Tata to Mistry - Part 1

Like many others, I will not say that I was shocked by the removal of Cyrus Mistry as Chairman of Tata sons. Believe you me when I say, I was half expecting some change. Ever since the start of legal battle with Docomo, I was sensing some rift in the top management. In the Board meeting on Monday, six Directors have voted for removal of Mr Mistry,while two Directors had abstained. The ninth member of the Board,Mistry,could not vote.He continues to remain a Director.

Tata sons has two companies in the group which are cash cows. They are TATA Motors and TCS (Tata consultancy services). The two companies alone account for more than half of the revenue of US 103.5 billion.International revenues account for more than 70 percent of the revenues and most of the capital expenditure was in overseas areas during the last three years. Shapporji Pallonji,18.5 per cent shareholder in Tata sons and father of Cyrus Mistry, could challenge this decision in a court of law.Mohan Parasaran, a leading lawyer has said thus: "I think Shapoori Pallonji could challenge this decision although I think all the rules ere strictly followed and I was convinced". He also said that that fifteen days ago Mr Ratan Tata and another Director had asked Mistry to step down,but he refused. Tata group also consulted P.Chidambaram.

My guess for the removal is this. Mr Mistry was tying his best to change the management structure of the group at very senior levels.Most of these employees have remained loyal to Tatas for many years. There was some resentment.Mr Mistry was also involved in the costly legal battle and settlement with Japanese telecom operator NIT Docomo. He was also seriously trying to sell Tata Steel's loss making UK business. This has now been put on hold.According to newspaper reports "nuanced changes to Tata's values and management style" led to the removal of Mr Cyrus Mistry.Ratan Tata has said that it was in the interest of long term stability Mistry was removed.

Ratan Tata will take over as interim Chairman for four months. A Selection Committee is entrusted with the job of finding the new Chairman within a period of four months. Mistry took up his position in December 1992 with lot of promise. It is sad that his short career with the Tatas had to end in this way. The Group Executive Council (GEC) consisting of outside professionals appointed by Mistry has been abandoned.

While maintaining that TATA Brand s bigger than any individual, Mr Hrish Salve, legal counsel for Tatas in many cases has said that the Group had lost its faith in the leadership of Cyrus Mistry.The response from Mistry is "I take tough decisions for right reasons.