Cyrus Mistry’s “hostility” to primary promoters had led to his removal as chairman of Tata Global Beverages as it posed significant risk to the company’s future performance, said the new head Harish Bhat.
He said a resolution seeking removal of Mistry was brought in a fully legal manner, is in compliance with the Companies Act and Mistry was voted out 7:3.
“I proposed a resolution (seeking removal of Mistry) as I believed that TGBL is at significant risk from having a chairman who is in a position of hostility to major promoter company, that is Tata Sons,” Bhat told PTI, referring to yesterday’s board meeting of TGBL, Starbucks Corp’s Indian partner.
Mistry, he said, no longer enjoys confidence or support of Tata Sons, which holds 35.27 per cent stake in TGBL.
“When you have hostile relationship between the chairman and the primary promoter, there are significant risks which are detrimental to all stakeholders, including minority shareholders,” he said.
The risks can be about use of Tata trademark, attracting and retaining talent, quality of partnership with partners and future performance and implementation of strategic plans, he said.
“It can come from the rating that the company enjoys. The risks can arise from several such factors,” he said, adding that interest of all stakeholders of the company, including minority shareholders, calls for a “good alignment” between the chairman and the major promoter company.
At the yesterday’s board meeting, seven out of the ten directors present voted for Mistry’s removal, showing that he had lost support of the board, he said.
Mistry had yesterday slammed the move as “a repeat of the illegality that the board of directors of Tata Sons Ltd did on October 24” when he was removed as chairman of the holding company of the USD 103-billion Tata group.
A statement issued by his office stated that there was nothing on the agenda of the TGBL board, a meeting of which was called to approve second quarter earnings, “about replacement of the chairman just as there was nothing in the Tata Sons board agenda on October 24”.
Asked about Mistry’s statement, Bhat said the resolution was “brought to the board in a fully legal manner.”
The Company’s Act provides for bringing resolutions or proposal that are not on agenda, he said, adding that he “respectably disagrees” with Mistry’s assertion.
The board meeting, he said, was very much in progress when the resolution was brought in. “The board meeting was being chaired by Santhanakrishnan, who was elected to chair the meeting” for that session.
It was during this period that one of the directors proposed Bhat’s name as chairman, he said, adding due process of law was followed in bringing the resolution.
TGBL is the second listed company of the USD 103-billion Tata Group that has removed Mistry as chairman since the October 24 decision of the holding company, Tata Sons, to remove him as the head.
Last week, Tata Consultancy Services (TCS) removed Mistry as chairman, but that ouster was not through a vote, but by virtue of Tata Sons holding a commanding 73.26 per cent stake in the India’s largest software services firm.
In the statement yesterday, Mistry said the Tatas continue to demonstrate the lack of respect for due process of law.
“Harish Bhat, an employee of Tata Sons, proposed that S K Santhanakrishnan be made chairman at the meeting.
This proposal was ruled out since there was already a chairman for the meeting, namely, Cyrus Mistry,” the statement by Mistry’s office said.
“When the proposal to remove Mistry was sought to be moved, it was ruled out by the chairman since it was not on the agenda. The meeting was conducted by Mistry as chairman and was concluded.”
The TGBL statement to the stock exchanges “is therefore inaccurate and illegal and it is but a repeat of exactly the same illegal acts done by Tata Sons Ltd on October 24”, it said.
Two independent directors Darius Pandole and Analjit Singh “opposed the bid at committing these illegal acts”, it said.
Since taking over, the 78-year-old Tata has begun tightening his grip over the conglomerate.
Even after his removal as chairman of Tata Sons, Mistry continues to head several listed companies ranging from Tata Motors to Tata Steel and Tata Power.
Tata Sons has asked Tata Motors, Tata Steel, Tata Chemicals and Indian Hotels Co Ltd (IHCL) to call extraordinary general meeting of shareholders to remove Mistry from the board.
“A chairman who does not enjoy the support of the majority of the board, a chairman of the board who does not also enjoy the support of the main promoter company, would find it very difficult to ensure continued performance of the company,” Bhat said, adding that it was in the interest of all stakeholders, particularly minority shareholders, that the resolution was brought.
Asked if Mistry’s performance as chairman of TGBL was an issue, he said circumstances have changed significantly and materially over the last few months as against what was prevailing at the time of previous rating.
“The board viewed performance in the context of changed circumstances where chairman does not enjoy confidence of majority of the board and of primary promoter company,” he said.
Bhat added that he holds Mistry in very high personal regard and moving a resolution for his removal was “very difficult” for him at a personal level, but as non-executive director of TGBL it was his responsibility to safeguard the interest of all shareholders.
“In Shakespeare’s Julius Caesar, there is a famous quote. I am going to paraphrase that a little bit, it is ‘not that I love Mistry any less but it is that I love my company much much more’ and my fiduciary responsibilities to do right to protect interest of all stakeholders took precedence over my personal difficulties,” he explained.