After independent directors "unanimously" backed Cyrus Mistry as Chairman, Tata Chemicals Director Bhaskar Bhat has resigned from the company's board saying concerns raised by him were "totally ignored".
"Bhaskar Bhat, non-executive, non-independent director, has resigned from the Board of the company w.E.F. November 10, 2016," Tata Chemicals said in a BSE filing.
In his resignation letter, Bhat said, "I have just read the statement put out by the independent directors on the BSE website. The contents as well as the spirit of the statement completely dilutes the views I expressed at the Board meeting today especially regarding the threat the company faces on account of loss of confidence of the promoter Tata Sons in the Chairman of Tata Chemicals."
He further said: "Several important issues of discomfort I expressed seem to have been totally ignored. I therefore hereby tender my resignation as Director of Tata Chemicals, with immediate effect."
Yesterday, independent directors of Tata Chemicals "unanimously" backed Mistry as its Chairman and affirmed their confidence in the management.
This is the second group company after Indian Hotels where independent directors have come out in support of Mistry as Chairman.
In a regulatory filing, Tata Chemicals, in which Tata Sons has 19.35 per cent stake, said its independent directors at a meeting today recalled and reaffirmed their earlier assessment and evaluation carried out in 2015 and 2016 of the Chairman, the Board, and its functioning.
Mistry, who is Chairman and non-independent, non- executive director of Tata Chemicals, was ousted as Chairman of Tata Sons last month but continues to chair the boards of several group firms.
The company's independent directors include Wadia Group Chairman Nusli N Wadia, DCB Bank Chairman Nasser Munjee, former NABARD Chairman YSP Thorat and marketing professional Vibha Paul Rishi.
Taking strong objection to Mistry's latest letter to the
shareholders on corporate governance, Tata Sons said the Tata Group has functioned for 149 years and set standards of corporate governance all through this period.
"It is therefore shocking that Mr Mistry, who was given the privilege of heading the group, should, in a short period of four years, be now lecturing us on corporate governance.
"The corporate structure of the group which prevailed under the leadership of Mr JRD Tata for over 50 years and thereafter Mr Ratan Tata for over 20 years, exemplified the best corporate governance practices. Mr Mistry consciously dismantled this long established corporate structure by identifying himself as the only Tata Sons representative on the boards of Tata operating companies," the statement said.
Under the Governance Guidelines Framework which Mistry himself introduced in 2015, there is a clause to the effect that all employees of a Tata company should, after their employment ceases, immediately resign from the Boards of all Tata companies where they are functioning as Non-Executive Directors.
"Therefore Mr Mistry, on ceasing to be the Executive Chairman of Tata Sons, should have immediately resigned from the Boards of all other companies under his own guidelines. Yet he has chosen not to do so in wilful breach of the Governance Guidelines Framework," it said.
In the appeal to shareholders, Tata Sons said it needs the support of all big and small shareholders who have stood with Tatas always to remove Mistry.
On Mistry's constant complains about "bad" legacy issues, Tata Sons said he was fully aware of them and nevertheless choose to be the Chairman as a challenge to turn around and resolve these issues.
He "conveniently ignores the good legacies which he inherited, namely TCS and JLR, which account for nearly 90 per cent of the group's total profits and which helped him to claim good aggregate group results."
"It has always been Tata's policy to tackle difficult situations and turn them around but instead he has only taken the easy option of taking large amounts of write-offs to huge detriment of the shareholders and blaming it all on the past management, while doing little to fix the challenges faced by certain companies," Tata Sons said.
Stating that Tatas have faced many critical problems in companies like Tata Steel and Tata Motors, it said these can be overcome by strong management action and financial support from Tata Sons.
"In our opinion, mature responses to challenges of business are at the core of the Tata philosophy, and in our opinion, Mr Mistry has failed to live up to it," it said.
Tata Sons alleged that it was Mistry who decided to go on
a public campaign in the media by making irresponsible and incorrect allegations.
"Mistry's statements have caused the Group (including the companies where he continues to be the Chairman) enormous damage and caused considerable financial loss to all shareholders, running into tens of thousands of crores and in our opinion, Mr Mistry alone is responsible for such losses directly arising from his irresponsible and incorrect statements.
"His actions and statements have also caused instability and confusion in these companies and their managements which would have been avoided if he had done the right thing by stepping down from the Chairmanships and Boards as is normally done," Tata Sons said.
Instead, Mistry, it said, seems to have taken the stand that even if he ultimately has to relinquish, he would have the satisfaction of damaging a great institution built up over 150 years after just five years of his tenure.
"It is also ironical that Mr Mistry is resisting his removal from the Boards of these very same Tata Companies which he has attacked by his false allegations and caused enormous harm to," it said.
Tata Sons said Mistry was appointed as the Chairman of the various Tata Companies only through his Chairmanship of the parent company, Tata Sons Ltd.
And so when he was removed as Chairman of Tata Sons on October 24, "propriety and reason demanded that he step down from the Chairmanship of the various Tata Companies."
"Instead, Mr Mistry has chosen to resort to selective media leaks, media statements and to make a public spectacle, knowing fully well that his actions would hurt and damage the companies even while remaining as their Chairman," Tata Sons said in the statement.
The holding company said Mistry alleges legacy issues faced by Tata Companies but has sought to entrench himself in the Board of such Tata Companies, whilst making false allegations against such companies.
"In our opinion, his actions are driven by a perverse motivation to cause harm to the "Tata" brand and to intentionally erode shareholder value," it said.
Stating that the operating Tata companies and Tata Sons have worked cohesively and seamlessly for the benefit of all stakeholders, the statement said, "There has been no other agenda or personal interest as ultimately even the dividends paid to Tata Sons and subsequently to its own shareholders went back to philanthropy except for those paid to the minority shareholders."
"The operating Tata companies have individually grown and prospered but they have also benefited in no small measure from being part of the Tata Group.
REOPENS DEL52
"This encompasses the ability to attract and retain
management and employees, use the TATA brand nationally and internationally, which has been painstakingly built up over the past decades, help in the marketing of their products and their ability to attract capital in all forms and give the comfort of safety because of the past default-free record," it said.
Tata companies cannot exist in a vacuum but benefit from being part of the Tata Group, it said adding all such benefits are likely to be at stake if Mistry continues to remain Chairman, as his continuance is likely to lead to fragmentation of the Tata Group.
"For this purpose alone, Tata Sons would need the support of all, big and small, shareholders who have stood with the Tata Group at all times," it said.
Tata Sons said it wants to put the current turmoil in the Group behind it. "Tata companies have always been managed by dedicated professionals under the supervision of their Boards which, till recently, comprised a judicious mix of persons representing the promoters, the management and independents - as prescribed by the applicable regulations and which is also the case in almost all corporate entities in our country."
This structure ensures that the interests of all constituents, namely, shareholders, employees and consumers are protected and good corporate governance is followed and constantly improved upon.
"Tata companies must therefore quickly return to focusing on inancial consolidation, prudent and strong Balance Sheets and sustainable returns and? values to their shareholders, big and small," it said.
