New Delhi: In an email to the Tata Sons board members and trustees, Cyrus Mistry, the ousted Chairman, has claimed that he had been reduced to a “lame duck” chairman as Ratan Tata still continued to exert considerable power over the Tata Group.
Here are the excerpts:
“I was shocked beyond words at the happenings at the board meeting of October 24, 2016. Apart from the invalidity and illegality of the business that was conducted, I have to say that the Board of Directors has not covered itself with glory. To "replace" your Chairman without so much as a word of explanation and without affording him an opportunity of defending himself in a summary manner must be unique in the annals of corporate history.”
“I am writing this letter to the Board to emphasise the total lack of corporate governance and to point out the failure on the part of the directors to discharge the fiduciary duty owed to stakeholders of Tata Sons and of the group companies. All of this does not augur well for the future of the Group. All that is said here is well-known to many among you, but I would like to put in one place my journey as Chairman of Tata Sons. It is important to emphasise the enormity of what has transpired in the Group.”
“In 2011, after some exploration by a search committee, I was approached by both Ratan Tata and Lord Bhattacharya individually to be a candidate for the position. l politely declined. I 'had myself built a business which I would continue to run. However, as the search process progressed and the committee was unable to find a suitable candidate, I was asked to reconsider. After consulting my family and in the broader interests of the Tata Group, it took courage to overcome my initial reluctance and agreed to consider the position. Prior to my appointment, I was assured that I would be given a free hand. The previous Chairman was to step back and be available for advice and guidance as and when needed. After my appointment, the Articles of Association were modified, changing the rules of engagement between the Trusts, the Board of Tata Sons, the Chairman, and the operating companies. Inappropriate interpretation indeed followed, and as elaborated below, it severely constrained the ability of the group to engineer the necessary turnaround.”
“As there is no line of sight to profitability for the Nano, any turnaround strategy for the company requires to shut it down. Emotional reasons alone have kept us away from this crucial decision. Another challenge in shutting down Nano is that it would stop the supply of the Nano gliders to an entity that makes electric cars and in which Mr. Tata has a stake.”
“On the performance of the portfolio, as you are aware from my presentations to you in the recent past, if we look at the aggregate data between 2011 and 2015 and limit the analysis largely to the legacy hotspots (IHCL, Tata Motors PV, Tata Steel Europe, Tata Power Mundra, and Teleservices), it will show that the capital employed in those companies has risen from Rs 132,000 crores to Rs 196,000 crores (due to operational losses, interest and capex). This figure is close to the networth of the group which is at Rs 174,000 crores. A realistic assessment of the fair value these businesses could potentially result in a write down over time of about Rs 118,000 crores.”
“In the face of the above challenges, I had to take many tough decisions with sensitive care to the group's reputation. Apart from hotels, the group made several exits in the fertilize business, UK steel operations, and of course in smaller companies such as the logistic company, DIESL. I had to ease out hangers-on who are prone to flaunt their proximity to power.”
“Early in my tenure, our foray into the aviation sector began when Mr. Tata ushered me into his office and handed me a report on Air Asia by Bain & Co. He had concluded negotiations to partner with Air Asia and wanted the proposal tabled at the forthcoming Tata Sons board meeting. My pushback was hard but futile. A few months later, I was surprised to be confronted with a similar situation requiring me to execute a fail accompli JV with Singapore Airlines."
“To come back to the amendments in the Articles of Association, as feared, the inappropriate implementation created a flux in the decision-making process. I have often presented to the trustees, before and after Tata Sons board meetings. This created alternative power centres without any accountability or formal responsibility.”
I cannot believe that I was removed on grounds of non-performance. As you are aware, the Nomination and Remuneration Committee comprising Vijay Singh, Farida Khambata and Ronen Sen independent directors (two of whom have voted for my removal now), had only recently lauded and commended my performance.”
“I hope you do realize the predicament that I found myself in. Being pushed into the position of a "lame duck" Chairman.”
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