Amid a spate of charge and counter-charges, Ratan Tata, interim chairman of Tata Sons, on Tuesday said the move to replace Cyrus Mistry as Tata Sons chairman was “a well-considered but difficult decision made after careful, thoughtful deliberations.”
Reassuring employees on the future of the group and its companies, Tata said in a letter that the decision to change the leadership at Tata Sons was to maintain the Tata “culture and value system”.
Tata’s second letter to employees came hours after Mistry released a statement about the group’s ill-fated partnership with Japanese telecom giant Docomo, which has been awarded $1.17 billion by an international arbitration court but remains entangled in court cases. Tata also promised “a world-class leader” for the $103 billion group in his letter and assured of “maintaining stability and continuity of leadership”.
Mistry, who was sacked a week ago, had alleged last week that his removal was illegal, based on invalid grounds including non-performance, and prefaced by constant interference by Ratan Tata. Since his sacking, Mistry and Tata Sons have issued statements of charges and counter-charges of financial irresponsibility and ethical impropriety.
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A day after his removal, Cyrus Mistry had raised a series of serious allegations against the overall functioning of the group, “total lack of corporate governance” and “the failure on the part of the directors to discharge the fiduciary duty owed to the stakeholders of the group”. “I cannot believe that I was removed on grounds of non-performance. I am not sure if the individual board members and trustees truly appreciated the extent of the problems I had inherited,” Mistry had said.
“The decision to change the leadership of Tata Sons was a well-considered and serious one for its board members. This difficult decision, made after careful and thoughtful deliberation, is one the board believes was absolutely necessary for the future success of the Tata Group,” Tata’s letter said.
“While I am excited with the opportunity to work with all of you once again as an interim chairman to maintain stability and continuity, I am looking forward with equal excitement to the finalisation of the selection committee of a world class leader to be the new chairman of the group,” Tata said.
“I would like to stress that your company and the Tata Group are well served. The directors on your board and empowered leadership of your companies continue to serve with the same degree of passion and ethical commitment as they have done in the past,” Tata said in the letter. “As a group, we are steadfast in our resolve to maintain the Tata culture and value system that all of us have worked so hard to nurture over the decades.”
“As I said in the meeting with CEOs last week, that the companies need to focus on their profit margins and their market positions vis-à-vis competition, and not to compare themselves with their own past. The focus has to be on ‘leading’ rather than ‘following,” he said. “Over the years, I have been amazed at the spirit each one of you has displayed to meet the ambitious objectives and goals that we have set, as also the value system that we have upheld, which has differentiated our group from others,” Tata said.
In a statement, rating agency Crisil said, “at this stage, we do not believe that the change in chairmanship, will have any immediate impact on the business and/ or financial risk profile of Tata Sons, or any of the group companies rated by Crisil. However, management and strategy continuity is an important element of our credit analysis.”