 "No compelling reason for Cyrus Mistry's removal as director: InGovern")
Six of the seven Tata listed group companies where Mistry serves as a director have called EGMs between December 13 and 26 after having received requisition to this effect from the promoter shareholder, Tata Sons.
Cyrus Mistry was sacked as chairman by the board of Tata Sons - the holding company of group firms - on October 24, but he continues to chair the boards of various entities.
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"Tata Sons has not provided any compelling reasons for the removal of Cyrus Mistry as a director from the boards of operating companies," InGovern Research Services said in a report.
"Tata Sons has not articulated any new plans or visions for the operating companies than what the boards under Mistry had adopted."
Similarly, global proxy advisory firm ISS has asked TCS shareholders to vote against the move to remove Cyrus Mistry as the director of TCS and other large group companies, saying Tata Sons has not given any "compelling evidence" for his ouster.
Mistry continues to have beneficial shareholding of 3-13 per cent in the listed companies through the 18.4 per cent minority shareholding in Tata Sons.
"His presence as director... Of listed companies should be a balance on the boards and representation of the minority shareholder. In many operating companies, Mistry continues to have the confidence of the independent directors," InGovern noted.
The proxy advisor firm suggested that shareholders need to question inherent assumptions made regarding the value of the group structure and 'Tata' brand and demand greater disclosures on information flow between Tata Sons and operating companies.
Minority shareholders should decide on their votes independent of the actions of the promoter shareholder, it added.
The 6 companies -- Tata Consultancy Services, Tata Steel, Tata Motors, Indian Hotels, Tata Power, Tata Chemicals and Tata Power -- have called EGMs during December 13-26 while Tata Global Beverages is yet to announce any such date and notice.
The proxy firm has questioned the logic as to why the TCS board has recommended removal of a director who was given a favourable rating in his evaluation as chairman a few months ago itself.
"The plausible reason is that he was a nominee of Tata Sons on board of TCS and since he was replaced as chairman of Tata Sons, it is natural that he is removed from the board of TCS," it said.
Besides, Tata Steel, Tata Motors and Tata Chemicals have called EGMs to remove Nusli Wadia as independent director.
InGovern has suggested that minority shareholders should vote against removal of Wadia as Tata Sons proposal is not because of his long tenure but because he has expressed a contrary opinion.
"By stating that he is acting in concert with Mistry,
Tata Sons has questioned the position of the independent directors. Promoters removing independent directors who do not agree with their views also sets a bad precedent for Indian corporate governance and such efforts should be thwarted by voting against the promoter proposals," InGovern noted.
However, it said shareholders should raise concerns on the tenure of Wadia.