Tata Sons has said the decision to remove Cyrus Mistry as chairman of Tata Sons was not taken suddenly or in haste and it “was the result of a chain of events that led to a growing trust and confidence deficit that had to be addressed without delay”.
“Ensuring a positive relationship with investors and shareholders specially the principal shareholders is one of the primary duties of any leader, which Mistry was unable to fulfil. This led to a growing and untenable trust deficit between Tata Sons and the Tata Trusts,” Tata Sons said in its affidavit, responding to the petition filed by investment firms associated with Mistry’s family against his removal at the National Company Law Tribunal (NCLT). Mistry was removed as chairman after “little or no signs of improvement” in his leadership and due to “growing and untenable trust deficit between Tata Sons and the Tata Trusts,” it said.
Tata Sons affidavit said Ratan Tata, who was then chairman emeritus of Tata Sons, had personally asked Mistry to resign as chairman as the board had lost faith in him. “Before the commencement of the board meeting of Tata Sons on October 24, 2016, Ratan Tata and and Nitin Nohria personally spoke to Mistry and offered Mistry an opportunity to resign voluntarily as Executive Chairman. However, Cyrus Mistry refused to do so,” Tata Sons said.
The affidavit said several disturbing facts emerged about his leadership including insufficient details and discipline on capital allocation decisions, slow execution on problems, strategic plan and business plan lacking specificity and follow-through, no meaningful steps to enter new growth businesses and weak top management team. Mistry was reluctant to accept and fully embrace the terms in the Articles of Association that spelled out the governance structure of Tata Sons and certain rights of the Tata Trusts and the Trust Nominee Directors — terms which he himself had participated in finalising through extensive meetings and discussions with representatives of the Tata Trusts and external advisers, it said.
Tata Sons said Mistry in a “systemic and planned manner” reduced the representation of Tata Sons’ directors on the boards of other major Tata Companies.
As several directors of Tata Sons on the board of Tata companies retired, he did not appoint any directors of Tata Sons on the boards of other Tata Companies, as was the practice in the past. “This systematic dilution weakened the bind through which Tata values, ethos, governance principles, group strategies were to be implemented across the Tata Group companies. In most of the cases, Mistry ensured that he was the only director who was common to Tata Sons and Tata Group companies. Effectively making himself the only ‘channel’ between Tata Sons and Tata group companies. Mistry’s actions were deliberately weakening the Tata Group structure which was inimical to Tata Sons’ interest and therefore, the mismanagement, if any has been perpetrated by Mistry,” the petition said.
“During Mistry’s tenure as executive chairman, several board members, including Nohria, repeatedly expressed their concerns to him about the criteria and discipline employed to make capital allocation decisions,” it said. Mistry focused only on the problems from the past and blamed them on “legacy issues” but identifying these hot-spots, the execution was slow and lacked a sense of urgency, the affidavit said.
Although a strategic plan was presented in June 2014, it lacked the specificity. Also, no new business initiative was launched that gained meaningful traction.
‘Natural for Tata Sons to deny allegations’
Sources in the Mistry camp said it is but natural that Tata Sons, its directors and the trustees of Tata Trusts would deny allegations and level counter-allegations. “The Petitioners and Cyrus Mistry will indeed file their rejoinder on all facts and issues that are involved in the proceedings. Meanwhile, as stated earlier, since the matter is before a judicial tribunal, there is no question of participating in a trial outside the tribunal,” they said.