Mumbai: As the tussle between Tata Sons Ltd and its ousted chairman Cyrus P. Mistry continues, Nirmalya Kumar, visiting professor of marketing in London Business School, who was part of the core group executive council (GEC) formed by Mistry till he was fired, said Tata Sons could have handled Mistry’s exit in a more dignified manner, pointing out that till date it has failed to give a valid reason for his removal. Edited excerpts:
What is your take on Cyrus Mistry’s removal?
Cyrus was fired in October, his contract ends in April. They could have simply said look your contract ends in April and it’s not working out, so let’s figure out a way for you to step down. Instead what they did is public execution and humiliated a gentleman who didn’t deserve it.
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They mistook Cyrus’s quiet confidence and inner strength as his weakness. They probably never thought what would happen the day after they fired him. This happens when you are a person with a halo and you surround yourself with a bubble of sycophants and nobody dares to burst the bubble. The three years that I have known Mistry, I can say that he is ethically the cleanest man and there’s nothing they can touch him on. It’s in his moral fiber and make-up of his personality. On the other hand, he does know where the dead bodies are in the Tata group…
...Are you saying that he was replaced as chairman as he was unearthing skeletons?
I am not saying that. If you ask me why he was fired, I don’t know the reason. The first day they thought it wasn’t important to give explanations; when people started badgering them, the first balloon that they floated was performance balloon, as they didn’t have an explicit reason. People quickly figured out that the market capitalization during his time went up 14.9% versus BSE’s 10%. Some newspapers also did “before and after Cyrus" kind of stories and quickly found out that performance can’t be the reason. He was evaluated by some 50 to 60 independent directors. Did they consult any one of them to find out what was their feedback on his performance?
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Thirdly, and more importantly, the Tata Sons board had just evaluated him on 27 June and 28 June and had also given him a glowing report. Once the first issue died out the next balloon that was floated was that there was some ethical issue with respect to Shapoorji Pallonji group. The data revealed the business (from the Tata group to Shapoorji Pallonji) went from Rs100 crore to zero. When that also didn’t work out they said, you know it was about the culture and the ethos of the group. Its like you are having an argument and you can’t win it, you have run out of all logical ideas, so you turn to the audience and say: “Did you know he was a communist?"
What was the working relationship which GEC members had with the CEOs of operating companies? We hear that GEC members ride roughshod over them and they were very unhappy.
You should ask Chandra (N. Chandrasekaran, managing director and CEO, Tata Consultancy Services Ltd) that question. How many GEC members rode roughshod over him? We did not have a reporting relationship. I did not interact with any CEOs unless they asked me to come and share my views on something. Ask Noel Tata (chairman Trent Ltd) how many times did I ride roughshod over him? He was the one who invited me and asked to share my feedback on one of the company’s strategies. I didn’t tell Ajoy (Ajoy K. Misra, managing director and chief executive, Tata Global Beverages Ltd) “you present your strategy to me"; he was the one who told me “we are having a strategy day, so can you spend a day with me and give us some feedback and suggestions".
Even in Tata Chemicals, it was Mukundan (R. Mukundan, managing director, Tata Chemicals Ltd) who invited me for a two-day strategy meet in Singapore. I was a consultant on-call when they needed me—some of them never called me. I was a centre of excellence. My responsibility was to support the group chairman and think about Tata Sons’s strategy. For group company strategy I was only available, if available—and if requested.
What’s the feedback you got on the strategy document? One criticism we have heard is, it’s too “textbookish".
That’s a fair criticism. You have to understand how a strategy document is made. You think of a strategy document as, Nirmalya prepared it, Cyrus signed it and board saw it. It doesn’t work like this. It was made over two years, it was an evolving document, and is still evolving. What happens is, you agree on certain things with the chairman and prepare the document; he signs it and presents it to the board. If you say, the final version of it is textbookish, I will agree.
The most vocal person during the strategy discussion was Nitin Nohria (independent director on Tata Sons board, dean of faculty at Harvard Business School) so it could be that he moved it in the textbook direction—I don’t think so because, as an academic, I understand where he was coming from even though he was disconnected from the reality of the Tata group and his understanding of how business works in real life, might be limited. Having said that, if they think it’s textbookish, release the document and let everyone give their opinion . When I came, on the first day I asked where are the strategy documents? I got nothing. So you are comparing our textbookish documents with the vapourware of the strategy documents of the past. I am happy to take that criticism.
As a GEC member did you interact with Tata Trusts?
The relationship between Tata Sons and Tata Trusts was managed by only one person; that was Cyrus Mistry. Tata Trusts has directors on the Tata Sons’s board and that’s how they are supposed to interact. If there was any other interference it was handled by Cyrus and not by me. The only thing which I know is that Cyrus had lot of meetings with Ratan Tata over the last three to four years and those meetings lasted for three to four hours. Whenever Cyrus had those meetings, he asked me to prepare documents, which I did. I thought it was his way of being nice and keeping the Trusts involved.
Was the potential $18 billion write-down ever discussed with the board?
Ask them to release the minutes of all the board meetings to you, we did touch upon the hot spots all along the way. If we didn’t, I am a liar. If you have documents to prove, why will you go with one person’s account?
What was the governance report that Cyrus Mistry was supposed to table before the board on 24 October?
Because of the complexity of governance in Tata group, Cyrus was to table a report which was to highlight roles of the Tata Trust, Tata Sons, group center, CEO, operating companies and board. We have to realize that we can’t take power away from operating company boards and mute them to the level where they can’t make decisions on their own. If you put independent directors on a company board, you have to ask them to act independently. It’s not a name, it’s a state of mind. Now what is happening is, if an independent director speaks his mind, I am going to launch a witch hunt.
Your key takeaways as an academic….
My key takeaways as an academic, when I write a Tata case and talk about it in the classrooms—what will I talk about? I will talk about the need for succession planning and the ability to hand over; the turnaround strategy—do you go for quick surgery or patient turnaround; the importance of corporate governance—roles of board, executives, CEOs, directors. The board has supervisory roles, executives have executive roles, and shareholders’ interests have to be protected by the people on the board. Promoters have their rights, but they don’t have the rights to ride roughshod over minority shareholders. The fourth thing that I would pull out from this case is the difference between the private equity groups, private equity business groups, conglomerates and venture capitalists. The last thing that I would say is, Tata is an incredible group—that is why I will never say anything about the Tata group. Because of its history, the brand Tata is closely associated with history of corporate India. So tarnish on the brand Tata is tarnish on the brand of corporate India. It took 140 years for the brand to be what it is, that is why you expect the highest level of corporate governance in this institution.
What next for you?
I am going back to academics.