Ratan Tata created the mess and he should resolve it quickly, says The Economist
With things unfolding in public and the decision to chuck out Mistry from the chairmanship position in other listed companies facing several challenges, many feel that the current interim chairman needs to quickly fix the problem which he triggered few weeks back
The Ratan Tata and Cyrus Mistry war broke out almost a month back and the bitterness for each other has only increased with each passing day as both the camps indulge in allegations and counter allegations.
The unceremonious way through which Mistry was forced to step down from the board of Tata Sons and Ratan Tata being re-inducted as its interim chairman had surprised one and all.
Prima facie it felt that Mistry had been very soft on his approach which affected the prospects of the group's business during his four year tenure, and that led to his forced exit from the group. But with can of worms opening up over the next few weeks, the story has now turned as now there is an increased perception that it is some hard decisions taken by Mistry that led to his ouster.
With things unfolding in public and the decision to push Mistry out from the chairmanship position in other listed companies facing several challenges, many feel that the current interim chairman needs to quickly fix the problem which he triggered a few weeks back.
According to this article in The Economist, Ratan Tata needs to get his act quickly and come out of the mess he created. "Mr Tata created the mess and it is up to him to resolve it," The Economist article said. It said Tata, through the trusts, orchestrated the firing of Mistry from the holding company.
As per the report, Mistry never got a free hand to perform his duties at the group companies, as Tata was breathing down his neck from the start.
Recent media reports suggested that Tata group was unhappy over Mistry's decision to sell some of the Tata Steel's assets in Europe, and the mis-handling of Tata-DoComo deal that went awry during his period. Also, his decision to slash dividend payments, resulting in lower payout to the group holding company Tata Sons did not help it either.
Last week, the promoter company of the major operating Tata group firms had accused Mistry of betraying trust and trying to seek control of main operating companies of the over $100 billion group.
It had also punched holes into Mistry's performance over four years and listed Tata Steel Europe, DoCoMo-Tata Tele joint venture and Tata Motors' Indian operations as "problem companies" where there was no "noticeable improvement in operations" and the situation has worsened with widening losses, increasing debt and declining market share.
As things stand out, Mistry has been removed from the chairmanship positon of Tata Consultancy Services, while the board of Tata Global Beverages' directors, too, have backed the decision to replace him. However, Mistry still remains chairman of some of the group's major companies like Tata Motors and Tata Steel, where Tata Sons does not have majority ownership. Tata Sons has called shareholder meetings at these companies to get Mistry ousted from those boards.
On the other hand, Mistry in his counter allegations had said that most of the troubles at Tata Group companies were due to some reckless decisions of the group taken in the past, and he was only trying to rectify those errors through some tough measures.
In fact, some of the independent directors of Tata group firms, including the Wadia group chairman Nusli Wadia, continue to back Cyrus Mistry, and consider his ouster unfair.
But with both the corporate heavyweights indulging in the blame game, experts feel that Ratan Tata needs to get over this mess as quickly as possible and run the group more effeciently. With accusations over dodgy accounting and unethical deals being levied in recent past, the group could face the risk of being investigated by regulators, said the report.
Taking control of the group, Tata needs to reform the group's structure and first list it's main holding company, the Economist report said. The article suggests that the trusts should bring down their stake in the holding company to below 50 percent and diversify their assets to streamline group and ensure accountability.
Finally, the report says that Tata should remain as chairman for next one year, after which he should renounce all his control over the group.
The airline will now be on its own and will see its own PSS (Passenger Service System), website and more. The change will have to be communicated to the market and would mean additional expenditure.
With the purchase of Air India, the Tata umbrella will have a capacity share of 40.17 percent in Delhi
From founding the airline to spreading the wings of the Maharaja to Europe in 1948, Air India remained JRD Tata's first love