Tata Sons interim chairman Ratan Tata, who is also the chairman of Tata Trusts, has, in a direct communication to shareholders of the group companies, made it clear that ousted chairman Cyrus Mistry’s continuance on the boards of group companies would be a “serious disruptive influence on these company boards, which can make the company dysfunctional, particularly given his open hostility towards the primary promoter, Tata Sons.”
The Tata letter comes two days after a direct representation was sent by Mistry to shareholders under article 169 of the Companies Act of 2013, ahead of the slew of extraordinary general meetings (EGMs) of the group companies which begins from December 13 with Tata Consultancy Services.
Explaining the rationale behind the removal of Mistry as Tata Sons chairman on October 24, Tata says this happened “after the relationship with Mr Mistry steadily deteriorated, and several attempts to remediate went unheeded.” As a final step, Tata adds, he was offered an opportunity to step down voluntarily from the chairman position, which he rejected, and said that it should be taken up at the board. “This was done and he was formally replaced.”
Even as he sought the shareholders’ support at the EGM, Tata explained why the group continues to stick with certain businesses despite challenges. “Our approach has been to support and fund these businesses during their development and growth phases. We exit the business only when we believe it is unviable.”
“In every situation our capital allocation decisions are always based on maximizing long-term shareholder returns, viz., return on capital employed, return on equity and free cash flows,” he adds, affirming a strong alignment with the interests of minority shareholders. Tata cites Tata Steel Europe as an example of an investment that has “taken time to be profitable”, while those like TCS and Jaguar Land Rover have been “hugely successful.”
Mistry, on his part, has countered Tata’s claims calling the Tata Sons interim chairman’s letter to shareholders “a combination of statements ranging from misrepresentation and convenient mischaracterisation.”
“His [Ratan Tata’s] 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,” Mistry’s office said in a strongly worded statement in response to Ratan Tata’s letter to shareholders.
Recalling what he calls was a “fait accompli” given to him at the Tata Sons board meeting of October 24, the Mistry statement said: “At the meeting, every legal procedure was thrown to the wind and the blemish-less history of Tata Sons’ was destroyed. Neither was there any deliberation nor was there any prior attempt at remediation as Mr Ratan Tata now seeks to make out.” The statement also reiterated that the Nomination and Remuneration committee of Tata Sons had endorsed his superlative performance and that of his team.
Tata Sons, it may also be recalled, has recently inducted TCS MD and CEO N Chandrasekaran and JLR CEO Ralf Speth on its board, following the move to replace Mistry as chairman. Alongside, in a bid to bring back the commonality of personnel across Tata Trusts and Tata Sons, Venu Srinivasan, chairman of TVS Motor, has also been inducted on the Sir Dorabji Tata Trust, one of the key Trusts which hold part of the majority 66 percent stake in Tata Sons.
(FOR FULL TEXT OF TATA’S LETTER TO SHAREHOLDERS, SEE BELOW)