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Cyrus wanted a stronger Tata group: Nirmalya Kumar

Fired Tata group top executive Nirmalya Kumar says attempts to put proper governance structures have been thwarted

Published: Dec 14, 2016 06:24:23 AM IST
Updated: Dec 12, 2016 03:27:44 PM IST

Cyrus wanted a stronger Tata group: Nirmalya Kumar
Nirmalya Kumar was a key member of Cyrus Mistry’s team
Image: Joshua Navalkar

Nirmalya Kumar says he was fired over the phone the same day Cyrus Mistry was ousted as chairman of Tata Sons. And he cites his close working relationship with Mistry as the only reason for his unceremonious dismissal.

Three years ago, in 2013, global headhunters saw Kumar’s experience of working with over 300 top international corporations in the area of strategy development as an ideal fit for the Tata group. He even developed its 2025 strategy document. But recently, Kumar was sent a legal notice by Tata Sons for speaking to the media and asked to give an unconditional apology. Reason: Among the various dramatis personae involved in the Bombay House boardroom battle, Kumar, a visiting professor of marketing at London Business School, has been among the very few who have chosen to go on record about the events that have unfolded since October 24.

In an interview to Forbes India, Kumar minces no words in pointing out what is wrong at the Tata group and what needs to be done for it to regain its lost glory. Edited excerpts:

Q. You left a cushy job at London Business School to take up the role at Tata group. Do you regret the move?
I had a fantastic experience at the Tata group and have nothing negative to say about it. You can’t let a couple of rotten apples throw out the entire basket. There are 675,000 people working in the Tata group. They are working hard and believe in the Tata values. You can’t tarnish what they are doing just because a couple of people behave in an “un-Tata” manner. Given the opportunity and knowing the same outcome, I would do it again.

Q. In the last three years, you have worked very closely with Cyrus Mistry. What sort of a leader is he?
The first and the most important thing about Cyrus is that he is a smart guy, a deep thinker who goes into every problem or challenge he faces in detail and understands the context. He is not someone who shoots from the hip. He took his time to understand all the nuances of the Tata group because different companies have different challenges and are in different stages of evolution. The second aspect about him is that he has great character. You cannot get him to do something which is wrong. The Tata group values and he were a fantastic fit.

Q. What, in your opinion, are his major achievements?
He set up the Group Centre [Group Executive Council or GEC] as a Centre of Excellence. He helped TCS with the cash conversion cycles, so that it could pay a higher dividend without reducing its ability to make acquisitions. He helped TCS by opening the doors to global CEOs. As CEO of TCS, you get access to CTOs [of global corporations]; Cyrus, as chairman of the Tata group, was able to reach out to the CEOs.
He participated in a number of design reviews of JLR [Jaguar Land Rover]. He worked with the CEOs and management of group companies to develop a turnaround strategy. A company like Tata Teleservices saw its Ebitda grow from Rs 500 crore to Rs 2,500 crore during his leadership. In Tata Motors, he was intensely involved in its domestic operations. The company is now coming out with quality products. In IHCL (Indian Hotels Company), he made the decision to reduce the footprint in the US so that he could use the money to pay off debt.

Tata Power’s Mundra project had a loss of Rs 1,500 crore. He worked closely with the company’s CEO Anil Sardana to reduce the loss to Rs 350 crore. I can go on and on. The fact is that Cyrus was getting his hands dirty and getting things done while ensuring that we had growth platforms for the future.
 
Q. What was his strategic focus?
He wanted to future-proof the winners like TCS, JLR, Titan and Voltas and ensure that they continue on their winning path. He sought to turn around the hotspots, including Tata Power and Tata Motors, apart from investing in growth platforms. These are companies that can grow faster than the overall portfolio such as the companies involved in finance, defence production, infrastructure and consumer products. Being in the consumer space helps to reduce the volatility of the Tata Sons portfolio which otherwise is heavily loaded with cyclical sectors with high capital needs. So he made the decision to re-balance the portfolio.
He decided to start increasing the dividends to Tata Sons shareholders from Rs 323 crore to Rs 800 crore in 2020 and the payout from 15 percent to 25 percent by 2025. He also began to seed new businesses like Tata CLiQ.

Q. So performance is not the reason why the Tata Sons board lost confidence in Cyrus Mistry?
Fifty independent directors have evaluated his performance this year. Tata Sons’ board and its nomination and remuneration committee have evaluated his performance. Why can’t Tata Sons release all the evaluations? What we are seeing are selective leaks. Is that in line with the Tata values? After removing Cyrus, they are looking for a curtain to hide behind. Unfortunately that curtain is too transparent. Nobody in Tata Sons is willing to stand up and say on record what the reason is.

Q. You were closely involved in the preparation of two documents: The Strategy 2025 and the Governance Framework.
The Strategy 2025 document has been discussed three times in the Tata Sons board over full-day sessions. In fact, the board co-created the document. It was not that we presented the document and they signed off on it. They gave us inputs which were incorporated. We did three drafts. The Governance Framework was supposed to be taken up at the October 24 board meeting and it was sent to the board members two weeks in advance. That was never discussed in that board meeting. The Governance Framework clearly specified the role of the boards of the operating companies, the GEC, Tata Sons and that of the Trusts which would be consistent with the law, Tata values and the highest standards of corporate governance apart from protecting the rights of minority shareholders and right to certain information that promoters have which other shareholders don’t have. The Tata Trusts have the right to information, but they do not have the right to take decisions. Their influence is through their representatives on the Tata Sons board. Trusts, by definition, are not allowed to engage in business.

Q. Is the manner of his removal the reason for Mistry to stay on and fight?
He is fighting for the Tata group. He wants to fix its corporate governance. He joined the Tata group saying it was a great institution which was central to India’s industrialisation and development of its corporate institutions. He wanted to make it stronger. Why should he back down? Today like ‘Swachh Bharat’, we need a ‘Swachh Tata’.

Q. GEC has been accused of being an alternate power centre.

The Group Centre was a Centre of Excellence. It didn’t have any operational responsibility. It was there to help the chairman and the companies when they asked for it. Please ask Noel Tata, Chandra [N Chandrasekaran], Rakesh Sarna, Anil Sardana or any other operating company CEOs if the GEC pushed them around. If they say yes, I will accept the criticism.

Q. What is the need of the hour at the Tata group?
What is needed is the highest level of corporate governance. The only way you can get over this crisis is by being honest and candid. Playing the leaks game is not going to help. In trying to protect their legacy, they may have shot themselves in both the feet.

Q. Where do you see the Tata brand after what has happened?
The Tata brand at the consumer level is fine. But the reputation at the corporate level has been severely hit. The fact that the Tata group market capitalisation has fallen so sharply shows that the investors have lost faith in the group. They know there is no protection for minority shareholders. The promoters can decide one fine morning that they do not want someone as chairman and the independent directors are told to fire him or else...

Q. Do you think the law needs to be modified when it comes to removing independent directors?
In India, we expect the law to fix everything. It is an attitude. Some promoters believe that the independent directors are supposed to do what he says. He will appoint them because the law expects him to have them. It is a question of the approach and attitude towards independent directors.

(This story appears in the 23 December, 2016 issue of Forbes India. To visit our Archives, click here.)

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