was ousted as the chairman of Tata Sons, on Sunday lambasted Tata Sons terming its criticism of independent directors of Indian Hotels and Tata Chemicals, who are “revered names” in India Inc, as “absolutely astonishing and really speaks to how low Tata Sons has unfortunately stooped in their public statements”.
To suggest that “ulterior objectives” and “clever strategy” can sway these eminent names in undertaking their fiduciary duties and in discharging the duties mandated by statute as independent directors is “truly unfortunate,” Mistry said in a statement.
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On the allegation that operating companies were drifting away, Mistry said: “This is furthest from the truth.” Independent directors of Indian Hotels and Tata Chemicals supported Mistry in their board meetings. Out of nine independent directors, six were appointed during Ratan Tata’s tenure. Two of these directors (K Dadiseth and Nasser Munjee) also serve as Trustees on Tata Trusts.
Mistry said, “to understand the rationale behind the new Tata group governance model, one needs to understand the contextual difference within which the group currently functions.” Prior to Mistry’s chairmanship, all the of Board members of Tata Sons, with the exception of him, were internal to the group, he said.
“Today, the structure is exactly the opposite. The requirement to have 30 per cent Trust nominees and 30 per cent independent directors meant that in addition to Ishaat Hussain and Mistry, there was possibly only one more senior group centre member who could be on Tata Sons Board. This limited the involvement of other group centre members on the Tata Sons Board,” Mistry said.
Moreover, in the past three years, all these internal members, with the exception of Ishaat Husain have retired. “This was a generational change. As agreed with the Tata Sons board, the governance mechanism to protect Tata Sons’ interests and ensure adequate group representation on operating company boards, was to have GEC members, other senior group centre members (e.g, Farokh Subedar, S. Padmanabhan), and select CEOs (e.g., Bhaskar Bhat, Noel Tata) on the boards of operating companies,” he said.
The corporate governance framework that was developed under Mistry’s leadership attempted to ensure that group companies would adhere to the group values…, and do all of this without impinging on the independence of the operating companies and the boards…, the statement said.
“In the spirit of protecting the interests of all stakeholders, employees, and minority shareholders, the strategy of individual operating companies, Mistry believed, should be created by their management and approved by their own board of directors,” it said. By placing the responsibility where it should lie, with the board of directors of the operating companies, allowed the independent directors to ensure that the interests of minority shareholders were aligned with the operating company’s strategy as well as the overall direction of the Tata group, he said.