 "Cyrus Mistry former chairman of Tata sons leaves from Bombay House in Mumbai (Photo: Kamlesh Pednekar)")
In his four years at the helm of Tata Sons, ousted chairman Cyrus Mistry did not execute several measures he himself had proposed in 2010. In October 2010, Mistry, who was then a Tata Sons director and one of the members of the selection panel to find a successor to Ratan Tata, had presented a detailed note on how the group should be managed.
Business Standard has reviewed a copy of this 2010 note and did a status check. While one could see significant deviations, between what was proposed and what was executed, some measures he took during his tenure were opposite of what he had proposed. The Tatas feel this was part of a ‘clever strategy’ to take control of the operating company. The Mistry camp argued all decisions were taken after discussions with the trust nominees and were keeping in sync with evolving ground realities.
The proposals included a detailed composition for a 15-member Tata Sons board with a plan to induct two vice-chairmen, setting up an advisory board with a mandate to regularly review and push the operating companies towards better value creation for stakeholders. Mistry also had laid down plans to form sub-committees of Tata Sons board on investments, leadership talent development, board review, strategy, audit, finance, remuneration, property and business incubation.
The presentation was among the key elements that impressed the selection committee, which included N A Soonawala, Shirin Bharucha, Lord Kumar Bhattacharya and R K Krishnakumar. The committee’s original objective was to look for a person with the experience of running large (and preferably diverse) businesses with considerable international exposure.
“During the meetings, Mistry made many relevant comments and submitted a detailed note in October 2010 setting out his views on how a large and complex group like Tatas should be managed and gave a comprehensive management structure with details of the composition and objectives of each component of the structure. This fitted with the views of the committee and having failed to find an alternative candidate, the committee decided to recommend Mr Mistry partly because of his recorded views and plans, and also his association with the group,” Tata Sons had said in a statement earlier this month.
The proposal to appoint vice-chairmen was intended to reduce the concentration of responsibilities of operating company boards. “I believe that the group chairman should not be the chairman on more than two group operating companies at any one time. The reason for having two vice-chairmen is to have each of them as chairperson for other group core companies, again not more than three companies at any point of time,” Mistry had said.
The Tata Sons board would have five members nominated by the trusts, including the chairman. It would have two people with general management and industry experience and one each with legal/regulatory experience and financial sector, preferably private equity.
There would be four independent directors of which at least two would be international. One of these independent directors was to have a strong technology focus, one was to be a thought leader in management, one with strong financial background with expertise in governance and risk management.
His plans for a Tata Sons advisory board were also interesting. This board was to have around 30 members, with the core committee to be formed with representation from the trusts and Tata Sons.
“I believe we should incubate a maximum of four major new business verticals in a five-year period. Each of these verticals should have a potential to be a $5 billion business in five to 10 years,” Mistry is said to have said in the presentation.
Of these sub-committees, several of them such as strategy committee, leadership talent, business incubation did not see the light of day, say sources. The vice-chairmen, the expanded Tata Sons board and advisory board structure did not materialise. In some respects, what transpired was the opposite of what was proposed.
According to the November 10 statement, “After four years, it is unfortunate that hardly any of his major views on the management structure (which had impressed the committee favourably) have been implemented.”
In response to queries by Business Standard, a Tata Sons spokesperson said, “As Tata Sons has said earlier on November 10, 2016, in hindsight, the trust reposed by Tata Sons in Cyrus P Mistry by appointing him as the chairman four years ago has been betrayed by his desire to seek to control main operating companies of the Tata Group to the exclusion of Tata Sons and other Tata representatives. Indeed, this strategy of being the only Tata Sons’ representative on the boards of the operating Tata companies seems to have been a clever strategy, planned and systematically achieved over the past four years.”
Sources close to Mistry said, “Many structures were discussed during the course of the tenure. All decisions were taken with the discussion and knowledge of trust representatives. To believe that thought process does not evolve over a period of six years reveals their lack of understanding.”
The Mistry camp also pointed out that although they were not designated vice-chairmen, two Tata Sons nominees R Gopalakrishnan (till his retirement last December) and Ishaat Hussain were on operating companies’ boards. They cite the appointment of Group Chief Technology Officer Gopichand Katragadda by Mistry as a sign of his commitment to innovation.
They refer to Tata CLiQ, the group’s e-commerce venture, Tata Health and the digital analytics business as new ventures nurtured by Mistry.
Mistry went about his job quietly. “What he did not do was to go about and make a noise in the press,” they argue. The Mistry camp also wondered if there were major deviations, why were these not raised earlier.
The Tata Sons spokesperson said, “Tata Sons, acting in good faith, did not anticipate such devious moves by Mr Mistry and thereby did not inform the other directors of the operating companies about its dissatisfaction with Mr Mistry at the level of Tata Sons. However, Tata Sons will now do whatever is required to deal with this situation. I will not be able to provide any guidance, because these matters are internal to the company.”
Promises not kept
* 15-member Tata Sons board
* Appointment of two vice-chairmen
* Restrict chairman’s role in operating companies to one or two
* Induction of technology, finance experts on board
* Formation of advisory board
* Formation of sub-committees of Tata Sons board
* Incubation of new businesses
Mistry defence
* Structures could have changed due to evolving thought process
* All decisions taken with knowledge of trust nominees
* Inducted Ireena Vittal and Ashish Dhawan on board of Tata Industries
* Brought in Gopichand Katragadda as group chief technology officer
* Why were questions not raised earlier
