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BOARDROOM DRAMA

The board meeting that ousted Cyrus Mistry as Tata group chief

REUTERS/Vivek Prakash
Frenemies.

Three years, 10 months and seven days (after his appointment as chairman)…

It was another Monday. Bombay House was quiet. Mistry, just back from a routine overseas trip, sat in his room mulling over tough decisions that had to be made, preferably that day itself. Could he urge the Tata Sons board to go along with him? A forensic report had culminated in the discovery of a fraud in Tata’s joint venture AirAsia. Mistry had placed that on the agenda of the meeting. A five-year plan for the Group, which had been going back and forth for several months, was also on the agenda. It included proposals for paring down loss-making investments, several of which were made during Ratan Tata’s tenure as chairman. Mistry knew the pain points dragging down the Tata Group’s performance on his fingertips. But resolution is never easy, especially if it involves shutting down businesses or selling assets. He called the pain points the Group’s “hotspots.” Some of them certainly were touchy subjects.

Mistry had heard that some of the board members had met separately earlier that day. Perhaps they were discussing his proposals to sell businesses. What else could it be? The meeting was to start in a few minutes. It was best he went more prepared than usual.

As he sat there, unexpected visitors came to his room—Ratan Tata and Nitin Nohria.

[…]

Without any preamble Nohria brought up the rift between Tata Trusts (led by Ratan Tata) and Tata Sons (led by Cyrus Mistry). The Trusts disagreed with many of Mistry’s plans and actions. Nohria said, “Cyrus, as you know, the relationship between you and Ratan Tata has not been working.” Ratan Tata was there, but quiet for the most part. Nohria offered Mistry two choices—resign or be voted out by the board. Mistry refused to quit. With that, the two visitors left his room, and Mistry made his way to the board meeting.

There was not much time to think. Mistry messaged his wife, Rohiqa, that he may soon be sacked. There was probably no time to consult a lawyer. Surely, there were some board members who would side with Mistry?

Mistry walked a few paces from his office to the boardroom to get the meeting started. This was the last stage in the game of chess.

Present in the room were:

  • Ratan Tata: chairman emeritus (an honorary member with none of the usual rights associated with board members)
  • Ishaat Hussain: finance director since 1998; career-long Tata professional
  • Vijay Singh: nominee of the Trusts since June 2013; former IAS officer with over forty-seven years of experience
  • Nitin Nohria: nominee of the Trusts since September 2013; dean of Harvard Business School and regular adviser to Piramal Enterprises companies
  • Ronendra (Ronen) Sen: independent director (a non-executive director on a company’s board usually tasked to represent the interests of minority shareholders and uphold corporate governance) since April 2015; diplomat, India’s Ambassador to the US between 2004 and 2009
  • Farida Khambata: independent director since April 2015; strategist at Cartica (an investment firm that acquires companies and controls their management in emerging markets), and former member of the International Finance Corp Management, a World Bank affiliate
  • Venu Srinivasan: independent director since 26 August 2016; chairman of TVS Motors
  • Ajay Piramal: independent director since 26 August 2016; chairman, Piramal Enterprises, credited with creating and divesting a pharmaceutical empire now focused on real estate and financial services
  • Amit Chandra: Trust-nominated director since Aug. 27, 2016; MD, Bain Capital, part of the Asia leadership team and India head, also brother-in-law of Nitin Nohria

Mistry walked past some members to settle into the chairman’s seat, which was marginally bigger than the others. The Tata Sons board had nine members: three trust-nominated members, four independent members and two executive members: Mistry and Hussain.

What transpired after that can be best described as “Gone in 60 minutes” because the meeting lasted just that long.

Mistry sat in the chairman’s seat and initiated the meeting at 2pm. He was officially informed that Ratan Tata would be joining them.

Nohria: Tata Trusts has asked us to bring before the board a motion (not mentioned in the agenda).

Amit Chandra: We, the trust-nominated directors, held a meeting earlier this morning and have agreed to request Mr Mistry to step down as chairman. Mr Mistry, would you like to reconsider and resign before we initiate formal proceedings to change the board?

Mistry: I’d request Mr Tata to please say a few words.

Tata: At this stage, I am just an observer.

Chandra: Mr Mistry, do you have any views on the motion (to remove you as board chairman)?

Mistry: The motion, sir, is illegal. The Board, including all its members, must be informed at least 15 days in advance before such a motion can be put before it.

This set the tone for Mistry’s refrain for the rest of the meeting. On everything else that ensued as well, Mistry noted his objection to no avail.

Chandra: We actually have obtained a legal opinion which suggests that in the current situation the notice is not necessary.

Mistry: Gentlemen, would you be so kind as to share this legal opinion. I am not aware of it and I do not agree with it.

Chandra: Mr Mistry is an interested party, I would like to bring this before other board members. For the purpose of this meeting, I propose Mr Singh act as chairman hereon. Let’s put this to vote.

Ishaat Hussain: I would like to abstain from voting on this.

Farida Khambata: I would also like to abstain, please.

[…]

The minutes of the board meeting show that first Vijay Singh became chairman for the rest of the meeting. He then proposed other resolutions that were not mentioned on the agenda. The first was to strip Mistry of all executive powers and annul all power he had been granted on behalf of Tata Sons. Then, the retirement age for directors that was set at seventy-five years was removed.

This was necessary because without that, Ratan Tata could not be nominated to the board.

[…]

Tata: We must recognise the work Cyrus has done over the last four years. It is important for the Group to move forward as seamlessly as possible. Cyrus, would you like to continue as a director on the board?

Mistry: Yes.

Chandra: Should we adjourn the meeting to consider this?

Mistry: Are we planning to make a public statement on what has happened here?

Hussain: Does Mr Mistry continue as the chairman of the Group companies? If not, this is a material change and the listed companies must report it to the stock exchanges.

[…]

Mistry: I will think this over and let you know.

Tata: Keeping directorship on the board is really up to you.

Khambata: Can we already announce this? There seems to be a question on the legality of these resolutions.

Chandra: I am not carrying the opinions, but they are from eminent lawyers and ex-supreme court judges.

Mistry: Could I please get copies of the written opinions? How can the rest of the board act without ever seeing these opinions? I would like to see these opinions today itself, please.

Chandra: Sure, we will check with the lawyers.

Tata: These are material developments to our company. What has happened here must be reported today itself. We should call a press conference.

[…]

Mistry walked back to his cabin. He checked with (Farokh) Subedar whether he should return for a handover the next day. Negative. He was to wrap up his affairs and walk away without looking back.

Bombay House buzzed once again, readying for an explosive press announcement.

Excerpted from Deepali Gupta’s Tata vs Mistry: The Battle for India’s Greatest Business Empire with permission from Juggernaut BooksWe welcome your comments at ideas.india@qz.com.

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