As soon as he was told he was being sacked as the chairman of Tata Sons, Cyrus Mistry texted his wife to inform her about the decision taken by the group's board of directors, a blog written by a former member of the Group Executive Council (GEC) of the conglomerate revealed on Saturday.
Nirmalya Kumar, a professor of marketing at Lee Kong Chian School of Business, Singapore Management University, wrote about the entire episode that took place on 24 October 2016 at Bombay House on his personal website. He was part of the GEC which formed Mistry's core team at Tata Sons.
Nirmalya wrote that Cyrus Mistry had not expected that the routine board meeting would end up passing a resolution sacking him as the chairman, adding that Cyrus was surprised to see Ratan Tata, his predecessor, and Nitin Nohria, another board member at his office. Ratan's presence was surprising as he had never attended any board meeting after Mistry took over as the chairman.
Mistry had taken over as only the second non-Tata family chairman in December 2012 and was expected to remain in office until 31 March 2017.
According to Nirmalya, Nohria told Mistry, "Cyrus as you know the relationship between you and Ratan Tata has not been working", and proclaimed that the Tata Trusts had decided to move a board resolution to remove him as the chairman.
Nirmalya wrote that the board offered him to either resign or face the resolution for his removal at the upcoming board meeting. Meanwhile, Tata chimed in at this stage to say that he was sorry that things had reached such a stage, he wrote.
"Cyrus Mistry calmly responds with gentlemen you are free to take it up at the board meeting and I will do what I have to do. Nohria and Tata exit the room and walk over to the other end of the hallowed fourth floor of the Bombay House, where the boardroom is located," Nirmalya wrote on his website.
Nirmalya wrote that Amit Chandra, another Tata Trust nominee, told the nine-member board that at a meeting (that took place in the morning), they had agreed to move a motion requesting Mistry to step down. Chandra added that the decision had to be taken as the Tata Trusts had lost confidence in him for a variety of reasons. During the meeting, no rationale for the decision was provided by any of the board member.
"In response, Cyrus argued that the articles of association required a 15-day notice before taking up such an item for the consideration of the Board, and as such, the present action was illegal. Amit Chandra informed the board that the legal opinion obtained by the Trusts stated such a notice was not necessary. He offered to share the opinion, but none has been to date. Instead, he proposed Vijay Singh to be elected as the Chair for the remainder of the board meeting," Nirmalya wrote.
Nirmalya wrote that despite Cyrus objecting to the turn of events, one member, Venu Srinivasan, seconded the proposal. On the other hand, two others, Ishaat Hussain and Farida Khambata abstained on this motion to replace Mistry with Singh.
Not just Mistry but his ambitious idea to create a GEC was also scrapped, and members of the council were asked to leave the company. Nirmalya, who was part of the GEC, looked after the group's corporate strategy. He was part of a group which also included two former Tata employees and two others recruited from outside the group.
Despite Mistry's protests, Singh was elected as the chair for the rest of the meeting. Nirmalya wrote that all this happened in such short notice that Mistry had no time to even offer a rebuttal.
After the unceremonious sacking, Nirmalya wrote that Mistry went back to his office and called up his lawyer friend Apurva Diwanji to help him out. Apurva, the article said, whisked Mistry to be taken to a safe house to escape the media glare.
Unknowing to Mistry, the Tatas had begun strategising against him, he writes. According to the writer, Tatas hired six major public relations companies and top lawyers in India to defend them.
The sacking of a Tata group chairman is really unheard off since there have been only six chairmen in the 148-year-old history of the group. As Mistry was selected after due process, it was expected that he would continue holding the chairmanship for at least 25 years, Nirmalya believed.
"In general, the Tata group is renowned for its values, which did not encompass a 'hire and fire' policy. Most senior Tata executives were consummate insiders, having usually served their entire career with the group," he wrote.
Nirmalya put the blame on the board, suggesting that they could have waited for Mistry to exit the conglomerate in March 2017. However, by unceremoniously sacking Mistry, the writer said that Tata Sons gave itself a bad name.
"By eschewing the public humiliation of Mistry, the bloody aftermath that followed could have been avoided. Unfortunately, instead, there was the subsequent public airing of the underbelly of the Tata group as well as the deleterious impact on the reputations of Tata, Mistry and the Tata brand. The only winners as far as one could see were the public relations companies and lawyers, who are still having a field day."
While Nirmalya claimed that there was a smear campaign run by public relations companies hired by the Tatas, he defended Mistry's record as the group chairman.
Pointing out the fact that only two members of the board had to say something against Mistry. Even they, Nirmalya wrote, were "remarkably muted" in their criticism. Nirmalya concluded that this is the testimony to Mistry's performance as the Tata group chairman.
Updated Date: Oct 22, 2017 13:50 PM