Tata Sons on Thursday accused ousted Chairman Cyrus Mistry of various acts of omission and commission, 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 nine-page note, which is the first official statement issued by Tata Sons explaining the reasons for Mistry’s sacking, the company countered point-by-point all the allegations made by the former Chairman in his note to the board soon after his exit.
Responding to these allegations contained in the note, Mistry camp sources told the media that the note was 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,” Mistry camp sources added.
They pointed out 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.
The Tata Sons statement said that Mistry was appointed as Chairman based on the views and plans he shared with the selection committee. However, he failed to deliver on these plans, it added.
“After four years, it is unfortunate that hardly any of his major views on the management structure (which had impressed the Committee favorably) 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.
Pointing to the “poor performance” of group companies under Mistry, the statement said dividends received from all 40 companies (excluding TCS) has continuously declined from Rs1,000 crore in 2012-13 to Rs 780 crore in 2015-16. There was little or no profit on the sale of investments during these years, impairment provisions increased from Rs200 crore in 2012-13 to Rs2,400 crore in 2015-16 and group indebtedness increased by Rs 69,877 crore to Rs 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.
It blamed Mistry for using the “strong public relations network” of the Tatas to repeatedly highlight the major problem areas in the group inherited by him to cover up his lack 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 asked.
The note said: “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.
Refuting all these allegations, Mistry camp sources said: “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.”