Mumbai: Institutional Investor Advisory Services (IiAs), a proxy advisory firm, Wednesday recommended its shareholders to vote in favour of the removal of Cyrus P. Mistry as a director from the board of Tata Consultancy Services Ltd (TCS) as his continuation on the board may lead to “unnecessary friction between the operating companies and Tata Sons.” It said the recommendation, however, should not be viewed as an endorsement of Mistry’s removal, adding Tatas should use this as opportunity to fix structural and corporate governance issues.
“We believe Cyrus Mistry’s position as a director of TCS was a direct consequence of his position as chairperson of Tata Sons,” said IiAs. With his removal as chairperson of Tata Sons, his continuing on TCS’ board as a non-independent director becomes untenable,” it added. “While this must not be construed as an endorsement of his removal, we believe his removal will provide the Tata group a clean slate to fix the larger structural issues of the group,” the proxy firm said in advisory.
IiAs’ intent, it added, is to provide a clean slate and an occasion to overhaul the structural issues, which may have been present all along, but have surfaced with this sacking. “It is imperative that the Tata group use the opportunity being provided to fix the control and governance structure– going back to the status quo is not an option, and investors do not want to see a re-run.”
Shareholders of TCS, India’s largest provider of IT services by sales and market capitalization, are scheduled to meet on 13 December for an extraordinary general meeting to consider a resolution to remove Mistry as director. TCS, in which Tata Sons holds 73.26%, will be the first Tata company to hold an EGM for Mistry’s removal. Mistry was replaced as chairperson with Ishaat Hussain, another Tata Sons’ representative.