Cyrus Mistry's charges unforgivable, says Tata Sons

Group says trust deficit with board led to former chairman's ouster

A day after former chairman of Tata group Cyrus Mistry’s letter  accusing the earlier management led by Ratan Tata of saddling the group with bad investments that could potentially lead to Rs 1.18 lakh crore of write-downs became public, the Tata group hit back saying group companies made disclosures on all impairments and presented a true and fair picture of their accounts to shareholders.

“For the last four years, Mistry was party to the accounts that were disclosed to the regulators and shareholders. The Tata Sons board in its overwhelming view was of the opinion that Mistry was unsuitable for the job,” said a Tata group insider. 

As expected, the Tatas, angry with Mistry’s leaked letter to Tata Sons board, also upped the ante against the latter and said he was asked to go for his failure to present the board with any long-term vision or plan. The plan, presented to the board in September, was flawed and heavily dependent on only one company, Tata Consultancy Services.  

Besides, the plan, presented late in the fourth year of his five-year term, also lacked emphasis on return on capital of group companies, the source said. There was also no mention of financial discipline and of portfolio rejig, the source said. All these shortcomings were communicated to him, but the advice was not heeded, said the insider, asking not to be named.

In a statement, the group said Mistry, who had been on Tata Sons’ board since 2006, was fully familiar with the culture, ethos, and governance structure.

“It is unfortunate that it is only on his removal that allegations and misrepresentation of facts are being made about business decisions that the former chairman was party to for over a decade in different capacities.” It also added that efforts were now being made to level accusations against individuals and company boards for ignoring corporate governance norms that were supposedly upheld by Mistry while in office. 

Mistry’s attempt to besmirch the image of the group in the eyes of 600,000-plus employees was unforgivable, the group said. But, Mistry’s explosive letter detailing lack of corporate governance in various group companies, resulted in the group’s listed companies losing combined market value of Rs 26,000 crore as on Thursday since Mistry’s exit.

In statements to stock exchanges, several listed entities said they had made all disclosures and taken proper impairments on investments.

The Tata Sons statement also said it was a matter of deep regret that a communication marked confidential to Tata Sons’ board members was made public in an unseemly and undignified manner. It added, “The correspondence makes unsubstantiated claims and malicious allegations, casting aspersions on the Tata group, the Tata Sons board and several Tata companies and some respected individuals. These will be responded to in an appropriate manner." 

The Tata Sons said its board gives its chairman complete autonomy. However, Mistry’s tenure was marked by repeated departures from the culture and ethos of the group.  

The statement said that the Tata Sons' board, composed of several eminent personalities, was not a group of people who would act without exercising proper judgement in the best interests of the entities they sit on the boards of. "It is unfortunate that Mr Mistry had overwhelmingly lost the confidence of the members of the board of directors for a combination of several factors," it added. 

The directors of Tata Sons’ board had repeatedly raised concerns on certain business issues, and trustees of the Tata Trusts were increasingly concerned with the growing trust deficit with Mistry, but these were not addressed. “The Tata Sons board, in its collective wisdom, took the decision to replace its chairman in the manner undertaken,” the statement said.

In his mail to Tata Sons' directors and Tata Trustees on Tuesday, Mistry had said he was reduced to a “lame duck” chairman and was asked to sign on questionable deal papers by Tata. He also accused Tata Trusts' nominated directors, Nitin Nohria, Dean of Harvard Business School, and Vijay Singh, former defence secretary, of being “postmen” as they took instructions from Tata, while keeping the board meeting of Tata Sons on hold.

The group’s statement said it was beneath its dignity to engage in a public spat on the unfounded allegations made by Mistry. “It is convenient to put selective information in the public domain to defend one's point of view. There is a multitude of records to show that the allegations made by Cyrus Mistry are unwarranted and these records will be duly disclosed before appropriate forums, if and when necessary, sufficiently justifying the decision made by responsible boards of directors of Tata Sons and its group companies,” the statement said.

Ratan Tata, in his first interaction with senior leaders of the group on Tuesday, had stressed the need to continue focusing on building great businesses, while laying emphasis on delivering strong shareholder returns. Board members of Tata Sons have in the past stressed the need to focus more on bringing down debt, and on portfolio and capital efficiency. 

The Tata group also dismissed rumours that Rakesh Sarna, MD & CEO of Indian Hotels, will be asked to go as he was a Mistry appointee.

Meanwhile, the interim chairman, Ratan Tata, met the Chairman of Life Insurance Corporation V K Sharma, one of the largest investors in Tata group entities, seeking his support. Many bank chairmen and CEOs told this paper that they supported the Tata-led management as it has never defaulted on commitments.