Denying that Cyrus Mistry had created a structure that made Tata Group companies “drift away” from promoters, Mistry’s office said the corporate governance framework that was developed under Mistry’s leadership attempted to ensure that group companies would adhere to group values, without impinging on their independence and the boards that they are ultimately responsible to.

“As agreed with the Tata Sons board, the governance mechanism to protect Tata Sons’ interests and ensure adequate group representation on operating company boards was to have Group Executive Council members, other senior group centre members (eg, Farokh Subedar, S Padmanabhan), and select CEOs (eg, Bhaskar Bhat, Noel Tata) on the boards of operating companies,” Mistry’s office said.

It further said that by placing the responsibility where it should lie, with the board of directors of the operating companies, Mistry allowed the independent directors to ensure that the interests of minority shareholders were aligned with the operating company’s strategy as well as the overall direction of the Tata Group. A Tata Sons spokesperson reiterated that “it is crucially important for boards, including independent directors, to consider that their views and positions ensure that the future of Tata companies is protected, taking into consideration the interest of all stakeholders.”

Proxy advisory firm Institutional Investor Advisory Services India Ltd (IiAS) said the current back-and-forth between Tata Sons and Mistry, with independent directors of listed companies in the fray, is reactionary — and unlikely to provide a long-term solution.

“To align the interests of Tata Trusts and Tata Sons, the Chairperson of Tata Trusts and Tata Sons must be the same individual. In the past, when this has been so, this has worked smoothly. It needs to revert to this structure with some minor fixes. Tata Trusts and Tata Sons should in future be run by independent CEOs. The chairperson should be the custodian of the Tata brand,” it said. IiAS believes the current combative conversation between Tata Sons and Mistry is a distraction from the core issue. “Tata Chemicals’ and Indian Hotels’ independent directors’ decision to support Cyrus Mistry adds to the growing complexity of the current narrative.

“The independent directors in the operating companies are right in taking a stand and providing guidance. But, we are concerned with the way the situation is playing out: their decision threatens to dismember the companies from Tata Sons and, effectively, the group,” it said.

It added that the role of Tata Sons CEO should be more than of a portfolio manager.

Related Topics