Cyrus Mistry camp questions role of two independent directors of Tata Steel

At the Dec 21 EGM, Andrew Robb and Mallika Srinivasan will be in spotlight for supposedly wrong reasons

The Cyrus Mistry camp is expecting shareholders of Tata Steel to question the independence of two directors — Andrew Robb and Mallika Srinivasan — at the company’s extraordinary general meeting following what it calls a potential conflict of interest between their role as an independent director and the remuneration received by Robb and Srinivasan’s spouse from other Tata companies. 

Robb currently earns remuneration of £270,000 (Rs 2.3 crore) per annum from Tata Steel Europe as its chairman and from Jaguar Land Rover, a Tata Motors subsidiary, as a director. Srinivasan’s husband, Venu Srinivasan, was inducted on the board of Tata Sons this August and would get sitting fees and commission on profits from Tata Sons in future. Besides, Venu Srinivasan is also a trustee on Tata Trusts, which owns 66% stake in Tata Sons, the holding company of the Tata group. “Shareholders would move the regulators on this issue,” said a Mistry camp source. When contacted, a Tata group spokesperson directed the queries to an external agency. The external spokesperson of Tata Steel declined to comment on the issue. 

 

Corporate lawyers said according to the Companies Act, 2013, an independent director should not have any pecuniary relationship with the company, its holding, subsidiary of associate company, or their promoters, or directors, during the two immediately preceding financial years or during the current financial year. Besides, Section 166, Schedule IV of the Companies Act, 2013, says a director of a company will not involve in a situation in which he may have a direct or indirect interest that conflicts, or possibly may conflict, with the interest of the company.

Soon after the November 25 board meeting of Tata Steel, in which Mistry was ousted as chairman, his office had hinted about the potential conflict of interest. “Just minutes before a convened and pre-scheduled board meeting, a circular resolution replacing the chairman for the meeting is said to have been initiated,” Mistry’s office had said. Adding that those involved are representatives of Tata Sons, those drawing large remuneration from other Tata Trusts-controlled companies, “and an ‘independent’ director, who is the wife of a newly-inducted Tata trustee, who’s also a recently nominated director of Tata Sons”. 

As independent directors, Srinivasan, Robb, Jacobus Schraven and O P Bhatt had signed the circular resolution to remove Mistry while two other directors, Nusli Wadia and Subodh Bhargava, had opposed the move. Bhatt, who is a director on the TCS board as well, was appointed chairman till the EGM to be held on December 21.  

In the EGM, both Wadia and Mistry are planning to speak directly to the shareholders apart from writing to them beforehand.  

Shriram Subramanian, founder and managing director of InGovern Research Services, said Robb has been serving as non-executive chairman of Tata Steel Europe for a number of years now, and has been an independent director of Corus Group since August 1, 2003.

“We don’t see a conflict of interest based on his compensation (which in GBP terms doesn’t seem high), but, based on his tenure which exceeds 10 years, we would classify him as a non-independent director,” Subramanian said.

“The compensation paid by Tata Sons to Venu Srinivasan would be as sitting fees and commission. He is an independent director on Tata Sons Limited, and a trustee. We wouldn’t say that this leads to a conflict of interest for Mallika Srinivasan,” he added. “The regulators should be consistent as they can only take action on any non-compliance by any company with the Companies Act or LOD (line of duty) regulations. The Companies Act clearly defines material relationships and conflicts of interest of independent directors. There are multiple instances of pecuniary relationships of independent directors in the Indian corporate world that goes unspoken about!” Subramanian said, adding: “It is for the institutional investors to raise matters of ‘true independence’ of directors, based on tenure, pecuniary relationships, etc. ahead of conflict situations.”