Tata Chemicals Shares Mistry’s Representation With Shareholders Ahead Of EGM
Tata Chemicals Ltd. became the first Tata group company to file its present chairman, Cyrus Mistry’s representation to shareholders. In an extraordinary general meeting on December 23, these shareholders will decide if Mistry will continue as director of the company.
Mistry shared his side of the story in a 15-page representation on Monday, saying the Tata group was no one’s personal fiefdom. It will form the basis on which Mistry will defend himself before shareholders of six Tata group companies between December 13 and December 26. All EGMs have been convened to consider Mistry’s removal as director of these companies.
The Tata Group is no one’s personal fiefdom: it does not belong to any individual, not to the trustees of Tata Trusts, not to the Tata Sons directors, and not to the directors of the operating companies.Cyrus Mistry, Former Chairman, Tata Sons
Overstepping Governance Structure
Tata Trusts are public charitable trusts and the future of the group lies in how the trustees govern it, Mistry stated.
If trustees start managing the business, overstepping the entire governance structure in Tata Sons, they will jeopardise the legal status of the trusts, thereby risking the future of the Tata group, he argued.
The conferment of all decision-making power in one man or a “high command” among them is unethical, improper and a breach of trust. It is critical that serious decisions of severe magnitude and consequence are not taken whimsically, without much thought, or for unstated collateral objectives.Cyrus Mistry, Former Chairman, Tata Sons
Mistry said that after he took over as Tata Sons chairman in 2012, the holding company’s Articles of Association were amended to ensure that certain decisions at the operating units were placed before the holding company board to protect shareholder value. But, this position was abused by Ratan Tata and NA Soonawala. “In their capacity as trustees of Tata Trusts took the veto rights of the Trustee-Nominated Directors as their entitlement to dictate to these directors how Tata Sons should conduct itself. They interpreted the Articles of Association to mean that they could call for information and seek discussions on any subject they considered material,” he added.
Also Read: Tata-Mistry War: The End Game
In his letter, Mistry said that as a director of Tata Sons he was aware of the business challenges and opportunities created by the acquisition spree, but was unaware of the magnitude of these challenges.
He was an outsider to the workings of the Tata Group despite being no stranger, he added. The board of Tata Sons had a majority of ‘insiders’ - individuals who have worked for long in the group. But since his appointment there has been a marked shift in the composition of the Tata Sons board.
When I took over, due to a variety of factors, ranging from the retirement of individuals, strategic induction of fresh minds, and new company law requirements, there was a marked shift in the composition of the Tata Sons Board. Therefore, most of the directors of Tata Sons too were “outsiders”.Cyrus Mistry, Former Chairman, Tata Sons
The Five Hotspots
It soon became evident that some of the companies were dragging the group down, Mistry said in his representation.
It soon became apparent that much of the Tata Group’s capital was locked down in five “hot spots” which were dragging down performance. These put the entire Tata Group to risk and needed tackling on a war footing.Cyrus Mistry, Former Chairman, Tata Sons
Mistry added that his strategy was not only to repair the ‘hotspots’ but also future-proof some Tata group companies like TCS, JLR, Titan, Voltas and others. The group also invested in growth platforms such as the consumer products sector and in financial services.
“We also seeded next generation businesses in the digital and healthcare space such as Tata Cliq, Tata IQ and Tata Health. Our investment in growth over the last three years was in excess of $25 billion across the Tata Group, substantially met from internal cash generation”, Mistry stated.
Reason For Dismissal
Mistry said Tata Sons did not offer an appropriate reason for his dismissal. “I am told that at a meeting of CEOs of Tata Group companies Mr Ratan Tata was asked by a CEO why I was removed as Executive Chairman. Mr Ratan Tata is reported to have replied that ‘the answer will probably go with me to my grave’. Therefore, the impression sought to be created was that there was something unspeakable underlying his inexplicable and unreasonable conduct,” he added.
Here’s a reproduction of Cyrus Mistry’s full letter.
Tata Sons’ Counter Allegation
Tata Sons hit back at the ousted chairman’s claims and said that it was in fact Mistry who had converted the group into his own “personal fiefdom”, and through his unilateral actions destroyed the “precious institutional memory of the House of Tata”.
Sixty-six percent of the holding company is owned by charitable trusts, and there is no prejudice for any individual or a family, Tata Sons said in a statement in response to Mistry’s 15-page representation.
Finally – and most importantly – it must be recalled that the operating Tata companies and Tata Sons have, for many decades, worked cohesively and seamlessly for the benefit of all stakeholders namely the companies, their shareholders and employees and for society at large. There was no other agenda or personal interest as ultimately even the dividends paid to Tata Sons and subsequently to its own shareholders went largely back to philanthropy except for those paid to the minority shareholders.Tata Sons Statement
The holding company affirmed that shareholders are qualified enough to see through the “smokescreen of baseless allegations passed off as an appeal” by Mistry. They added that Mistry's actions since his ouster on October 24 have led to financial losses at the group companies.
His 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.Tata Sons letter
Here is Tata Sons’ full response.