Mumbai: The governance document which Cyrus Mistry wanted to present to the board the day he was fired as chairman of Tata Sons sought to define roles played by each Tata entity—the trusts, the holding company and the operating firms—in the running of the group.

Mistry has claimed, since he was forced out on 24 October, that the ambiguous roles of each had led to several lapses in corporate governance.

According to a copy of the document reviewed by Mint, Tata Trusts in their capacity as the largest shareholder had the “right to visibility" of Tata Sons’ strategy and ensure that it was aligned with their objectives in terms of value, returns, risk and governance.

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The document said that the trusts were also to be informed of decisions that could affect their dividend flow.

However, once the trusts appointed their nominees on the board of Tata Sons, they should go by their (appointees’) judgement.

“The nominees should not go back to the trust as postmen; that was a critical aspect," said a person familiar with the document, who spoke on condition of anonymity.

“The board of Tata Sons then operationalizes it through various aspects."

In a letter released a day after his exit, Mistry had alleged that some of the trusts’ nominee directors on the board of Tata Sons had held up a board meeting midway to consult with and seek guidance from Ratan Tata, the chairman of Tata Trusts.

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Tata Trusts own two-thirds of Tata Sons, the holding company of the group, and have the right to appoint one-third of the directors on its board.

In the various missives to Tata stakeholders and the media, Mistry’s office had pointed to excessive interference of the Tata Trusts and some trustees who had sought direct knowledge from operating companies.

The document said Tata Sons as the parent would review the strategy of the operating companies, but not so much to approve, as to provide feedback through nominee directors on the respective boards.

The parent company would give feedback on issues of critical importance such as business boundaries, balance between short-term and long-term goals, fund-raising plans and risk appetite to ensure that the operating firms were in alignment with overall Tata group vision and Tata Sons interests, the document said.

The decision to draft the document, said a second person with direct knowledge of the matter who asked not to be identified, was prompted by the challenges Mistry faced particularly when he took “tough decisions", such as Tata Power Co. Ltd’s Welspun deal, and the sale of Indian Hotel Co. Ltd’s Boston property and the fate of Tata Steel Ltd’s UK operations. The document was prepared by Mistry and Nirmalya Kumar, who was then head of strategy at Tata group.

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Describing the document as “benign", the second person said its only objective was to clearly demarcate roles and protect the interests of all stakeholders. Mistry shared the draft with Ratan Tata in September, a month before it was to be presented to the board, this person added. Tata rejected it, he claimed.

Ratan Tata has “time and again reminded Mr Mistry to have these discussed at the board of Tata Sons", the holding firm said in a statement.

In a 3 October letter, Ratan Tata wrote to Mistry, saying that his (Mistry’s) views on governance structure are “at variance to what we have been discussing in the past and what the trusts have been seeking. To avoid misunderstanding I suggest that this should also be formally tabled at a forthcoming Tata Sons board meeting".

Tata further wrote that the “if the present papers were sent to the trusts’ nominee a reasonable number of days in advance, it would enable an internal discussion with our nominees prior to the meeting and would then enable them to express" the trusts’ views.

Amit Tandon, managing director at Institutional Investor Advisory Services (IiAs), said Tata executives endorsed the governance framework.

“Most of the senior executives I have interacted with in the Tata group have given very positive feedback regarding the governance document. They say... (it) successfully addresses various critical areas which offers them a good framework," said Tandon.

In a 20 December report, IiAs said Mistry’s resignation must not be seen as an end in itself—instead, it must be used to clean up some of the issues that plague the governance structures across the group, address the operational aspects and establish a succession plan that is enduring.

The IiAs report also advocates the cancellation of veto power given to Tata Trusts, which shifts the balance of power in running the holding company to them and their nominee directors.

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