Why Cyrus Mistry is fighting a losing battle against Tata
When on October 24, Cyrus Mistry was unceremoniously thrown out of the chairman's post at Tata Group through a hidden agenda, he might have thought that was the last straw.
He wrote a letter to the Board members, explaining his position; he also threatened to approach the law for the wrong meted out to him, and so on and so forth. He did everything that was expected for being at the receiving end of such high-handed and cavalier treatment. Although later, the Shapoorji Pallonji family, which generally believes in keeping a low profile, rubbished media claim of judicial redress.
But now Tata Sons has stepped up the fight, which promises to go to the finish, which will only be when Mistry is completely removed and has nothing left to do with Tata. Obviously, Mistry didn't anticipate this either. He didn't know the worst is not yet over.
A concerted effort is underway to strip him of all top posts and thus get rid of him altogether. It shouldn't come as a surprise if, before long, Mistry finds himself thrown out of the Board as well. And the moves for that are already afoot, since, although Mistry has been sacked as chairman, he continues to be a member and sparks are sure to fly once meetings are convened in the already rancorous atmosphere.
It appears that Mistry has already sensed it, otherwise he would not have tried to take on the top management or at least get some Board members on his side. But his efforts have evidently been unsuccessful. The core Tata team comprises long-time associates and loyalists who would not go against the old structure and hierarchy.
That the Tata Group would explore all options to remove Mistry is evident, even going by the way he was sacked. It carried the message loud and clear that anyone trying to move away from the old system to a new one and against the consent of all stakeholders would not be allowed to carry on.
It has set a precedent about the kind of summary justice that would be peddled in case of disagreement. Whether the proposed route is within the bounds of propriety doesn't really matter. The decision would be quick and its execution immediate.
According to reports, Mistry's ouster had little to do with his performance. Independent experts believe his policies were good for the long term. But the people who mattered obviously thought otherwise.
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| According to reports, Cyrus Mistry's ouster had little to do with his performance. (Photo credit: India Today) |
That the Tata Group is going after Mistry is evident as they have sharpened their attack. From what was "not good for the long term for the company" hardly a fortnight back, has now gone into the territory of making direct accusations. This change of tactic - one of defence to outright attack - should worry Mistry.
There is sufficient evidence to support this argument. Tata Sons has nominated Ishaat Hussain as chairman of the Tata Consultancy Services Board. He replaces Mistry until a permanent appointment is made. On Wednesday, Tata Sons called an extraordinary general meeting (EGM) in order to replace Mistry as the director of the company.
The Tatas are upping the ante in a fight where the opposition is non-existent and too weak to fend for itself. Today, in tandem, the Group also launched a vitriolic attack aimed at former chief Mistry, accusing him of betraying trust and trying to take control of the main operating firms of the group, valued at more than $100 billion.
Apart from the vicious attack, the Group's nine-page statement seeks to debunk the claims made by Mistry in his letter written to Board members the day after he was sacked.
Tata Sons has accused Mistry of attempting to take control. "In hindsight, the trust reposed by Tata Sons in Mr Mistry by appointing him as the Chairman four years ago has been betrayed by his desire to seek to control main operating companies of the Tata Group to the exclusion of Tata Sons and other Tata representatives," Tata Sons' statement read.
The Group has also accused Mistry of destroying the historic management structure through which Tata Sons controlled its Group companies.
"We now have an unacceptable new structure where the Chairman alone is the only common Director across several companies and this situation could not be allowed to go on," it said.
Seeking to fuel the view that Mistry has been removed for non-performance, the statement also goes on to say that while dividends from the 40-odd Tata Group firms had dropped, the expenses had risen during Mistry's stay.
The statement 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 had changed for the worse with increasing losses and debt.
From the look of things, it clearly shows the battle is on and there are no signs of reconciliation. This is a fight that Mistry is bound to lose. The juggernaut has started rolling at India's most well-known of business houses.