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Proxy advisory firm Stakeholders Empowerment Services (SES) has questioned the classification of Shapoor Mistry as an ‘independent’ director of Indian Hotels Company Ltd (IHCL), part of the Tata group.
SES, which provides investors with independent opinion on governance issues, said Shapoor Mistry being the elder brother of Tata Sons’ Deputy Chairman Cyrus Mistry is not eligible to be the independent director of any of the group companies.
Shapoor Mistry is also related to Tata Sons’ Chairman Ratan Tata. Mistry’s sister, Aloo, is married to Tata’s half-brother Noel Tata.
“We are working towards achieving a corporate governance state where all stakeholders are treated in just and fair manner,” said J. N. Gupta, founder of SES and an ex-Sebi Executive Director.
CONFLICT OF INTEREST?
Asked about legal implications, Chandubhai Mehta, Managing Partner of corporate law firm Dhruve Liladhar & Co, said: “There might be a conflict of interest and errors in compliance when any independent director is related to the promoter company.”
To a query, IHCL said, “It is not a subsidiary company of Tata Sons and that Cyrus Mistry was appointed as the Deputy Chairman of Tata Sons, the promoter company of IHCL with effect from November 23, 2011 whereas Shapoor Mistry held Independent Directorship in IHCL since April 17, 2003,”
However, Clause 49 of Listing Agreement of SEBI says an ‘independent director’ cannot be related to promoters or management at the board level or at one level below the board. He cannot have material pecuniary relationships or transactions with the company, its promoters, its senior management or its holding company, its subsidiaries and associates.
The company also said that Cyrus Mistry’s appointment on the Board of Tata Sons Ltd will not attract the provisions of the revised Clause 49 amended in 2008 retrospectively. However, the amendment is pending clarification from the appropriate authority on the subject.
IHCL further said that it is the process of applying to the Ministry of Corporate Affairs seeking necessary approval in this regard. Post such approval, the Board will initiate necessary steps.
“This is breach of listing agreement and we expect the company to rectify it,” Gupta said.
An AT Kearney study in 2007 said that only 39 per cent of companies in India followed a formal process for the selection of board directors and 90 per cent of independent directors were selected from personal networks of companies’ CEOs or chairpersons.
The IHCL share closed at Rs 59.6 on the BSE, down 0.3 per cent on Monday.
>nivedita.ganguly@thehindu.co.in
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