Mumbai: Indian Hotels Co. Ltd, the operator of the Taj chain of luxury hotels, was the first Tata group company where all six independent directors came out in support of its chairman Cyrus P. Mistry in a board meeting held on 4 November.
Indian Hotels has now announced that it will hold an extraordinary general meeting (EGM) on 20 December to consider the removal of Mistry as director. Nadir Godrej, an independent director on the board of the Indian Hotels, comments on the role of independent directors and the conflicts of interests that could arise in fulfilling their duties on the sidelines of a Confederation of Indian Industries conference in Mumbai. Edited excerpts:
The independent directors on the different boards have changed their stance gradually from coming out openly in support of Mistry to going ahead with the demands of the promoters. Why is that?
You have to remember that there are different stakes of the promoter in the different companies and different agreements—the Tata brand agreement in some of the cases, specific clauses about nominating the chairman. Indian Hotels doesn’t use the Tata brand but there are promoter company agreements. The promoter group has pointed out that they have given loan guarantees to companies and of course those are important and of course the companies are dependent on the loan guarantees. Because of those guarantees, the promoters have an extra say.
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At the same time, there can be inherent conflicts between minority shareholder interest and promoter group interest and it is part of the independent directors’ duty to work for both which can be a bit conflicting. So, Indian law may have to be redesigned because of such issues. However I am not an expert on law... but these are issues we are discussing.
Are independent directors speaking to each other to decide on how to deal with this conflict?
We are constantly speaking with each other. We have had meetings. I have not had a chance to meet with any of the other independent directors since the last board meeting. However, we will speak to each other before the EGM.
Would you seek legal counsel?
Independent directors have a right to appoint counsel paid for by the company. As far as I know, we have yet not done that. We will certainly explore doing that but it will be a call taken by all the independent directors.
Will this be prior to the EGM?
It could be prior to the EGM, but as of now nothing has been done, to my knowledge.
Can you tell us what are some of the concerns for the independent directors?
I cannot disclose that. Whatever final conclusion we have we will of course report as we did when we made a statement in support of Cyrus Mistry. We have been constantly evaluating Cyrus Mistry and naturally we have to maintain that. It is not the question of taking sides.
Are independent directors across board companies consulting with each other?
As far as I know, there have been no meetings across the board of independent directors. And I don’t think there should be. The only role we play is because we have a duty towards all the stakeholders of IHCL and not just the promoters and of course, that can cause a conflict. We have to be very careful to not be conflicted and not just take the promoters’ views into account. The promoter is also a stakeholder and has an important view we can’t deny that either. So you must understand that we can be conflicted. We hope whatever happens, happens for the good of the group and should not be for the good of individuals. It is not like we want to go against the interest of the Tata group but our primary duty is to IHCL and hopefully, there will be no conflict between the IHCL and the Tata group and we will of course try to ensure that as well.
What will be the role of the independent directors at the EGM?
Independent directors don’t have much to say at that time. It should be understood that promoters have certain rights clearly and they can’t run away from that and independent directors have certain duties and sometimes the two may clash. In fact, if there is any type of disagreement they will clash. You must realize that independent directors have evaluated Cyrus Mistry on places where he is on the board and they have a certain obligation to maintain that evaluation. There may be a clash with promoter interests and presumably it is for shareholders to decide that. Beyond that I would not like to make a comment.
Will independent directors speak at the IHCL EGM?
I am not sure whether we will be speaking at the EGM or not. I was originally supposed to be abroad but now I will try and go for it. However, I am not sure what will happen at the EGM. There was a board meeting to have the EGM but I could not attend at that time.
Do you feel that this episode will impact the group’s reputation?
We wish the Tata group all the best. It is an iconic group. India’s reputation depends on the Tata group and we all wish that things work out well for the Tata group.