Maintaining that good corporate governance balances promoters interests with minority shareholders rights, the office of Cyrus P Mistry, the ousted Chairman, has questioned the motive of Tata Sons, the holding company of the Tata Group, in questioning independent directors for carrying out their fiduciary duty.
"To question the independence of the directors by Tata Sons is truly unfortunate given that the country acknowledges them as stalwarts of India Inc. To suggest that 'ulterior objectives' and 'clever strategy' can sway these eminent names in undertaking their fiduciary duties and in discharging the duties mandated by statute as independent directors is absolutely astonishing and really speaks to how low Tata Sons has unfortunately stooped in their public statements," the office of Mr Mistry said in a statement.
In a late evening statement issued on Sunday, Tata Sons stated that it will do all it takes to initiate similar action wherever required and deal with the situation. "In the light of the developments since 4th November, Tata Sons reiterates that it is crucially important for boards, including independent directors, to consider that their views and positions ensure that the future of Tata companies is protected, taking into consideration the interest of all stakeholders," the Tata Group holding company said.
So far, after the removal of Mr Mistry as chairman, Tata Sons has issued notices for shareholders' meeting in at least five companies -- Indian Hotels, Tata Steel, Tata Motors, Tata Chemicals and Tata Consultancy services -- seeking his removal from their boards.
The office of Mr Mistry also provided list of independent directors of Tata Chemicals and Indian Hotel Co Ltd, who are being questioned by Tata Sons for 'undertaking their fiduciary duty of protecting shareholders of the companies of which they serve'. The names include, Deepak Parekh, Gautam Banerjee, Ireena Vital, Keki Dadiseth, Nadir Godrej, Naseer Munjee, Nusli Wadia, Vibha Paul Rishi and YSP Thorat.
"It is imperative to highlight that out of the above list of nine independent directors, six were appointed during Ratan Tata’s tenure. Two of these directors also serve as Trustees on Tata Trusts. In both IHCL and Tata Chemicals – the independent directors were unanimous in their support to Cyrus Mistry as the Chairman. The Independent Directors on the Tata Chemicals board, in their statement, 'also reaffirmed that all the decisions taken with regard to the operations and business of the Company had been taken by the board unanimously and executed by the Chairman and management as per directions of the board'. The endorsement is a reflection of Mistry’s conduct as Chairman in upholding the highest standards of corporate governance and in taking the board along in all decisions that impact the company," the statement issued by Mr Mistry's office says.
Talking about corporate governance in the Tata Group, Mr Mistry says, after becoming Chairman of Tata Sons, he understood that the Group needed a strong corporate governance framework that balanced interest of the promoter with minority shareholders’ rights. In addition, between Tata Trusts, Tata Sons, and the Tata operating companies, there was a need to be compliant with the law relating to insider trading by ensuring communication of unpublished price sensitive information strictly on a need to know basis, he added.
The statement says, "The corporate governance framework that was developed under Mistry’s leadership attempted to ensure that group companies would adhere to the group values, share best practices, enable movement of talent, exploit win-win synergies, and do all of this without impinging on the independence of the operating companies and the boards that they are ultimately responsible to. By placing the responsibility where it should lie, with the board of directors of the operating companies, allowed the independent directors to ensure that the interests of minority shareholders were aligned with the operating company’s strategy as well as the overall direction of the Tata Group."
Mr Mistry also refuted the allegations made by Tata Sons on 'drifting away' of the group's operating companies. "Prior to Mistry’s Chairmanship, all the Board members of Tata Sons, with exception of him, were internal to the group, being either Vice Chairmen of group companies or members of GCC. Today, the structure is exactly the opposite. The requirement to have 30% Trust nominees and 30% independent directors meant that in addition to Mr Ishaat Hussain and Mr Mistry, there was possibly only one more senior group centre member who could be on the Board of Tata Sons. This limited the involvement of other group centre members on the Tata Sons board. Moreover, in the past three years, all these internal members, with the exception of Ishaat Husain have retired. This was a generational change."
"As agreed with the Tata Sons board, the governance mechanism to protect Tata Sons interests and ensure adequate group representation on operating company boards, was to have GEC members, other senior group centre members (e.g. Farokh Subedar, S Padmanabhan), and select CEOs (e.g., Bhaskar Bhat, Noel Tata) on the boards of operating companies."
"The corporate governance framework in India has considerably tightened in recent times with more stringent rules with respect to independence of directors, female directors, board evaluation, and so on. To meet this increased scrutiny, several new policies and frameworks were developed at the group centre and deployed across operating companies including refreshing the code of conduct, developing a board effectiveness framework, LEAD program to enhance gender diversity, and provide TBEM feedback on company to the board," the statement issued by Mr Mistry's office concludes.