Tata’s travails

The tussle between the three titans Ratan Tata, Cyrus Mistry and Nusli Wadia over directorship of certain Tata Group companies intensified with Wadia criticizing Tata for his investment in the British steel giant Corus. In a 15-page representation to the shareholders of Tata Steel who are to vote on his removal from the board of that company at an extraordinary general meeting (EGM) on December 22, 2016 Wadia stated that "the real ‘person’ on trial is the institution of the independent director itself, and not me.”
Referring to his dissension to the pumping in of funds by Tata Steel into its European operations, Wadia alleged, "It is not the role of your company to save jobs in the UK (or) to support its pension funds…It is ironic that the founder Jamsetji Tata started Tata Steel to fight British Steel and now Ratan Tata is trying to save British Steel by deploying huge resources at the cost of Tata Steel India.”
EGMs have been called on varying dates in December in six listed Group companies, seeking the removal of Mistry from their boards. Stating that the governance framework at Tata Sons (TS), the holding company of the $ 100 billion conglomerate needed "urgent repair,” Mistry reiterated that "the movement to reform cannot and will not be arrested.” According to him, the Group is at an inflection point and there is a "crying need to reclaim the glory of the (Tata) Group,” as per a report in the Business Standard of December 10, 2016. Mistry said that the EGMs have "been called in extraordinary circumstances. It is my duty to place before you a full perspective of the facts and factors that are in play.”

Blast Furnace 5 at the Port Talbot Steelworks, United Kingdom Photo: Wikipedia

From left: Ratan Tata, Cyrus Mistry and Nusli Wadia

Mistry’s newly created website www.cyrusforgovernance.com prominently features a quote from the founder of the House of Tatas, Jamsetji: "In free enterprise, the community is not just another stakeholder in business but is in fact the very purpose of its existence.” The website features Mistry’s responses to various statements from TS and interim Group chairman Ratan Tata, and also performance synopses of how companies led by Mistry have fared during his tenure as the chairman of those boards.
Ratan Tata has appealed to shareholders to remove Mistry from the boards of Tata Group companies, as his continuation would "make the companies dysfunctional.” A message on the Group website dated December 7 states that the board of TS has "lost confidence” in Mistry and his ability to lead the Group in future given his "open hostility” towards TS.
The Economic Times (ET) of December 8 carried a detailed article headlined "the real inside story” of the breakup. Quoting Vijay Singh, non executive director of TS, who chaired the critical October 24 meeting where Mistry was ousted, and other unnamed officials, the report states that disputes between Mistry and TS ranged from how to go about poll funding, to partners for a proposed QSR (Quick Service Restaurant) business. Ratan was reported to be "dismayed” when the Group under Mistry’s leadership made two separate bids for a prestigious army contract early this year. He believed that two bids "made Tatas’ a laughing stock.” He was also believed to be "discomfited” by Mistry’s handling of Tata workers’ relations and the relationship with Japan Inc, specifically with DoCoMo, the Tatas’ business partner in the telecom business.
Tata has accused Mistry of having misled the selection committee set up to seek a successor for Ratan Tata in 2011. A press release from Tatas dated December 11 quoted in The Times of India said that Mistry made "lofty statements about his plans for the Tata Group ” but none of these management structures and plans has been given effect to. Mistry is also accused of not fully distancing the Group from transactions with his family business Shapoorji Pallonji Group.
"Far from hurting the Tata Sons businesses intentionally, Mistry is saving the Tata Group from the whimsical ineptitude of Ratan Tata,” the office of Cyrus Mistry said in a statement, according to The Indian Express of December 12. In response to allegations of not distancing the Group from his family business, the clarification continues, "New engineering and construction contracts from the Tatas to the SP Group came down to nearly zero from the level of Rs 1,100 crore when Mistry had assumed office.”