India Inc. received a huge jolt on Monday evening when the board of Tata Sons Ltd announced that Cyrus P Mistry will be replaced by Ratan Tata, who will be the interim Chairman of the group.
A selection committee comprising Ratan Tata, Venu Srinivasan, Amit Chandra, Ronen Sen and Kumar Bhattacharyya will now find a replacement for Mistry within four months.
The short and simple press release from the board of Tata Sons did not specify why Mistry was fired, but several media outlets have been reporting based on information from anonymous sources and certain events in the recent past.
Here is a roundup of what is being reported on why Cyrus was fired.
Most newspapers have reported that this was not a sudden fallout, but a decision which was months in the making, since Ratan Tata was not happy with the way Cyrus was running the group.
“There were many theories--ranging from unhappiness over the group's performance, to the handling of certain situations and companies--none of which could be confirmed. At the core, though, there appeared to be a clash of cultures and management styles; there was concern over the erosion of long-held “values” and the reversal of certain policies and practices.”
Here are the theories of exit according to TOI
- Mistry’s handling of disputes like the NTT DoCoMo issue were seen to be going against the group’s values
- Mistry’s own team, the Group Executive Council, which was disbanded immediately after Mistry’s exit, was seen by the old guard as not being effective enough
- Sluggish growth
- Reversal of past policies
ET reports that the move to fire Mistry could have been ‘payback time’ from Ratan Tata because Mistry had “cleared Tata Power’s $1.4-billion acquisition of Welspun’s solar farms without seeking approval from either Tata or other key shareholders”.
“But soon, youth was perceived as insolent, precocious and out to destroy “the core values that the group stood for, for close to 148 years,” reports ET.
Here are some pointers from ET,
“There was a fundamental disconnect between Mistry and Tata, particularly with regard to ethos, values, vision and the direction that the group was headed in. Detailed letters were sent to Mistry asking him to spell out his vision, five-year plan, etc, but the responses were vague and non-specific.”
“Several of Mistry’s decisions, including the disposal of some of Indian Hotels Co’s overseas properties and especially the move to shut the UK steel operations, did not go down well with Tata Trusts.”
“Tata Trusts were of the view that the group under Mistry had not been able to take into account the sensitivity of shareholders as well as the global ecosystem in which the group companies operate”
Business Standard reports,
“A top source in Tata Sons said the group was not doing well under Mistry and the board was unhappy with the performance, especially in Europe and India. “Look at the poor returns on investments across all businesses in India and abroad,” the source said, adding the Tatas were not happy with the advisors around Mistry.”
Mint reports,
“The boardroom putsch has been some time in the making, according to a person close to Mistry, who asked not to be identified. Differences have surfaced over how Mistry has been dealing with the significant challenges facing the group.
Several of Mistry’s operational decisions were challenged by Ratan Tata, according to this person. Still, it is the prerogative of the largest shareholder to do this, the person said a few weeks ago. Mint couldn’t ascertain if there was an immediate trigger for this ouster.
“Primarily, it was a lack of communication between the shareholder and the management. A lot of decision-making was done unilaterally by Tata Sons and was not approved by Tata Trusts,” said another person briefed about the matter.”