Tatas charge Mistry with betrayal, mismanagement

Tata Sons on Thursday levelled serious charges against ousted Chairman Cyrus Mistry, including “poor performance”, “disregard of long-standing Tata traditions” and betrayal of trust owing to his “desire to take control” of group companies.

In a blistering nine-page note, the first official statement by Tata Sons explaining the reasons for Mistry’s sacking, the company gave a point-by-point rebuttal of the allegations made by the former Chairman in his note to the board soon after his exit.

Tata Sons said that Mistry had been appointed as Chairman based on the views and plans he had shared with the selection committee, but claimed he had failed to deliver on these plans.

“After four years, it is unfortunate that hardly any of his major views on the management structure (which had impressed the Committee favourably) have been implemented. In fact, even the then existing structure of the group, which had stood the test of a long period of nearly 100 years by the visionary founders and generations of Tatas, seem to have been consciously dismantled so that now the operating companies are drifting farther away from the promoter company and their major shareholder (except for periodic presentations) through systematically reducing the effective control and influence of the promoter,” Tata Sons said.

Highlighting the “poor performance” of group companies under Mistry, Tata Sons said dividends received from all 40 companies (excluding TCS) has continuously declined from ₹1,000 crore in 2012-13 to ₹780 crore in 2015-16. There was little or no profit on sale of investments during these years, impairment provisions increased from ₹200 crore in 2012-13 to ₹2,400 crore in 2015-16 and group indebtedness has increased by ₹69,877 crore to ₹225,740 crore over the last four years. “This surely reflects the decline in the total profits of those operating companies from which dividends are paid, during the last four years,” it said.

Tata Sons blamed Mistry for using the “strong public relations network” of Tata to repeatedly highligh the major problem areas in the group inherited by him to account for his lack of his performance. “After four years of full-time involvement and executive authority, we continue to be told how these ‘legacy’ problem areas are a major drag on Mr. Mistry’s otherwise good performance. How many more years would we be told this same story?” Tata Sons wondered.

“Insiders in Bombay House who have been with the group for many years silently and helplessly watched the conscious departure from old, proven and successful structures within the group and the induction of very senior executives from outside the group with little or no experience of running large companies and being paid amounts reportedly running to several crores for purely functional positions at the very top,” the note said.

Responding to these allegations, sources close to the Mistry camp termed the note a “desperate” act. “After 17 days of silence on the unjustified and unexplained removal of Cyrus P. Mistry as Chairman of Tata Sons, the Tata Sons’ nine-page ‘press release’ has not much but selective data, unsubstantiated claims and half truths without a word of explanation as to why it became necessary to remove him summarily violating natural justice and without explanation,” sources close to Mistry said.

The source said that for the Tatas to blame Mistry for all the problems he had inherited was fallacious; the Tatas, the source added, had embarked on a “smear campaign” unworthy of the Tata Group.

“All the ‘reasons’ in the letter, would have, and should have, been tabled and recorded in the minutes of the many Tata Sons board meetings held over four years of Mr. Mistry’s Chairmanship. Unfortunately for them, no such record exists because these allegations are simply not true.”

COMMENT NOW