TATA SONS – THE M(I)STRY SAGA – Part 2

Decoding The Signals –

In our earlier post (Part 1) we had tried to give a chronology of events that led to the decision of removal of Cyrus Mistry as Chairman of Tata Sons Board. This is a continuation of the same piece.

It would perhaps appear that the seeds of discomfort were sown long time back. The chasm and the faultlines only widened with time resulting in complete breakdown of communication. It appears that there was serious trust deficit amongst the principal protagonists – Ratan Tata and Cyrus Mistry – over a host of issues. The signals have been there for more than 3 years now.

The best indicators of relationship going south can be gauged from the fact that at several instances the Articles of Association of TATA Sons was modified to strengthen and protect the interest of TATA Trusts – the dominant shareholder of TATA Sons. The timeline of the amendments to the AoA would indicate that the screws were tightened and the grip on the affairs of the Group was consolidated to severely curtail the latitude that was originally available to Mistry. This could only have happened based on several factors – misaligned objectives, leadership orientation, departure from established philosophy, unbridled aspiration, “significant minority” shareholder activism amongst others.

It would make interesting read to understand the specifics of the amendments to the articles that were carried out at different points in time. The ramp up of the amended resolutions in terms of impact perhaps would have been in tandem with the growing chasm between the two protagonists, thereby necessitating the changes in AoA to protect rights and benefits of TATA Trusts, the principal and majority shareholder.

Further, the fact that Mistry took nearly four years to put together a Strategic Business Plan (SBP) for the Group itself is an indicator of the widening trust deficit between the two sides. The SBP was to be presented to the Board immediately upon Mistry assuming charge as Chairman. However, fro reasons not known, there was no forward movement on presenting the plan, despite several follow-ups on this count. This could also have contributed to the widening rift between the two sides as the Board was totally in the dark about the broader plans that Mistry was willing to put together.

So when the SBP was finally presented to the Board in September 2016, it was rejected outright on account of several issues that were either missing or perhaps included measures did not go well with the long term, broad ethos of the Group. The failure to gain acceptance and pass muster with the SBP became the proverbial final straw that precipitated the need to take the tough decision of removing Mistry as Chairman. Clearly there was no one single event of catastrophic proportions that would have resulted in the inglorious exit of Mistry from TATA Sons.

In our next post (Part 3) we will try and decipher specific issues that could have led to this tumultuous relationship and painful outcome.

 

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