seeks govt intervention to reform Tata Trusts
Says governance of Trusts sacrosanct; Tata group counters that it has always acted for ‘people at large’
Hitting out at the core of the Tata Group, ousted chairman Cyrus Mistry on Monday raised the need for external intervention into the conduct of Tata Trusts, the principal shareholders of the group who own around 66% of the conglomerate’s equity.
Pitching the issue before shareholders ahead of the extraordinary general meetings (EGMs) of group companies, Mistry, who spoke to the media for the first time since he joined the group as chairman, said there is a threat to the future of the Tata Group unless the governance of Tata Trusts is reformed and subjected to checks and balances.
“The governance of the Tata Trusts is even more sacrosanct. The very future of the Tata Group lies in how the trustees govern the Tata Trusts, since the main trust property is the holding of shares in Tata Sons,” Mistry said. “In the absence of an appropriate governance structure and ethical behaviour of trustees, it would become an inherent obligation of the government to remedy and repair breakdown in the governance of such trusts.”
He also took a strong stance against interim chairman and group patriarch Ratan Tata by saying that the group was no one’s personal fiefdom.
Responding to Mistry’s statements, a Tata Group spokesperson said: “This is precisely what the Tata Trusts have been faithfully carrying out for more than a 100 years. 66% of Tata Sons is owned by the charitable Trusts, 18% is held by the Mistry family, 13% by Tata companies, and the balance 3% by individuals. It can be seen straightaway that what the Trusts have been doing so far is for the people at large and not for any individual or a family.”
Tata Sons has already initiated the process of convening the EGMs, which are mandatory under law, to remove Mistry as director from the board of group companies, including Tata Steel, Tata Consultancy Services (TCS) and Tata Motors. Representatives from both Tata Sons and Mistry’s office have met institutional shareholders to present their views. It is, however, widely expected that institutions will back the Tatas to protect their investments in the group.
The issue also assumes significance as Mistry, by bringing the trusts in focus, may trigger questions about the role of trustees in the functioning of the group. Group patriarch and interim chairman Ratan Tata is also the chairman of Tata Trusts.
Incidentally, the I-T department recently sent notices to Tata Trusts on details about the various exemptions the trusts enjoy as charitable organisations.
“Since these trusts are solely for the benefit of the general public of India, they enjoy many exemptions under law, including exemptions from tax. The role, functions and actions of the trustees of public charitable trusts are governed by special law. Therefore, in managing trust property, the conduct of trustees who oversee the properties and functions of public charitable trusts has to be of the highest order,” said Mistry, referring indirectly to Ratan Tata and trustees NA Soonavala and Amit Chandra, who are also on the board of Tata Sons.
Proxy advisory firm ISS, which guides shareholders on how to vote at meetings, on Monday recommended that shareholders should vote against the proposal to remove Mistry from TCS and other large group companies, saying Tata Sons has not given any “compelling evidence” for his ouster.