Image: Danish Siddiqui / Reuters (for Illustrative purposes only)
Note: Story updated with results of EGM vote and Mistry's letter thanking shareholders
Cyrus Mistry was ousted director of Tata Consultancy Services at an extraordinary general meeting where the only agenda was to seek his removal.
In results announced late Tuesday night TCS said that 93.11 percent of the shareholders had supported the resolution to remove Mistry as a director. The result was a foregone conclusion as Tata Sons holds a majority 73.3 percent of the voting rights. Among institutional shareholders 44 percent abstained while 57.5 percent of the remaining backed Mistry. Retail shareholders only 17 percent of whom voted overwhelmingly backed Mistry with 78 percent voting against his ouster. Mistry's office issued a statement claiming 'moral victory' as 70 percent of the non-promoter shareholders abstained or voted against the resolution. In a letter released on December 14 Mistry said, "The voting in TCS is therefore a, strong signal from minority shareholders that the need for governance reform must not go unheeded." He pointed to the 48 percent of votes cast by institutional shareholders that we against his removal and the 78 percent by retail investors cast in his favour.
The meeting was conducted by Aman Mehta, an independent director who said that the independent directors had met in advance and determined “that this dispute has a material impact on the functioning of the company … once trust is lost it is best for a nominated director to resign.” The decision had been unanimous, he said.
The TCS EGM was the first in a series of EGMs that have been called by various Tata group companies seeking the removal of Mistry as either director or chairman of its companies. Mistry who has repeatedly said his ouster from Tata Sons was illegal has remained steadfast in his refusal to step down from these companies even though he’s lost the confidence of the ‘principal shareholder’. At the same time he has repeatedly questioned the corporate governance standards of Tata Sons and the Tata Trusts and appealed to independent directors to vote with their conscience.
Mistry’s allegations have been denied by Tata Sons.
In a statement released a short while before the meeting Mistry made an appeal to shareholders and urged them to, “… vote with your conscience and send a signal that catalyses a larger discussion on governance reform, to save the very fabric of what we have inherited – the Tata Values that our Funders handed us.” His statement went on to say, “We have witnessed an unmatched erosion of ethical values and the very foundation of the institution being put to grave risk by the conduct of a few.”
Ironically it was the minority shareholders who questioned Mistry ethical standards during the course of the meeting. An overwhelming majority of the 42 shareholders who spoke at the meeting said they supported the Tata’s even as they said that the manner in which Mistry was ousted left a lot to be desired. “We have full confidence in the Tata group. Today’s issue should have been handled internally,” said Lehka Shah, a minority shareholder. An overwhelming majority also decried the fact that they had learned more about the Tata-Mistry fracas through the press than through communication through the companies. The Tata brand and the value of their holding in TCS had been eroded as a result.
While most shareholders were patient there was the occasional heckling and booing when a point was made too forcefully. Many shareholders spoke beyond the remit of the meeting. One pledged to sacrifice his life for Ratan Tata, interim chairman of Tata Sons while another long-time shareholder scolded Tata and Mistry saying they should have fought through the courts rather than “washing their dirty linen in public.” Through it all Tata maintained a stoic silence with the occasional smile when a shareholder praised his contribution. Others wondered why a compromise couldn’t have been reached.
While Mehta concluded the meeting by saying the “most important thing is that we cut it here and get on with it,” a minority shareholder got up and protested one last time that his question as to why Cyrus was sacked was not answered. “What do you mean he has lost the confidence of the promoter group. Is he a chaprasi who can be removed like that?” he asked while audience members cheered but not before he was cut off by others saying the Tata brand is paramount and another Tata – possibly Noel Tata – should be brought in.
The last word went to shareholder Aspi Behrania, “When two cats are fighting it is the monkey who catches the roti,” he said. "Let’s hope it doesn’t happen with other Tata companies."