 "Ratan Tata")
Seeking support of minority shareholders to remove his former protégé, Cyrus Mistry, Tata Sons Interim Chairman, Ratan Tata on Wednesday said the former chairman’s presence on the boards of various Tata group companies was a serious disruptive influence.
Responding to Tata, Mistry said it was “misrepresentation and convenient mischaracterisation”, and accused the veteran industrialist of lying.
In a letter to Tata group shareholders, Tata said Mistry was removed as the Tata Sons board had lost confidence in him and his ability to lead the conglomerate. “Tata group companies are supported by Tata Sons transparently in multiple ways — such as through licensed use of the Tata brand. We seek your support of the EGM (extra-ordinary general meeting) resolutions to enable our companies to continue on the path of growth and value creation,” Tata said as shareholders of six listed companies start voting from December 13 when TCS shareholders would vote to remove Mistry as director.
Tata said Mistry should have resigned as a director of group companies on his own instead of remaining on the boards of various Tata companies. “His continued presence as a director is a serious disruptive influence on these company boards, which can make the company dysfunctional, particularly given his open hostility towards the primary promoter.”
On October 24, Mistry was removed by Tata Sons board in a surprise move that has resulted in a bitter fight between Tata and Mistry. Tata has not given any reasons for Mistry’s removal but told a CEOs meeting that “the reasons for Mistry’s removal will go with him to grave.”
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In a statement, Mistry’s office also denied that his sacking was preceded by various attempts to discuss with him.
“Mr Ratan Tata does not speak the truth. His claim that Mr Mistry's treatment at Tata Sons Board on that day was well-deliberated and was preceded by various attempts to discuss with Mr Mistry is a lie,” the statement said.
Soon after his removal, in a letter to Tata Sons directors, Mistry had said the Tata group is staring at $18 billion of potential write downs due to wrong acquisition and business decisions taken by Tata.
Tata said before his ouster Mistry was asked to leave on his own but he refused. “As a final step, he was offered an opportunity to step down voluntarily from the Chairman’s position, which he rejected and said that it should be taken up at the board,” Tata said.
In his letter, Tata said the holding company’s approach is to support and fund Tata businesses during development and growth phases and exit only when it becomes unviable. Tata supports group companies in multiple ways such as licensed use of Tata brand and financial support. “In every situation our capital allocation decisions are always based on maximizing long term shareholders returns,” said Tata.
“If the current situation has caused you uncertainty in recent weeks, it is our firm resolve to focus the group on growth through induction of new leadership which is currently underway,” Tata said.
On Monday, Mistry had released a 14-page letter to shareholders giving details of governance breakdown in Tata trusts and Tata Sons. Mistry asked the Indian government to intervene in the ongoing fight and said charitable trusts lack transparency and should be made accountable to the people of India as they get tax exemptions.
Mistry had also received support from the independent directors of Indian Hotels, Tata Chemicals and Tata Motors that came out with statements in reposing their faith in Mistry’s leadership. The board of Tata Steel was split with three directors supporting Mistry while three others were against Mistry. Nusli Wadia, an independent director on the boards of Tata Steel, Tata Chemicals and Tata Motors is also been removed from these boards in the EGM as Tata accused him of galvanising other independent directors against Tata.
