The TATA Board­room Bat­tle Rages On ......................................................

Libertatem Magazine - - Content Content - By Vaib­hav Sharma

The Board­room Bat­tle be­tween the for­mer Chair­man of the Tata Group Cyrus Mistry and the old guard Ratan Tata has seen var­i­ous turn­arounds since 24th Oc­to­ber when the for­mer was re­moved as the head of the con­glom­er­ate af­ter a stint of four years. The Board of Di­rec­tors of the var­i­ous com­pa­nies of the Tata Group have been di­vided over the is­sue of Mistry’s ouster. The past fort­night has seen a spate of meet­ings of the com­pa­nies in the Tata Group to re­solve the is­sue. The con­fronta­tion is be­ing seen by the in­dus­try ex­perts as the clash of two con­flict­ing busi­ness ide­olo­gies. The ex­pe­ri­enced lead­er­ship view the en­tire Group as a

big con­glom­er­ate and tends to keep even the loss mak­ing en­ti­ties afloat by in­fus­ing in cap­i­tal. Cyrus Mistry is con­sid­ered to be more prag­matic in ap­proach and had been favour­ing the clo­sure of the loss mak­ing com­pa­nies to im­prove the over­all fi­nan­cial health of the Tata Group.

QUES­TION OF TCS LEAD­ER­SHIP

The clash for the lead­er­ship in the

Tata Group has been closely as­so­ci­ated with the supremacy of Tala Con­sul­tancy Ser­vices Ltd. The first ma­jor de­vel­op­ment oc­curred when the com­pany is­sued a state­ment on 21st Novem­ber that ac­cused Cyrus Mistry of caus­ing enor­mous harm to the rep­u­ta­tion of the com­pany and its stake­hold­ers. It is seen as an un­usual in­ci­dent as the state­ment di­rected con­demned the role of its for­mer Chair­man as be­ing ad­ver­sar­ial to the com­pany’s in­ter­ests. The more atyp­i­cal de­vel­op­ment was the state­ment given by Cyrus Mistry the next day. While re­fut­ing the claims of the com­pany, he said, “Tata (Ratan Tata) tried to sell TCS to IBM and made the Corus buy costly.” He crit­i­cised Ratan Tata for not be­ing able to man­age the af­fairs of TCS prop­erly and even at­tempt­ing to sell off the com­pany at one stage. But the drama didn’t end there as the for­mer chief of TCS F.C. Kohli terming the claims of Mistry as ‘not cor­rect.’ Kohli who is widely re­garded as the Fa­ther of the In­dian IT In­dus­try for his un­par­al­leled con­tri­bu­tion, ve­he­mently backed Ratan Tata and said that there was no def­i­nite pro­posal for the sell­ing of TCS to IBM at any point of time.

Th­ese de­vel­op­ments have come in the wake of the ap­peal by Nusli Wa­dia made to the Tata Sons to with­draw its let­ter ask­ing the com­pa­nies to hold meet­ings on Mistry’s ouster. Wa­dia, also a Di­rec­tor in the Tata Sons, has been sup­port­ive of Cyrus Mistry from the very be­gin­ning. He had even termed the al­le­ga­tions made by the Tata Sons against Mistry as ‘false, defam­a­tory and li­bel­lous.’ The un­re­lent­ing sup­port ex­tended by Wa­dia to Cyrus Mistry bring out in the open the sharp dif­fer­ence in the Board of Di­rec­tors as re­gards the re­moval of Cyrus Mistry as the Chair­man of the Tata Group. TCS had called for an Emer­gency Gen­eral Meet­ing (there­inafter re­ferred to as “EGM”) on 13th De­cem­ber to re­move Mistry even from the post of Di­rec­tor which re­quires the de­ci­sion to be taken by the ma­jor­ity of the com­pany’s stake­hold­ers. .

It is per­ti­nent to note that one of the ma­jor bone of con­tention in the present Board­room con­tro­versy has been the ques­tion of Corus ac­qui­si­tion. Corus was ac­quired by the Tata Steel at a whoop­ing cost of $ 12 bil­lion. The Tata Steel has run into the storm for the past cou­ple of years due to poor de­mand and cheap im­ports by China. But the ex­perts also hold the costly buy­ing of the firm re­spon­si­ble for not be­ing able to re­cover the cap­i­tal be­ing a ma­jor rea­son as well. Mistry has al­ready said the Corus deal was fi­nan­cial im­pru­dent and was done at the be­hest of one man’s ego (i.e. Ratan Tata’s) only. Tata Steel has also suf­fered due to not be­ing al­lowed by the Bri­tish gov­ern­ment to lay off em­ploy­ees to cut down on costs. The

com­pany is now look­ing to sell out a ma­jor stake in or­der to re­live the for­tunes.

COM­PA­NIES FAVOUR­ING MISTRY’S RE­MOVAL

The Tata Group is a big con­glom­er­ate and is pop­u­lar world­wide for pro­duc­ing a wide ar­ray of prod­ucts from salt to mo­tor cars. It also has a rich legacy be­hind it that goes be­yond the sole ob­jec­tive of profit mak­ing. The Group had been as­so­ci­ated with the works of pri­mary ed­u­ca­tion and phi­lan­thropy. A re­cent ex­am­ple of the so­ci­etal wel­fare at­tribute of the Group has been the work done by the Taj Pub­lic Ser­vice Wel­fare Trust. The Trust has been help­ing the vic­tims of the 26/11 Mum­bai at­tacks by prov­ing health­care and fi­nan­cial sup­port. It had also pro­vided vo­ca­tional train­ing and had given em­ploy­ment to the fam­ily mem­bers of the de­ceased in or­der to earn their liveli­hood. The benev­o­lent na­ture of the Tata Group dif­fer­en­ti­ates it from the other big busi­ness houses in In­dia and has been the hall­mark of its work cul­ture and ethos. It is this at­tribute that has in­clined the Board of Di­rec­tors of Tata Steel to re­move Cyrus Mistry from the post of the Chair­man.

