There was a long lead up to the ouster of the Tata Sons chairman on Monday. For more than a year, he was told orally and in writing that he wasn't meeting expectations.
Monday’s development in India’s biggest conglomerate that saw the exit of Cyrus Mistry as chairman of Tata Sons may have come as a shocker to the outside world but to those in the know of things, including Mistry himself, it was a matter of time.
Informed sources told The New Indian Express that a suggestion was made to Mistry much before Monday’s meeting, maybe even a couple of months ago, that he step down given the board’s “disappointment” with him.
The message, it is learnt, was communicated to Mistry through a member of the board but he chose to reject the suggestion. At Monday’s meeting too, Mistry was first requested to step down. It was only after he refused that the resolution to “replace” him was moved and voted yes by majority. A top source associated with Tata Sons confirmed this to TNIE though he did not choose to specify when exactly the suggestion was conveyed.
Sources said the differences between the majority stakeholders — Tata Trusts and Mistry — started cropping up more than a year ago and escalated in the last three months. For more than a year, it was conveyed to Mistry, in writing, orally and at formal meetings as well on several occasions, as to how he has not been able to measure up to the “expectations from him”.
Among many other “complaints” the Tatas had against Mistry, the primary discomfort stemmed from the way he sought to go about with disinvestment, reduce dividend payments and the way he chose to portray at official meetings how badly the various group companies were managed in the past, which could be interpreted as an indirect assault on Ratan Tata.
Board members representing the Tata Trusts were said to be discomfited by information flowing to them that Mistry was being “guided” by some who had a known enmity with the group.
Citing a specific example, another source revealed that one of the first tasks suggested to Mistry when he took over as Chairman in December 2012, was to come up with a five-year strategic plan for the group.
But it was only after more than three years — in September this year to be precise — that Mistry came up with the plan and the board conveyed to him it was “inadequate.” In other words, the writing was on the wall and by then the “breakdown in relationship” between Mistry and the Tatas was complete.
“If someone is repeatedly communicated that his performance is not up to the mark and the reasons for the same are pointed out, there is no need to specify them again when the final decision is taken. There is absolutely no breach of corporate governance in whatever decision was taken at Monday’s meeting,” a source said. The board members were said to have been conveyed three days before about the need to pass such a resolution if Mistry did not step down on his own.
An official source this newspaper spoke to ruled out the possibility of the Union government intervening in the matter, saying it has “no role to play” in a decision concerning Tata Sons.
E-mails sent by this newspaper to both Tata Trusts and Mistry for their comments were not responded to.