The Cyrus Mistry debacle is a reminder of Ratan Tata's true character and how mainstream media bends even without being asked to crawl.

Values and ethos have always helped Ratan Tata consolidate power and media plays alongImage: PTI
Voices Business Friday, October 28, 2016 - 09:15

Ratan Tata rarely receives bad press. He may have failed with his ambitious Nano car project, but the ‘dream’ of producing a cheap car for the average Indian somehow always transcends the product’s failure in the market. The Corus deal may have burnt a huge hole in the group’s pocket, but the 'audacity' of an Indian company to dream of being a global leader will always be our first prerogative. There are no two ways about it, the reserved, polished scion of the Tatas is, by choice of the media and largely the Indian public, the most reliable, responsible face of Indian business. 

On October 24, the board of Tata Sons announced out of the blue, that Cyrus Mistry, who was the Chairman of the board and in effect the mighty Tata Group, was being replaced by his predecessor, Ratan Tata, who would take over as the interim chairman until a new full-time chairman takes over, within a period of four months. The reasons were familiar, Mistry had failed to adhere to the core 'values and 'ethos' of the group, the Board claimed, but there were no concrete reasons forthcoming. 

Very few, apart from Mistry himself, have questioned the legality and ethicality of the move. 

Attacking in the dark

It is usual practice that before each board meeting, a list of all items on the agenda is circulated among the board members. Board members are given time to prepare for the meeting. According to media reports, Cyrus himself was kept in the dark about the particular ‘item’ on the agenda which was about his replacement. The crucial proposal to end Mistry’s reign as the chairman was listed under the ‘others’ category, and that particular ‘item’ was missing from the note which was sent to him. 

A top corporate lawyer in Mumbai who TNM spoke to says that unless there are specific rules pertaining to this in the Articles of Association of Tata Sons, this move cannot be seen as ‘illegal’, although Mistry himself has called it ‘illegal’ and ‘invalid’ in a letter to Tata Sons which was leaked.

“However, this does not bode well when one looks at it from the perspective of good governance. It is good practice and ethical to inform the chairman before replacing him. A person should be given a chance to defend himself, but there might not be a strict illegality to the move,” the lawyer said, wanting to maintain anonymity. 

Meanwhile, The Hindu reports that the AoA was tweaked in 2012 on this regard, so there might be no legal recourse for Mistry. 

What works in favour of Tata Sons is that it is not a listed company, and they are not required to make such disclosures in advance to the stock exchanges or market regulator.  Even so, senior journalist Sucheta Dalal makes a case for Tata Sons to give a detailed explanation to the shareholders of Tata’s group companies. “The Tata group is treated with such reverence that neither the market regulator, nor the stock exchanges on which the group companies are listed, nor the Finance Ministry have bothered to ask why the board has chosen to take such a drastic step and followed it up by removing Mr Mistry's speeches and interviews and disbanding the management committee he had set up,” she remarks. You can read her full piece here.

Apart from Dalal’s posers on Moneylife, and Andy Mukherjee’s damning questions to Ratan Tata here, Tata seems to enjoy a free pass over his recent coup, and some questionable decisions he took as the Chairman, from Nano and DoCoMo to Corus.

But the bigger question of the moment: does this sudden, rather unceremonious, seemingly devious replacement of Cyrus Mistry not deal a blow to the ‘good governance’ image of the Tata group? So then why isn't mainstream business media seeking answers from the hallowed Tata Board?

There must be more to this than just mainstream business media’s usual complicity with corporate honchos. Or is it a simple case of idolising and canonising a historic 'Indian' corporation to the extent of absolving them of their duty to come clean and explain their stance in a situation as ugly as the present one. 

Since the news of Mistry's ouster broke, media has not done much more than report what is being said by both sides. No tough questions are being asked, especially given that the doyens of business journalism in India would remember that this is not the first time Ratan has ousted a senior member of the Tata family in an unceremonious manner.

The hallowed Tata "ethos", "culture" card

Miffed with the ‘leak’ of Mistry’s letter to Tata Sons after he was replaced, which details Ratan Tata’s failures as Chairman, Tata Sons in characteristic style have released a detailed statement heavy with words like ‘undignified’, ‘unsubstantiated’ and ‘malicious’. But we also get a dose of “culture, ethos, governance structure, financial and operational imperatives of the Tata Group” and the likes.

These virtues have always come handy to the board of Tata Sons.

Three forgotten names from Ratan Tata’s history deserve mention here –  Tata Steel’s Russi Mody, Tata Chemicals’ Darbari Seth and the Taj Group’s Ajit Kerkar. 

In 1983, Ratan Tata embarked on what he saw as an ambitious plan to take the Tata groups to newer heights. His predecessor JRD, allowed him to do what he wanted with Tata Industries, but the “satraps” of the Tata empire - Mody, Seth and Kerkar – were reportedly not interested. In the years to come, Ratan would only get back at them, plucking them out of their seats of power one by one. (Read ‘The Insecure Tata’ by Sandipan Deb and Shekar Ghosh on Outlook here.)

The first episode was the ouster of Mody in 1993. Clearly, Mody put himself in an embarrassing position with a few missteps, but Ratan introduced the new rule that directors should retire at 65, and chairman at 75, a policy targeted at Russi Mody and Darbari Seth. But even before his term ended, Mody was asked to fall in line with Tata’s plans. He refused, and was sacked. Read Ajay Singh’s account here.

In 1994, Tata exercised his power and pushed Darbari Seth out of Tata Chemicals, creating a narrative that ‘young blood’ was needed. Nani Palkhivala was one of his co-conspirators. 

The story of Kerkar was no different. Faced with allegations of corruption and embezzlement, and refusing to be a part of Ratan’s royalty scheme whereby group companies pay 5% of their profits to the group, he too faced Tata’s wrath. 

Stories about his FERA violations were leaked to the media and the number of board members were increased to 11 by Tata to facilitate Kerkar’s ouster (recently, Ralf Speth and N Chandrasekaran joined the board after Mistry’s ouster). The subsequent fall of the Taj group is well documented here.

Nani Palkhivala, when asked about the trio’s ousters, had then said, “First, the Tatas have maintained the highest standard of ethics and integrity and purity. Second, the persons you mentioned are persons who have betrayed this kind of confidence of the Tatas.”

"For the public, Ratan was in the process of consolidating his group companies. But senior dons of the Tata empire realised that it was all euphemism for consolidating his own position within the Tata empire,” a stockbroker told Outlook then. 

What is also to be remembered is the Radia tapes controversy and 2g scam. One wonders if Tata's conversations with Niira Radia (whose company looked after the Tata group's PR) and his letter to DMK chief M Karunanidhi backing A Raja, who later came under the scanner for the telecom scam, lived up to the 'ethos' and 'values' of the Tata group.

Writing on la affaire Kerkar for India Today in 1997, Robin Abreu begins, “Some illusions of glory take little time to shatter. Like that of Ajit Kerkar being the czar of the Taj Group of Hotels…. The illusion was shattered in 10 minutes flat…”

For Cyrus Mistry, the illusion that he could drive Tata Group the way he wanted, without Ratan Tata’s blessings, took four years to shatter. 

Note: The views expressed here are the personal opinions of the author.

Note: JRD was earlier mentioned as Ratan's father instead of predecessor, this error has been rectified. 

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