While the tra­di­tional Tata Out­look would side with re­vival of the sick units through cap­i­tal in­flow and novel ideas, Cyrus Mistry had been favour­ing the sell­ing of a ma­jor stake of Tata Steel. Mistry has been lean­ing to­wards the trim­ming of the con­glom­er­ate port­fo­lio in or­der to make it fi­nan­cial vi­able and sus­tain­able in the present times. The Tata Steel re­moved Mistry as its chair­man on 25th Novem­ber. An­other com­pany that had ar­dently sup­ported Cyrus’s ouster is Tata Global Bev­er­ages Ltd. which also man­ages the Star­bucks chain of cafes across the nation.

FEW COM­PA­NIES AGAINST CYRUS MISTRY’S EVIC­TION

The Tata con­glom­er­ate worth around $103 bil­lion has some com­pa­nies who have fer­vidly stood in favour of Cyrus Mistry and has de­clined to re­move him from the post of their Chair­man. The In­dian Ho­tels Com­pany (IHC) in which the Tata Sons has a stake hold­ing of about 38.65%, has ques­tioned the ex­pul­sion of Mistry. Mistry who con­tin­ues to be the Chair­man of the com­pany even chaired its meet­ing on 21st Novem­ber. The Tata Power has also ren­dered for­ti­fi­ca­tion to the cause of Mistry and is not favour­ing his evic­tion. Though the com­pany is sched­ule to have an EGM to de­cide the fate of Mistry on 26th De­cem­ber, it is highly un­likely that an ad­verse ver­dict will be given to him. He has con­tin­ued to chair the gen­eral meet­ings of the com­pany even af­ter the 24th Oc­to­ber ouster by the Tata Sons.

SUP­PORT OF THE CEN­TRAL GOV­ERN­MENT

The bat­tle be­tween the two lead­er­ships at one of the largest in­dus­trial group of the nation is to be

de­cided by the Board of Di­rec­tors of the var­i­ous com­pa­nies, but there have been at­tempts made by Ratan Tata to ap­pease the Cen­tral Gov­ern­ment for a favourable stance. On 24th Novem­ber, Ratan Tata had twit­ted that the de­mon­eti­sa­tion pol­icy of the gov­ern­ment had caused great hard­ships for the com­mon man. In the re­mark­able turn of events, he favoured the note ban of the Union gov­ern­ment on 26th Novem­ber when he wrote on his Twit­ter ac­count, “PM has dis­played enor­mous courage in wag­ing war against the black econ­omy.” He also wrote that the de­mon­eti­sa­tion is one of the three ma­jor eco­nomic re­forms that the nation has wit­nessed along with deli­cens­ing and eco­nomic lib­er­al­i­sa­tion. It is be­ing spec­u­lated that for­mer Tata stal­wart is try­ing to win over the Cen­tre gov­ern­ment who had till now be­ing neu­tral on the is­sue. It is worth­while to state that the Cen­tre gov­ern­ment has been closely mon­i­tor­ing the Tata Board­room Bat­tle and had even in­structed the watch­dog Se­cu­ri­ties and Ex­change Board of In­dia (SEBI) to track the de­vel­op­ments closely.

THE ROAD AHEAD

While the bat­tle be­tween the two guards seem to have been un­re­solved for quite a while now, it ap­pears that Cyrus Mistry is not go­ing to give up eas­ily. The Mistry Group (Mistry and Nusli Wa­dia) hard­ened their stance and had al­ready stated that they will con­test the pro­posal to re­move them from the Board of Tata Mo­tors. The Tata Mo­tors is one of the most im­por­tant com­pa­nies of the Tata Group and the only one to fea­ture in the list of For­tune 500 in 2015. The Tata Mo­tors is not per­form­ing greatly in the re­cent times due to huge cost of the Nano project, a brain­child of Ratan Tata. Cyrus Mistry has al­ready crit­i­cised his successor for the project that had drains mil­lion from the com­pany’s cof­fers. The EGM of Tata Mo­tors is sched­uled on 22nd De­cem­ber to de­ci­sion the mat­ter. The Tata Steel has re­cently signed the ‘Let­ter of In­tent’ with the London House Group to en­ter into the ne­go­ti­a­tions for the sale of $ 124.3 mil­lion stake of the com­pany. It is be­ing seen as a dam­age con­trol mea­sure as the com­pany had been un­able to pro­duce any prof­its due to slow global econ­omy and huge labour costs in Bri­tain where it em­ploys around 1700 peo­ple.

The cli­max of this Board­room Bat­tle will be reached in the im­pend­ing

EGMS of the var­i­ous com­pa­nies which will de­cide the fate of Cyrus Mistry. It will be in­ter­est­ing to see if the ma­jor­ity in the EGMS of TCS, Tata Power, Tata Mo­tors and Tat Steel sides with the ver­dict of Tata Sons or if the Mistry Group is able to bat­tle the storm. It will be in the best in­ter­ests of In­dian in­dus­try that the Board­room con­fronta­tion don’t get ant murkier and the par­ties re­spect the ver­dicts of the var­i­ous EGMS sched­uled in the month of De­cem­ber.

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