Mistry issue: IiAS asks independent directors to guide minority shareholders

Our Bureau Mumbai | Updated on January 27, 2018 Published on November 08, 2016

Cyrus Mistry

Independent directors of the listed Tata companies must guide minority shareholders if a proposal is put forward to remove Cyrus Mistry as Chairman at an extraordinary general meeting, proxy advisory IiAS said in a report released today.

“As a dominant shareholder with over 30 per cent holding in each of the companies, the Tata group can call an extraordinary general meeting and present a resolution to remove Cyrus Mistry as a director. But, for the resolution to pass, it needs the support of at least 51 per cent of shareholder votes i.e those present and voting,” Institutional Investor Advisory Services (IiAS) said. So like the independent directors of group company Indian Hotels Company Ltd made a public stand in favour of Mistry, the independent directors of the other listed Tata group companies should offer their decisions as well.

“The reasoning behind Tata Sons’ decision to remove Cyrus Mistry as Chairperson and Executive Directors is yet unknown publicly. Tata Sons’ board is asking investors to blindly trust them,” the report said. The independent directors are then well-placed to form a judgement, the report added.

The boards of the listed companies risk becoming dysfunctional, if independent directors and the Tata Sons nominees hold divergent views on their support to Cyrus Mistry, or even if Independent Directors differ within themselves on this debate, the report added. This will have consequences, IiAS warned. For instance, credit for the listed companies is backed by the implicit support of the group companies and such a discord within the larger group, IiAS noted, may make lenders nervous about extending further credit to Tata businesses.

In all, the continued silence by the Tata Sons board is troubling for shareholders, IiAS said. “Tata Sons’ silence has not only led to excessive speculation, but is possibly haemorrhaging the current chain of command within the group. With public perception veering towards Cyrus Mistry, the Tata group needs to provide factual and cohesive information supporting its decision to balance the discourse. Else it must back down,” the report concluded.

Published on November 08, 2016

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