Ratan (right) and Mistry. - Reuters
MUMBAI: The agenda for Monday’s extraordinary board meeting at India’s largest conglomerate contained little hint of what was to come.
Tata Sons Ltd. directors were summoned to the group’s fabled Bombay House headquarters to discuss the sale of assets, its moribund British steel business and the group’s legal wrangles with Japan’s NTT Docomo Inc., according to a person with knowledge of the events.
But once the meeting started in the wood-paneled boardroom on the fourth floor, it took a different turn. Under a portrait of the formidable J R D Tata, the board wrested back chairmanship of the steel-to-software business empire for 78-year-old Ratan Tata, ousting his protege Cyrus Mistry, 48, in a coup that stunned India’s business community.
Mistry said he was shocked at the nature of his dismissal, according to a letter he sent to Tata directors. The letter described the board meeting as illegal and invalid. Yet Ratan Tata had met Mistry earlier on Monday to present him with options, according to three people with knowledge of the matter, who asked not to be identified because the meeting was private.
”I have to say that the board of directors has not covered itself with glory,” Mistry said in the letter, a copy of which was seen by Bloomberg News. “To 'replace’ your chairman without so much as a word of explanation and without affording him an opportunity to defending himself in a summary manner must be unique in the annals of corporate history.”
The rift had been brewing for months, said people who work with senior Tata executives. It was a clash of styles, a feeling that Mistry, handpicked by Tata, wasn’t sticking to the traditional values of a company that had previously been led by a person related to the Tata family.
Key to the showdown was a US$1.17 billion legal battle with former partner Docomo over an Indian telecom venture. Docomo is trying to enforce a London Court of International Arbitration decision ordering Tata Sons to pay the sum for failing to uphold a contract. That venture was created during Ratan Tata’s 21-year period at the helm, and Mistry’s handling of the matter was seen by some as an erosion of the Tata Sons ethic of honouring commitments, according to the people.
Tata said he would honour decisions made by Mistry, according to a Tata executive.
“The biggest challenge for an organisation is planning for succession, especially following the tenure of a very successful CEO,” said Vijay Govindarajan, a professor at Dartmouth University’s Tuck School of Business. “The current leadership crisis is an unwanted distraction.”
