Mistry-ous sacking: Why Ratan Tata sacked Cyrus Mistry?

Ratan Tata returns as interim chairman; four-member committee to hunt for the empire’s new leader; reasons for change remain murky.
File photo of Ratan Tata (L) with Cyrus Mistry (R) | PTI
File photo of Ratan Tata (L) with Cyrus Mistry (R) | PTI

NEW DELHI: Tata Sons, one of India’s largest and iconic business conglomerates threw a huge surprise on Monday. The salt-to-software conglomerate replaced Cyrus Mistry from the Chairman’s post, within four years of his appointment. The group’s doyen Ratan Tata has returned as its interim chairman. He would hold the office for a period of four months till the selection committe finds a new person to lead the business empire. The committee includes Ratan N Tata, Venu Srinivasan, Amit Chandra, Ronen Sen and Lord Kumar Bhattacharyya. The positions of chief executives leading the group’s companies remained undisturbed. 

While the Tata Group remained tight-lipped about the reasons leading to the decision, unconfirmed reports claimed that Mistry himself was planning to move the Bombay High Court against the decision. The sudden announcement on change of guard has come as a shocker for many industry analysts and experts. This is because, Mistry’s appointment in 2013 was considered as a move for stability, to ensure a smooth succession plan for the group. Now with his removal, uncertainties have emerged over the conglomerate’s future. By stating that he would be the ‘interim Chairman’, septuagenarian Ratan Tata has made it clear that he is unlikely to take permanent control.   


The change in leadership is not expected to be a smooth ride, considering the way things transpired. Cyrus Mistry is the son of Shapoorji Pallonji Mistry, an Irish-Indian construction tycoon and chairman of the Shapoorji-Pallonji Group. Interestingly, this group is also the single largest shareholder in Tata Sons with an 18.5 per cent stake. According to unconfirmed reports, Pallonji had termed the development as an ‘illegal move’.

A letter from interim chairman of Tata Group, Ratan N Tata,
informing employees about the change in leadership

If the Mistrys move the judiciary as claimed by sources, it could further worsen the selection committee’s task of finding a new chairman. However, sources also indicate that the Tata Group has consulted and taken legal opinion from senior experts, including the former Solicitor General Mohan Parasaran, ahead of the move. It is also said that Ratan Tata has written to Prime Minister Narendra Modi, informing him about the change in the top management. While details of his letter to the Prime Minister were not made public, the move is pegged to be a confidence-building measure, to minimise any rude surprises at the top-level. 


Why this change? Reports suggest that Cyrus Mistry did not enjoy great relations with Tata Trusts and Ratan Tata in particular. Mistry’s attempt to create a team of his own choice is also pegged to have been a reason behind the change. Mistry, after his appointment, had announced the need to bring in a generational change in the group’s top leadership. He then replaced the group corporate centre and the group executive office for decision-making with a new group executive council (GEC). Within hours of his removal, the GEC was disbanded by the group, agencies reported. Mistry’s decision to appoint NS Rajan from Ernst & Young as group’s chief human resources officer, and ex-BSE chief Madhu Kannan as head of business development and public affairs, was also not appreciated by the Board, claimed sources within the firm.


Mistry had also gone back on the Tata-Corus deal clinched by Ratan Tata for European steel operations. Tata Steel is currently in negotiations with ThyssenKrupp regarding a merger of operations. Ratan Tata, reportedly, is not happy with the decision to hive off one of his biggest acquisitions. “The change at Tata has thrown Britain’s steel industry into a fresh round of uncertainty, The Guardian reported.


Bombay coup rumours: Those owing allegiance to Ratan Tata also smelt a possible coup attempt by Cyrus Mistry to gain complete control of the Group, say sources privy to the matter. Though these claims could not be independently verified, such an attempt, if proven true, could have alarming consequences considering Shapoorji Pallonji is the biggest shareholder in Tata Group. Incidentally, the board of the Tata Group also underwent considerable changes in the recent months. In the month of August alone, three new members were inducted into the board — Venu Srinivasan, Ajay Piramal and Amit Chandra. And interestingly, two of the three new members, Venu Srinivasan and Amit Chandra, also feature in the new selection committee.

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