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Ratan Tata letter urged Cyrus Mistry to establish a Blind Trust

Tata in his letter to Mistry asked him to set up a "Blind Trust" that will disassociate the latter from his Tata shareholding, and also not to have any transaction of business between Shapoorji Pallonji Group and Tata Group as long as Mistry was its chairman.

2016 had been a big surprise for business world when Tata group ousted its chairman Cyrus Mistry, which became a cause of ugly spat between Ratan Tata’s Tata group and Mistry. However, this wasn’t as sudden as it seems. Mistry and Tata had issues cropping up since 2013.

According to the latest reports, Tata, in a handwritten letter dated September 24, 2013, seemed alarmed at what he thought were clear conflicts that Mistry as chairman of Tata Sons should avoid. This included disassociating himself (Mistry) from family businesses to ensure that there was no conflict of interest brought about by the personal holdings in Tata group companies.

The letter further confirmed that it was discussed by the selection committee and Mistry agreed. It further prodded Mistry to set up a “Blind Trust” that will disassociate the latter from his Tata shareholding, and also not to have any transaction of business between Shapoorji Pallonji Group and Tata Group as long as Mistry was its chairman.

It is to be noted that “Blind Trust” is a popular concept of the west when individuals are keen to avoid any conflicts with another entity their firm has a relationship with. It allows the owner of the stake to relinquish the control of the company during the period when he has other responsibilities. Tata preferred handwritten notes in his correspondence with Mistry, reflecting his desire to keep differences strictly confidential, between him and his then successor.

Tata had reasoned in the said letter that while he was supportive of every action and decisions that Mistry took as chairman and wanted to ensure that he would not want to be “a ghost in the corridor”, he reminded Mistry that he (Tata) will make every effort to safeguard what is in the best interests of the Tata Trusts

This matter was “fundamental” for him, which if it cannot be resolved between them, “will necessarily have to become an issue of a more public nature,” Tata warned in the letter.

Mistry had agreed to Tata’s thoughts in an email and said that Tata’s letter and conversations had “insinuated” that his actions or not taking them have compromised the ethical values of the founder. He reiterated that he would ensure that principles are not compromised and can stand the strictest global levels of public scrutiny. Tata in his letter also asked Mistry to tabulate existing contracts SP Group had with Tata Group.

 Mistry explained in his reply that time was taken only because the issue ethically, emotionally and financially impacted him, and because of his busy travel schedule in the face of multiple challenges faced by the group at a critical juncture.
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