Former Chairman of Tata Sons Cyrus Mistry was to present a corporate governance document before the board aimed at improving governance practices within the group on October 24, the day he was replaced as the chairman, a person close to Mistry told The Indian Express on the condition of anonymity.
“The day he (Cyrus) got fired — that was the discussion day. He had developed a document called the corporate governance document. Because he was frustrated after three years, so he developed a document. It outlined the rules of engagement between the Tata Trust, the Tata Sons, Tata independent boards and operating companies,” said the person who is familiar with the development.
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According to him, Mistry wanted the board to adopt the document as he felt that interference from the trust and the holding company had slowed the decision making process of the operating companies. “Mistry and the board wanted to invest in new spectrum but they had to have three meetings with the Tata Trusts and three meetings with the Tata Sons. Things cannot work this way. It became just too slow to make any decisions because every decision has to be cleared by them (Tata Sons and Tata Trusts) ,” said the person quoted earlier.
He (Mistry) was trying to say legally we need to be right but philosophically also we should be right. We should also make sure that the major shareholder does have some say,” he said.
A day after Mistry was removed as Tata Sons chairman, he had sent an email to the board of Tata Sons and Tata Trusts, leveling a series of allegations against the Tata group and his predecessor, Ratan Tata ranging from fraudulent transactions, unethical practices and conflict of interest, raising questions about the level of corporate governance in the $103-billion conglomerate.
In the email, Mistry referred to the “total lack of corporate governance” while raising questions about key investment decisions in several group companies taken during his predecessor’s tenure besides warning of a potential $ 18 billion write down on what he termed as “legacy hotspots “. Mistry had accused the board of Tata Sons of replacing him as chairman of India’s largest conglomerate without so much as a word of explanation. Sources said that Mistry was informed about the resolution to replace him minutes before the board meeting.
“One minute before the board meeting is going to start two people walk into his (Mistry’s) office one is Ratan Tata and Nitin Nohria. Then Nohria tells him that this relationship between Mistry and Ratan Tata is not working well so we have decided to pass a resolution in the board meeting asking you to step down as chairman…That was it. Do you call this briefing?” said the person.
On November 10, Mistry is expected to chair the board meeting of Tata Chemicals. Mistry is the chairman of top Tata group firms, including Tata Steel, TCS and Tata Motors. The Pallonji Mistry group holds close to 18 per cent stake in Tata Sons while 66 per cent is held by Tata Trusts and the balance by various Tata firms.
With Ratan Tata making it clear that Mistry’s removal was for the “future success” of the group, Tata is unlikely to yield to pressure at this stage. In a letter to employees, Tata had earlier 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.”
Another issue that Mistry was grappling with, according to the person, was on information being provided to one shareholder of the company, at the risk of attracting charges of insider trading and also not protecting the interests of minority shareholders.
The official spokesperson of Tata Sons said that he could not offer a comment as he was not privy to the minutes of the board meetings.